What about bailing out people who put too much on their credit cards, Schiff said. What about small entrepreneurs?
"Where does it end?" he said. "Why should somebody get bailed out and somebody else get stuck with the bill?"
In this case, JPMorgan Chase would buy out Bear Stearns at fire sale prices and the federal government would take over the risk on nearly $30 billion worth of mortgage investments that everybody else is afraid to touch.
The bailout will ultimately cause the value of the U.S. dollar to drop, Schiff predicted, which will lead to massive inflation. Those who Schiff said will be hurt the most are people who have money in CDs, government bonds, or those receiving a fixed amount of money, such as a pension or Social Security benefits.
Schiff predicted that America will experience runaway inflation as seen in Argentina or Zimbabwe.
"The dollar is going to fall through the floor and the cost of living is going to skyrocket," he said. "Americans, in general, are going to be impoverished because of these bailouts. It's going to be the most costly bailout in U.S. history, paid for on the backs of savers. The American standard of living is going to plunge."
For Schiff, the answer is pretty simple: "The government should not be loaning out taxpayer money. These things should be sorted out in the free market."
William S. Lerach, a shareholder advocate and plaintiffs' lawyer, said in a Pittsburgh Post-Gazette commentary, Sunday, that such losses by Bear Stearns are part of the natural cycle of the market, "a purge of speculative excesses.
"This collective pain disciplines those who binged and sets the stage for a recovery," wrote Lerach, who was sentenced to two years in federal prison for his role in a kickback scheme involving class action lawsuits against some of the nation's biggest corporations.
The real beneficiaries of the bailout, he wrote, are the trading partners at Bear Stearns, which faced huge losses if the free market had operated and Bear Stearns had gone bankrupt.
"But what about the millions of families facing hardship, but whose financial profligacy pales compared with Bear Stearns'?" Lerach wrote. "Unlike poor old JPMorgan, they can't call Ben Bernanke and get a lousy $15,000 or $20,000 loan to avoid foreclosure, let alone billions over a weekend to finance a giant — and what will be — hugely profitable takeover."