Peter Schiff -- They LAUGHED at him! He predicted the bank collapse and they LAUGHED!

Yep, he's got an inside track to understanding the financial system. He's an Austrian economist, and was one of Ron Paul's economic advisors during the primaries. His take on the economy has been very good to me.

Peter D. Schiff is the president of Euro Pacific Capital Inc., a brokerage firm based in Darien, Connecticut. Schiff adheres to the principles of the Austrian School of Economics and the Ludwig von Mises Institute. Schiff frequently appears as a guest on CNBC, Fox News, and Bloomberg Television and is quoted in major financial publications.

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The amazing thing is that he was on MSNBC just a couple days ago, and they were still laughing at his current predictions.

This video, from yesterday, is Peter Schiff's current take on what's ahead. Most people won't like what he has to say, but remember his record for accuracy.

Notice the commentators are still laughing. I wonder what their stock portfolios look like?

I wonder what happened to those other analysts, whether they are still in jobs?

Don said:

The amazing thing is that he was on MSNBC just a couple days ago, and they were still laughing at his current predictions.

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What were they?

Experts like Ben "Beuller" Stein, who had a lot of nice things to say about Merrill Lynch and what a "solid, well run" company it is. Well, Mr. Stein, you can time the stock market but not your biased and short sighted opinions crashing back down on your head, wouldn't you say?

Here's an interesting blog entry about Peter Schiff's predictions and his new book. He was right about some things, wrong about others:
http://www.getrichslowly.org/blog/2008/11/04/bull-moves-in-bear-markets/

Plot Device said:

Yeah, I tried to open that YouTube video just now, and evidently it is NOT compressed enoug for my tiny little computer to handle. So can you please tell us what was said?

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His prediction is that Obama's presidency will be followed by an attempt to get back to the borrowing and spending consumer bubble environment that's been creating the problem we're facing today.

He thinks Obama's mandate will be for more government spending, more inflation, more borrowing from foreign countries, and more consumer buying and spending -- all things that have contributed to the current situation. He mentions 1 to 2 trillion dollar deficits during the Obama presidency.

ETA: This is not a partisan viewpoint. He doesn't think McCain would be any better, but has already called the election for Obama.

Obama will try to create another new deal, and as he says, we're already broken from the first new deal and we can't afford another one.

He believes the only cure is massive cuts in government spending, including entitlements. The only alternative is to watch the dollar collapse when other countries can no longer afford to loan us money. We've destroyed our productive manufacturing base and have very little to sell to other countries to repay those loans.

Politicians have a very short time horizon: they can only see to the next election. Everything they've done to date has only delayed the problem and made the final resolution that much worse.

The current symptoms are not the problem. The problem is the massive borrowing and the size of the national debt. The solutions they're using to eliminate the symptoms are only contributing to the true problem.

That's paraphrased, typing as I listen. Hope it's coherent, at least.

MeowGirl said:

Here's an interesting blog entry about Peter Schiff's predictions and his new book. He was right about some things, wrong about others:
http://www.getrichslowly.org/blog/2008/11/04/bull-moves-in-bear-markets/

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That blog entry's not bad at all. Here and here are the two parts of a Bloomberg interview on 10/28 where he says increased consumer confidence is exactly what we don't need. We should be encouraging consumers to start spending and quit creating debt, so we can rebuild our productivity base. The money we've been borrowing wasn't spent on capital improvements, it was spent on consumer goods, so we have nothing to sell to pay off that debt.

As for his recommendations in his most recent book, Schiff explains in this interview that he didn't expect all the selling of assets and moves into the dollar. When the deleveraging ends, he expects the dollar to drop like a stone, and the strategies he recommended in that book will come into play. He talks about this at the beginning of the second video.

He points out that the government doesn't have the reserves for the bailout or other actions they're taking. Those funds are being borrowed, raising the overall debt load even higher. He expects we'll borrow another 10 trillion dollars over the next four or five years to finance deficits and corporate bailouts. That's going to fuel the inflation engine.

Can't believe this only has a couple of hundred views, but I see it was just posted the other day.

HOpe it gets around for his vindication

Mel...

dgiharris said:

Can't believe this only has a couple of hundred views, but I see it was just posted the other day.

HOpe it gets around for his vindication

Mel...

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Not like anyone in power will take notice...

dgiharris said:

Can't believe this only has a couple of hundred views, but I see it was just posted the other day.

HOpe it gets around for his vindication

Mel...

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More importantly to me, I hope it gets around to people so that they start to understand why things are the way they are, and that the solution won't be found in FedGov's hands. This is a great vindication not only for Peter Schiff, but for Austrian economics and small government.

Don did a really good job of summarizing the video link, btw.

The only other things Schiff said was that the recent crisis was the small one. A larger one is coming. Oh,and to buy gold, real gold, not "paper gold".

Plot Device said:

This vidoe has officially gone viral, guys!

http://www.youtube.com/watch?v=2I0QN-FYkpw



Last night it had 40,000 views. And now it has 130,000.

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And this morning it's almost 160,000. That's 160,000 more people who are starting to grasp the truth behind the talking heads. Perhaps there is some hope afterall.

Or they're quantifying how poorly some of his earlier predictions are panning out.

http://www.usnews.com/articles/busi...mabear-peter-schiffs-worst-case-scenario.html

• The stock market will sink. Got this one right.
• Oil will hit $200/ barrel.Way off.
• Gold will soar to $1200/ounce.Way off.
• The US Dollar will crash.Still up in the air.

And answers to questions like this:
Q: You're a Ron Paul adviser. He's out of contention, so who wins the election, and what happens then?
A: The Obama presidency will be like the Jimmy Carter presidency on steroids. I'm pretty sure it's Obama because the economy will be so bad into the election that as damaged a candidate as the guy is, I don't think a Republican could beat him. I think Ron Paul could've had a slim chance because he was different enough.

Could've had a slim chance? Now there's spin...

Rolling Thunder said:

Or they're quantifying how poorly some of his earlier predictions are panning out.

http://www.usnews.com/articles/busi...mabear-peter-schiffs-worst-case-scenario.html

• The stock market will sink. Got this one right.
• Oil will hit $200/ barrel.Way off.
• Gold will soar to $1200/ounce.Way off.
• The US Dollar will crash.Still up in the air.

And answers to questions like this:
Q: You're a Ron Paul adviser. He's out of contention, so who wins the election, and what happens then?
A: The Obama presidency will be like the Jimmy Carter presidency on steroids. I'm pretty sure it's Obama because the economy will be so bad into the election that as damaged a candidate as the guy is, I don't think a Republican could beat him. I think Ron Paul could've had a slim chance because he was different enough.

Could've had a slim chance? Now there's spin...

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Keep laughin,' dude, and presenting as facts things not argued in the article. How are Kirk Shinkle's predictions, by the way? He's quick to criticize, has he got a record to back it up?

Gold is going to be $1,200 to $1,500 by the end of the year.

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The year's not over yet, is it?

Oil prices had a pretty big run and might not make more headway by the end of the year. But we could see $150 to $200 next year.

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You don't think that's a good possibility?

Look at this chart of the monetary base from the St. Louis fed, and it's obvious that all you can say about oil at $200 a barrel and gold at $1200 an ounce is that it hasn't happened YET, but it's certainly on the horizon, as is hyperinflation.

As for Ron Paul, the racist smears and the focus on his over-energetic supporters did a great job of marginalizing his candidacy, if you could even find mention of him at all. Danged if it's not interesting now, over a year later, that he was the only one on the stage at the Republican debates yelling 'It's The Economy, Stupid!' and the message was laughed at.

Of course, that he was the only candidate on either side that had a true anti-war message was twisted to claim he's an 'isolationist' too. A 'slim chance' easily becomes 'no chance' when the message is so drastically distorted.

The article states what it states, Don. They're Shiff's predictions, which he was asked for and gave, so they set a benchmark. Remember: This interview was done in May 2008. Nowhere does he suggest a decline in oil prices at that time. My view is only that he's as fallible as any of the others.

http://www.usnews.com/articles/busi...ter-schiffs-worst-case-scenario.html?PageNr=2

How about some predictions?
• I think the stock market is headed lower. Gold is going to be $1,200 to $1,500 by the end of the year. That puts the Dow at a less-than-10-to-1 price ratio to gold. Right now, it's about 13 to 1. That's another 30 percent drop in the real value of stocks by the end of the year if you price them in gold. The Dow was worth 43 ounces of gold in 2000. It'll get to 10 by the end of the year and continue to fall from there.

• Oil prices had a pretty big run and might not make more headway by the end of the year. But we could see $150 to $200 next year. I don't think oil will hit $250 because there will be enough destruction of demand in the United States to keep it from doubling. The big problem for us is if the Chinese substantially allow their currency to rise. It could increase at least fivefold against the dollar over the span of a year or two. That reduces the price of oil by 80 percent for 1.3 billion Chinese. Consumption would go through the roof, and that will drive prices through the roof for us.

• At a minimum, the dollar will lose another 40 to 50 percent of its value. I'm confident that by next year we'll see more aggressive movements to abandon the dollar by the [Persian] Gulf region and by the Asian bloc. That's where the stuff really hits the fan.

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Gold at $1200 by 12/31/08 could still happen. Oil at $150-$200 next year could still happen. I don't see that these are earlier predictions that failed to pan out. They're predictions that have not yet expired.

He's also spoken several times to the fact that he did fail to foresee the extent to which people have been deleveraging themselves, which pushed down the price of gold. I suspect the deleveraging also has had an impact on oil prices.

Is he infallible? Absolutely not. Has he done a much better job of predicting what's going on in the economy than those who think John Maynard Keynes and Milton Friedman hung the moon? Yeah, a much better job. Bottom line, the real world is proving the validity of the Austrian economic model every day.

Gold has really proven to be an odd indicator though. It's defying the usual trend of rising swiftly as a hedge against inflation, as it has in the past.

And oil going as high as $150/200 a barrel is something I just can't see happening. I don't think the worldwide economies would be able to turn around that fast and drive consumption upwards. If a miracle like this occurred I'd think oil rising that far again, that quickly, would begin another recession.

We live in an interesting time.

Yes, gold's behaving oddly now, no doubt, although it looks like it might be breaking out and heading north before long. It's starting to tug at the reins. As I said, Schiff sees that as a result of people selling gold to pay off other positions.

As for the $150/200 barrels of oil, I don't see consumption being the driving factor. I see the inflation caused by the $2 trillion pumped into the economy causing the rise. Did you look at the chart of the monetary base from the St. Louis Federal Reserve that I posted? That tells a pretty important piece of the story.

Also notice the compounded rate of change in the table at the bottom. 785% Ouch!

Plot Device said:

This vidoe has officially gone viral, guys!

http://www.youtube.com/watch?v=2I0QN-FYkpw



Last night it had 40,000 views. And now it has 130,000.

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I heard that last line of the first segment, "I'll bet you a lot more than a penny..."

As for predictions of $200 per barrel oil and such, my impression is that was a prediction of what was going to happen before the sludge hit the fan, and it was just that the timing was wrong (or maybe such predictors just didn't see the sludge coming ). The sludge hit the fan sooner than expected.

Could $200 a barrel oil still happen? I wouldn't think soon, I would guess it will take several years for the world economy to recover to bring demand up to support such hugely rising oil prices again.

Slightly off topic (maybe deserves its own thread), I heard T. Boone Pickens has put his windfarm project on hold, and I wonder what's happened with other R&D spending on alternative energy in recent months. No doubt it has tanked severely, which is one of the most short-sighted things that could happen.

I heard a story on NPR, I forget if it was "The World" or "All Things Considered," but companies in China are laying off workers because orders for products to ship to the USA are down. Looks like the world's newest and biggest booming economy has gone bust. The sludge has hit the fan.

Thanks, PD, it helps to hear the view from that perspective. We can only hope that it will mean the next time he appears, the pundits will actually listen to what he has to say.

BTW, have you found his site? This page includes links to a wide range of resources, including videos of most of his television appearances, his weekly radio broadcasts, his newsletter, commentary and some recommended books, including his own.

His latest commentary is worthy of a quick read.