Peter Schiff v. Financial “Experts”

Sabina Becker asks “Who is Peter Schiff, and why is he pwning all these people?” We’ll get to that in a moment, but first, enjoy this compilation of him trouncing a number of self-appointed financial “experts” and savour how astoundingly wrong their prognostications have turned out to be in contrast to his relentless pessimism.

Now, to answer the opening question with a little bit more than the opinion that he “knows his onions” Wikipedia has a good write-up on Schiff from which we learn that:

Schiff also references the role of the US consumer in the world, saying that the US consumer thinks he’s doing the world a favor by consuming what the rest of the world produces. He is quick to point-out that this relationship will come to an end, in his view, much sooner than people imagine, and with negative consequences for the US. Schiff has been quoted as saying: “Consumption is its own reward for Production” — meaning that without production, the US cannot indefinitely sustain its ongoing consumption. Schiff, and other adherents of Austrian economics, promote savings and production as “the engine of economic growth — not consumption.”

Schiff has said on numerous occasions that the current economic crisis is not the problem; it is the solution. According to him the transition from borrowing and spending to saving and producing cannot be accomplished without a severe recession, given the current imbalances of the US economy. But according to him that transition needs to happen. He also thinks the government is doing no one a favor by trying to “ease the pain” with stimulus packages, bailouts and such. Schiff believes these actions will only make the situation worse and possibly result in hyperinflation if the government continues to “replace legitimate savings with a printing press.”

Doubtless the foregoing will be music to the ears of some of my libertarian friends who think that my “simplistic” Keynesian prescriptions are barking mad.

14 Replies to “Peter Schiff v. Financial “Experts””

  1. Sweet, sweet music Red!


    I’ll point out, from your video and those I have posted of him at my place, that his analysis has so far been proven correct.

    I’ll take that as evidence that your simplistic Keynesian prescriptions are wrong. I can extrapolate that if his analysis and predictions are correct, then its highly likely his prescribed solutions would also be correct – or at least better than continuing with the same Keynesian actions that got us here in the first place.

    The definition of insanity is, after all, doing the same thing over and over hoping for a different result.

  2. I thought you would like that. 🙂

    Well, we shall see. In principle, I agree with much of what Schiff says (And how could one not, given his obvious track-record of being largely right?), but I hold out the notion that the “Keynesian” prescriptions I’m subscribing to may not be entirely unharmonious with the concept of boosting production. The “savings” end of that equation will remain elusive for quite some time, however.

    So, I don’t think you (or Schiff) have the whole answer to the problem any more than Krugman and Bernanke do…

  3. But production requires (some level of) consumption, whether within or without the borders of the country.

    Circular, perhaps, but…

  4. Quite. It’s a bit consternating, isn’t it? None of these factors exists in a vacuum and there is a kind of circular logic to the whole contraption.

    What appeals to me about the “Big Build” (for lack of a better description for Obama’s upcoming stimulus package) is that it involves “production” without any need for “consumption”… this is more than a “go shopping… be happy” plan, but something that’s actually constructive. This is why I suggest that while it may seem counterintuitive the “Keynsian” approach may not be entirely unharmonious with Austrian School austerity and fiscal prudence. I know… it’s hard to reconcile those two things.

  5. Not to say that there is anything wrong with it, but even a “Big Build” requires consumption – not a direct average Joe the Plumber consumer-type consumption (as I guess you point out) – but consumption of resources, materials and the like, nevertheless.

    Just thought I’d add that two cents worth too.

  6. Nothing wrong with “consumption” of the kind that’s invested in infrastructure, as it will eventually pay back with dividends in terms of efficiency and competitiveness. That’s my two cents on the matter. 😉

  7. Spending nothing on social services and infrastructure (Austrian school) is just as senseless as spending like a drunken sailor on junk you don’t need (shopoholism)–or, schizophrenically, doing both at the same time (Bush League.)

    It’s not a question of spending vs. saving, but rather of spending on what matters, instead of wars and more wars. When bridges collapse in Minneapolis and New Orleans drowns for lack of levee maintenance, you know it’s time to divert those funds from the war chest.

    I have yet to meet the flibbertigibbertarian who objects to roads free of potholes. Or who can plausibly produce them by private-sector spending alone, with zero government involvement.

  8. Indeed. This is where their argument always tends to fall apart. Libertarians always seem to want to have their cake and eat it too. They’re long on theory and very short on practice.

  9. Not only do they want to have their cake and eat it too, they always want someone else to pay for the slice. While vigorously protesting that they are paying their own way the whole while, of course.

  10. I have yet to meet the flibbertigibbertarian who objects to roads free of potholes. Or who can plausibly produce them by private-sector spending alone, with zero government involvement.

    Interesting that you should mention this. Joseph Heath in The Efficient Society notes a case where St. Louis tried to fix their roads by privatize them — essentially by selling them off. End result…

    “Once these streets were privatized, people started to get picky about who was using them. Residents figured, somewhat reasonably, that if they were the ones paying for their streets, then they should be the only ones with access to them. And so, one after one, streets started getting closed off, with large gates and no trespassing signs springing up at every other corner. But this had another consequence. Throughout several parts of the city it became impossible to travel in a direct line from point a to point b. This became especially problematic when Washington University found that many of its students could no longer walk to school because all of the streets across the north side of the campus had been privatized. he university was fored to negotiate with the neighbourhood associations to create a special corridor that students could pass through.”

    Some solution, eh?

  11. Yeah, I’ll say. But it sure is a nice illustration of my point.

    My friends who used to live in the US said that gated communities, incidentally, didn’t protect them worth shit. An SUV in their gated community in Phoenix had its wheels stolen and was put up on blocks. The owner had to post a sign on it reading “THIS WAS THEFT!” to make the neighbors aware that it wasn’t his doing–and that their expensive, exclusive subdivision wasn’t the theft-free paradise they had been led to believe it was.

    In fact, I’m pretty sure that what with a guardhouse at the gate, it would take longer for effective PUBLIC security personnel–police, fire, ambulance–to get in there. But hey, that’s all just another externality to the gibbertarians…

  12. When I was working at my grandparent’s farm they always listened to Paul Harvey’s news on the radio. He would report consumption news like this: “Americans are to be commended for their confidence today – spending was up last month…”

    And when Glenn Reynold’s (instapundit) wife Helen wrote a column asking “Is it time to go John Galt?”, to go on strike from Obama’s impending looter’s regime, several of the comments were about how they were no longer shopping for things they didn’t need. This is the American equivalent of treason.

    I think you’re right that infrastructure spending is smarter than getting everyone shopping RT. My version of a stimulus would focus on cutting taxes on investment… maybe some kind of productivity incentive. I dunno though. I had a thought recently that there’s really no difference between a lot of shopping at a mall and buying a bigger house. Past a minimum size, a house is just as much an unneccessary good as anything else. I guess it doesn’t lose its value in the long term though.

    Drew Carey’s episode on privatized roads was good. (link)

    He’s not talking about privatizing everything, just allowing private addons like double decker freeways that people can use if they want to pay extra. I guess government couldn’t really tell everyone they can’t block off their private property. Huh. Require in the sale that you can’t do that or you lose ownership?

  13. Wolfe — I would certainly support a drop in the CGT if that’s what you’re alluding to. There should also be a means of writing off capital losses on property, etc.

  14. Oh yes. What Bob Rae said in his article at the Post. His tax policy sounds like it’s lifted off of Mike Harris. Mugged by reality : )

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