Schiff: Cassandra or stopped clock? You decide
Peter Schiff is an interesting case of prognostication. Take a look at this video (or any number of others), and you will find him describing the financial crisis-to-be with a fair amount of detail and specificity before it happened:
So, was Schiff a genuis? And were all the others fools?
The latter question is easier to answer than the former: yes. They were as wrong as they could be, and most were arrogant about it as well. A losing combination. And if you followed their advice you lost too, big-time.
But as the old saying goes, even a stopped clock is right twice a day. I haven’t followed Schiff’s career up to this point, but apparently he’s been a bear for a long time. Perhaps his being on the money about the current crisis (can’t resist those puns) simply illustrates the fact that sooner or later he was bound to get lucky, as the rest of us got unlucky. A bull market can’t last forever.
So the real question is, was Schiff’s uncanny ability to predict this one a fluke, or was it evidence that the guy’s a guru with excellent advice for the future? Consider that his predictions about gold and the dollar do not seem to have come true—and least, not yet.
This article from the Globe and Mail, written last July before the big meltdown, calls Schiff “Dr. Doom,” and describes him thusly:
To say Peter Schiff is bearish is like saying Tiger Woods is an okay golfer, or China has a small problem with air quality. The president of Connecticut-based Euro Pacific Capital Inc. is so pessimistic about the U.S. economy that he lives in a rented house and keeps the vast majority of his and his clients’ money outside the country, a healthy chunk of it in gold and energy stocks.
“America is finished. We are going to destroy this country. Our economy is just going to unravel,” he told me yesterday. “The question is how much money is the world going to lose before it writes us off?”
The article also points out that certain other predictions of Schiff’s have “proved uncannily accurate.” They cite his foreseeing the dot.com crisis, and the problems with Fannie and Freddie that had already surfaced by the time the piece was written. He also appears to have predicted the rise in oil prices a while back, although I haven’t read any evidence that he foresaw their current fall. And from the quote above, it seems he didn’t understand the effect the US problems would have on foreign stocks; they have not been immune, to say the least.
Let’s give Schiff credit for his remarkable foresight on this one. But I’d like to hear from you all—especially those who have followed him closely over the years—about his predictions in general. Has he made as many errors as correct forecasts? And what do you think of what he’s saying now?
Be forewarned: it’s not encouraging;. Let them fail, says Schiff. The government needs to stop bailing companies out, and no artificial economic stimulus will help. Americans need to start saving more and producing more:
“apparently he’s been a bear for a long time”
It just adds to his credibility. If one is a long term investor one looks to the long term prospects. Schiff has just that outlook. Consumer spending/debt has been rising for decades. The technology boom alleviated the pressure of that debt buildup. Immigration, legal and illegal, also played a part, offering cheap labor along with – more consumption. The fact that this was all taking place for over two decades without any correction just lulled most everyone into a false sense of security. Mr. Schiff is also correct re the bailouts. After all, it’s just more debt for the purpose of sustaining consumption levels at least enough to mitigate the coming recession. Lotsa luck to that!
Agreed.
Educate yourself. Learn skills. Learn to create and construct and learn a valuable skill. This country has relied on visa’s to supply surgeons and engineers (higher level).
Save.
Work hard. If you have nothing to do clean. If you have nothing to clean, help others.
We cannot expect anything from others or our government to provide for us.
A government cannot MAKE an economy. It can only make policies that can be helpful or hurtful and more often than not a government choosing who gets what (socialism) does not benefit efficiency and productivity – so it subsidizes BAD decisions (ala GM).
Instead of spending the $350 Billion – the government should:
1) Drastically reduce capital gains tax rates
2) Reduce corporate tax rates – this country’s corporate tax rates are ridiculous (I know I own a corporation)
To have a more steady stream of revenue, the government should broaden it’s tax base to MORE americans. Currently the bottom 40% of income tax payers pay no taxes and if you look at the bottom 50% of income tax payers they pay 3% of the income tax pie.
The bottom 50% of income earners contributing would produce a more steady stream of revenue into the government. They should impose a 1% bottom so that no matter what all people earning an income pay 1%. Then the income tax rates should be a flat tax in between 15% and 20% with large personal deductions so that a family of 4 making $40,000 pay the minimu 1% tax but a family of 4 making $50,000 will pay 20% max on the $10,000 over $40,000.
You can’t have a system where the government penalizes success and removes wealth from the job creators.
When did you last get a job from a homeless person?
What makes me come down on the side of his being a good forecaster is his reasons for what he was predicting – especially about the economy being driven by “borrowed” consumer money.
He’s a financial advisor I guess, so he should be advising his clients how to profit in up times as well. Keeping it all under the mattress is a brainless endeavor even if dressed up with media appearances.
Yes, old fashioned prudence is important but the ability to take risks is how national wealth is created. (see Pilgrims, Oregon Trail, Daniel Boone, etc.)
in a world were everyone is an idiot, someone that knows the basics can appear to be a genius…
in the land of the blind the one eyed man is king..
in a world of lies, telling the truth is a radical act
by the way… i always hated the financial guy that is laughing and trying to paint the other as ludicrous, rather than actually engage in fact.
meanwhile… which one does fox still put up more than others?
and on another note… yesterday, ny times… someone talking about how to compensate ceos.
the very end of the article points out all kind of things and then says… maybe their compensation should be tied to the company theyw ork for… and suggest that would be it..
its hard to take financial information from idiot experts when you read that, and then wonder if they know anything?
flud had 400 million of lehman stock… he lost it all… and everyone still thought that he was evil…
meanwhile.. do you really want someone with a public servants salary and no real interest from the business to be able to work your accounts, and also figure to make money working the system from the outside since they get paid so little?
dubai will end up getting a lot of experts, as will other countries… and the guy at the DMV will get a promotsion as he is appointed as your state financial officer for your retirement…
“Americans need to start saving more and producing more”
That’s good enough for me. My industry can’t get enough workers — we have to hire from India and China, and needless to say a lot of those jobs are now in India and China. Until we rediscover how to create wealth (get degrees in science and engineering) rather than just shuffle it around (get degrees in finance) his doomsday scenario is very real. Easy credit founded on overseas capital is among the devils spawned by those way-too-smart financier types.
There is nothing remarkable about what Schiff said or predicted. What is remarkable is that others haven’t picked up on the obvious for so long. I’m a banker and have been saying/discussing much the same as he with customers for years and like him I’ve met with a lot of skepticism – until late 07. I know a few others. Anyway He’s been reading/studying Austrian Economics – VonMises/Hayak/Rothbard/Garrison/Horwitz are my favorites.
Most of modern economists are heavily influenced by Keynesian ideas and concepts. It’s remarkable to me that in economics today people have tenure at major institutions that hold ideas as diverse as from Marxism over to extreme libertarianism. The Keynesians have the most influence. This is too bad because imo they are also clueless. A Keynesian will come to conclusions about what is going to happen in the economy completely the opposite of someone heavily influenced by Austrian interpretations. They both cannot be right. In my experience of the last 10 years the Austrian views have the edge. For example, a Keynesian thinks that you can ‘stimulate’ the economy by the government giving money to ‘consumers’ to spend. He also devoutly believes that deflation is always bad and must be avoided. Neither Keynesian idea is true. Anyway, Schiff is right on target and it was no accident. The world will be a better place if Austrian economic ideas and concepts get put back front and center of economic profession. If instead of 1 out of 1,000 analysts talking like Schiff, we had 8 or 9 out of 10 understanding/thinking the way he does we wouldn’t be in this serious mess now. The worst is yet to come.
If you want to pursue on your own.
Here’s an Economist survey titled the World Economy and dated September 25, 1999 – it doesn’t mention Austrian ideas but is embedded with them thruout and it correctly predicted the current troubles – the author thought it would bust with the end of the internet bubble. He didn’t predict that Greenspan would be so stupid.
Here are some current columns from Austrian influenced commentators:
http://www.washingtontimes.com/news/2008/dec/03/what-is-economic-stimulus/
http://www.realclearpolitics.com/articles/2008/12/government_sets_us_up_for_the.html
A favorite is Tamny who just moved over to Forbes:
http://www.forbes.com/opinions/2008/11/30/productivity-stimulus-growth-oped-cx_jt_1201tamny.html
Some websites:
http://mises.org/
Garrison’s site at Auburn for his classes there/filled with good powerpoint presentations on Austrian Economics
http://www.auburn.edu/~garriro/
And here’s Horwitz:
http://myslu.stlawu.edu/~shorwitz/
Government propagandists used Schiff as a foil until corrupt prudential regulation got too purulent to hide. The derisive televised mobbing he took helped obscure the fact that views like his were widely held by self-reliant observers with much to lose. Now he’ll be labeled a genius though he simply did his job and looked past the official pap. That too is intended to discourage you from using your bean.
db…
maybe this take might clue you in…
keneysian economics works…
its doing exactly what its intended to do…
austrian economics works too…
its doing exactly what its intended to do…
they BOTH can be right, it depends on the intent of the people using it and what they want from the situation…
lets take austrian. i favor it too… why? because the intent of austrian economics is to make a sound economic system for the purpose of growth to support the power of the average man through property ownership, and a desire for a small state.
thats in line with capitalism as a economic system of sustained growth without gunning the machine and braking it…
i dont like keynesian. not the least that maynard recanted his own work… which begs the question why do they use it?
what if they are using it because it does what THEY intend to do with it. run the system into the ground so it fails and they can reconstruct it or get the power needed to do so, while also removing the people that are no longer needed since they could live at this quality of life level for another 1000 years and live great…
drop the population to 10%, keep the technology preserved since the elite kids get private and very different schooling and are quite conservative in their lives while promoting arsenic for everyone else.
the few manipulatives are only friendly the way con men are friendly working the board walk. and in this system, they help each other gain position through manipulation and the con rather than merit and reform…
for that crowd, a failed economics system that is accepted as capitalism, and is not socilaism, will perfectly prove their point (falsely) as to the impossibility of the system that really is austrian…
technically keneysian economics isnt capitalism…
the kind of crap thing it is is akin to the arguments between flat earthers and round earthers… and so on…
so for socialist types, it serves as the ANTITHESIS to real capitalism with the added benifit of not being socialism… perverted capitalism vs capitalism… with both being accepted as variations of one, when one is a subtly fractured broken system that is designed to cut the accelarator spring on the gas pedal… (care to figure out what cut the brake lines?)
thats how i see the meta picture… a failed economic system not built on sound things is not an economic system, even if a crowd has consensus on it… forget that, and you get sucked into the invalid argument. you get sucked into an endless argument in which the people using the system refuse to accept refutation, and then keep you very busy trying to find the empirical argument that will win it. but for them the empirical argument is alredy won, it will wreck the system you hate, arguing to throw it out so that the system returns to is happy productive state and get rid of jobs for sociopathic control freaks and put them out into the world where they have to actually work rather than use their manipulative skills they are so good at and find so easy.
and keynes refuting himself is that he was handed this bull crap… and it took him that long to figure out that what he was handed was crap and that he was the one that will be remembered for feeding it to the nation.
i started reading his book… i never got far since so many other things are at hand.
oh.. and misis changed… i noticed a subtle change in their arguments that no longer was right… that was about a year, year and a half ago… anyone else notice it? it actually stopped me from reading them regularly like i used to.
Due to situations that I won’t go into here, I lost everything I owned 10 years ago and sold my house so I wouldn’t lose it. I could not believe what I got for it.
I have been looking around for the last 6 years to buy another one. I have not found a single, solitary home at any level, worth anywhere near the asking price in the last 6 years, so I did not buy one. I felt the pricing just could not hold and it would be foolish to buy.
We all now know why house prices have climbed as they have, and why the bottom has dropped out. But house prices are still too high. I am not a financial wizard, but even I smelled a rat.
Is Schiff a genius? Well, he seems an honest man with his feet on the ground, and he has been calling this one right for quite some time. And he was the only one doing so, while everyone else was literally laughing at him. It did not make him change his position.
I think we are in deep crap here, and are nowhere near the bottom. Nowhere. And again, as I’ve said before, I believe those inside the beltway have no idea what they are doing. They’re spending a hell of a lot of my money – that I haven’t even earned yet, and no one with their hand in my pocket is even asking me if it’s OK. Why haven’t they asked? Why are we letting them do this without our saying so? And most importantly, how come nobody’s gone to jail yet?
how come nobody’s gone to jail yet?
i am sorry to say that we have no punishment for making bad laws… and if someone is complying with a bad law, then technically the bad they do is legal…
since political terrorism (the more extreme forms of protest that cause loss and constitute a form of blackmail), is now “normalized”, that is not prosecuted at all either…
there is no law against making financial mistakes nor would you really want one…
we cant prosecute them for being communists… so we cant prosecute anyone for subversion… it has no meaning anymore… does it? its been made legal as far as i know
so i really dont know who you would jail..
I’ve been investing in stocks, real estate, and gold as well as lending money since 1956. I’ve seen a lot during those years. I have avidly read market reports, market gurus, and market statistics. Some things I have learned:
1. No one gets it right every time.
2. There are perma bears and perma bulls who walk among us. Perma bears are Schiff, Gary Shilling, Weiss, Joe Battapaglia, etal. Perma bulls are more numerous: Larry Kudlow, Don Luskin, Neil George, Ben Stein, and Ken Fisher to name just a few of the many.
3. Follow any one financial pundit’s opinions at your peril.
4. Buy and hold only works if your time frame is 30 years plus. Perfect market timing is not possible but if you are on the right side of the major trends you will always do better than in and out trading or buy and hold. Those who went defensive (30-50% cash) when the S&P broke its 200 day moving average have not suffered as much in this downturn and are positioned to take advantage when things do turn around.
5.. Most of the economic problems we run into in this country are related to the costs of energy and foolish government spending/policies.
5. Our present financial problems are the result of high oil prices and foolish government policy (Mark to market accounting rule, the CRA, failure to rein in Fannie & Freddie, and ham handed attempts by Treasury and the Fed to re-liquify the financial system to name just a few.)
6. The above policies have inspired a lack of confidence in the financial system because no one knows exactly how big the problem is, but almost everyone assumes the worst. When confidence is lost, fear reigns supreme and the system cannot function because so much of modern trade and economics depends on trust.
7. At this point the system has reached the point where we are tipping toward deflation. Believe me, we do not want to go there. That is why all governments around the world are injecting liquidity into the system – to stop deflation in its tracks. In this circumstance this is the right thing to do. The question is: Will they quit when the system starts operating normally again?
8. When confidence is restored (It will be restored, but it may take a couple of years) and normal commerce returns, those who have been optimistic but patient will do well. Those who have thrown up their hands and declared the game is corrupt, phony, rigged, or worse will be left behind.
9. Things have looked much worse in this country in the past. (The Depression, WWII, the oil embargo, 12% inflation with 15% interest rates, the savings and loan crisis, the Vietnam War with American cities aflame with race riots – you get the idea.) Those who took the long term pessimistic stance in those times were always wrong.
10. Yes, this country needs less government spending on foolish things, more energy independence, less mindless consumption, better education, and a strong military. The chances are we are not going to see any of that for at least four years, but confidence will return to the financial system as soon as it becomes clear that the mortgage backed securities problem is not unmanageable.
11. This too will pass. However, there will be a new bubble, mania, or widespread delusion in some commodity, financial asset, or technology within 7-15 years.
12. Be a skeptical optimist. Learn all you can and try to stay calm when everyone else is upset. Always remember that no trend lasts forever, no company is immune to the laws of economics, and that the trend is your friend.
The other thing I try to remind myself is that no matter my opinion, the universe is, no doubt, unfolding pretty much as it should. Looking back, I can only say that I’ve been fortunate to live in very interesting times.
At the end of the first tape, in December 2007, Peter Schiff recommended buying the “GLD” etf, it was then selling at $83.
Today, December 4th, 2008, GLD is selling at $76. Not as big a loss as many other investments, but not a win, either.
You can track GLD at Bloomberg.com for free, including charts of past values. Look for GLD:US.
While you’re there, you can track the Dow as INDU:IND and the S&P 500 as SPX:IND. Bloomberg has their own symbol system.
So, Jimmy J, what your saying is I have to get too big to fail, then I get to screw up all I want?
I have been trying to find out how we got where we are – this time around – and have decided that perhaps the Carter administration was actually trying to do some good for lower income individuals. But it morphed into a vote gathering machine for democrats, and went all to hell. Many saw it coming – for years – and no one plugged the holes. Those who tried, got shot down by those who benefited from the votes. Stop me if you’ve heard this one, or you think I’m wrong.
It is my belief this was allowed to turn into this monster, so that the only choice was to do as is being done. Had I done similar acrobatics with my own finances, I would be in jail. So would you.
At this time, you appear to be one of the types who was laughing at Schiff. Watch the videos above, and pay attention to what he says in them. He called it all right. It has come down almost verbatim as to what he said in those videos. It has to be more than “even a blind hog eventually digs up an acorn”. A lot of this can be attributed to greed. Greed for cash (power), greed for votes (power).
The ratio between recipients of welfare and S.S. vs. those who are paying in has never been more out of balance, and continues to tip in the wrong direction. And the money that is supposed to be there has been spent, and then some. This time, I just don’t see how we can spend our way out of it. There is no way I could do it personally, so how in the hell can the government pull it off? Uhhhh, without draining my pocket? Please, enlighten me.
Isn’t the whole premise of this down turn a basic refusal to accept worldwide competition would inevitably drive down American standard of living?
You can only pretend what your labor is worth for a short while. And you can only borrow for so long to keep up the farce.
So, Jimmy J, what your saying is I have to get too big to fail, then I get to screw up all I want? – br549
actually its not quite that simple… since we arent looking at how they got to be that big inthe first place.
in other words, rather than nationalize outright, they help companies get huge and so these companies then become a de facto centralize planning thing with the state over them because they cant live without the state.
imagine it this way… companies have to be lean to survive… so do people… its like an evil wife who keeps feeding her husband blintzes and cakes till the guy is 800lbs… he normally cant get that big without help since he cant leave the bed anymore… just like a superhuge corporation…
now the state/wife has him, they now can back and forth tug of war on things like hiring, salaries, taxes, abatements, and tons of other things. though ultimately the fat corporation has to comply or not get the food it needs to live the way it has learned to live.
they dnot do what the state wants, the state doesnt feed them, and they start to lose their massive size (painfully)… so they comply… and like some evil woman in a hitchcock film, or rather like a sadistic film of the modern era, she enjoys the sociopathic power she has to make them hurt and squirm and in turn make them hurt their employees, and they are helpless to do anything about it… (the key form of pleasure for a sadistic sociopath who craves power and wishes to feel it).
tell you the truth, the whole plot would make a really funky horror movie as the film gets darker and darker… then turns into something like Misery, only more subtler…
the metaphor would resonate, since the person gets into the situation through kindness…
Hi Neo,
Your blog is enjoyable as usual.
Predictions are tough – especially when they are about the future.
There are two opposing forces in this discussion which are very hard to reconcile.
1) Americans don’t seem to save very much and still seem to live at a standard of living far greater than any other. This would seem to point to doom.
2) Nearly all other countries have one of two other problems. In emerging countries, including China and India, corrupt government officials are very good at stealing a large part of anonymous capital. By anonymous capital, I mean capital which is not owned directly by the manager of an enterprise. When management does own the capital, they have ways of minimizing the damage.
In European countries, governments do the same thing, but without corruption. They use labor laws, environmental regulation, safety standards to essentially fleece a large part of what is owned by investors. A big chunk of what is left is taken in taxes.
Given this constraint, what is a person living outside the US to do with his savings? He can put it in a mattress, and hold it. But if he wants a return, he has to invest it somewhere. Do to factors given above, a large portion of that savings is invested here in the US.
Conclusion: So over the long term, which is more important? Is it the Americans spend-free ways? Or is it the very real factors that draw in capital from the outside the world? These factors ying and yang over time, in a way that is very hard to predict. Mr Schiff certainly can’t predict it. We are now going through a period where the inflow of capital from other countries was found to be badly invested – and a great deal of money was lost. If these things adjust themselves, and foreigners go back to investing in us, because we are the only honest return in the world, then are spend-free ways will continue. And a cycle will begin anew.
Obviously, other countries can start to become honest, and local investments will be as good as ours. Or our government can become corrupt, and no-one will want to invest here. Barring developments such as this, the cycle very well may go back and forth for nearly forever.
James
Thanks Jimmy J. Nice post, the rest of you are a waste of time.
He was right about the dot.com bust and the oil spike. Most analysts foresaw both but didn’t know when they would happen. That he predicted the housing collapse does set him apart somewhat. And yes, having now printed around $13 trillion in fiat (worthless) money, the U.S. government will inevitably crater, and Schiff will be right again – but no one knows when.
Nice post, the rest of you are a waste of time.
Given that it only took a few seconds to read your post, I thank you for not wasting any more of my time than was required.
The article also points out that certain other predictions of Schiff’s have “proved uncannily accurate.” They cite his foreseeing the dot.com crisis, and the problems with Fannie and Freddie that had already surfaced by the time the piece was written. He also appears to have predicted the rise in oil prices a while back, although I haven’t read any evidence that he foresaw their current fall. And from the quote above, it seems he didn’t understand the effect the US problems would have on foreign stocks; they have not been immune, to say the least.
Let’s give Schiff credit for his remarkable foresight on this one. But I’d like to hear from you all–especially those who have followed him closely over the years–about his predictions in general. Has he made as many errors as correct forecasts? And what do you think of what he’s saying now?
Be forewarned: it’s not encouraging;. Let them fail, says Schiff. The government needs to stop bailing companies out, and no artificial economic stimulus will help. Americans need to start saving more and producing more:
I saw a few clips of him on Cavuto and Fox News. They did laugh at him and painted him an outcast, as fake liberals would do to a real humanitarian. That takes moral courage to keep saying that, in public and in the presence of your peers, while sticking to your guns. That is admirable and should be respected.
As for Schiff being a broken clock, I think there’s some worth in that assessment but it would’t necessarily invalidate his predictions, not if they were based upon specifics and not Oracle of Delphi ambiguity.
Schiff, because he is pessimistic, would obviously pay closer attention to troubling trends and details. That insight and focus should not be ignored, but it should also be considered in light of Schiff’s bias and reliability. This means that you should pay attention to him when he says problems are going to develop. Ask him specifically what those problems are and then double check the results on your own. If Schiff said housing had problems, check the housing laws, regulations, and selling/buying data. The graphs for the increase in house values over the years would be one example.
From the data I’ve heard (not personally examined, btw), Fannie Mae really started kicking off with these sub-prime mortgages after 2002. Usually there is an adaptation time for banks and companies when new laws are passed. When the banks adapted to the new law requiring them to give loans to sub-prime loanees, it took a little bit more time for companies like Fannie Mae to understand how to get more cash out of this new situation. So when Ben Stein said the housing problem with sub-prime mortages was not “currently a problem” in 2004-5, he may very well have been right. It was not a serious problem… then.
Schiff is valuable as one of those canaries in a mine thing. He detects whiffs and often it is better to double and triple check then to assume things are safe and suffocate. Actually, that’s almost certain.
As for Schiff’s views on bankrupting companies like GM instead of bailing them out, I tend to agree. If McCain was in charge, I may not have agreed so readily but with Obama, I tend to think radical surgery and shock therapy is more critical now than sustainment of the status quo (There’s Change for ya, Neo).
GM would learn something from the bankruptcy, get new management, throw the bums out, and so forth. As I have learned after 9/11, with enough pain anything is possible: for it is only then that people start getting the will to get things done.
If there was a chance for the Unions and the companies to work out a deal to make US companies competitive and not Big Business + Big Government monopolies, then I wouldn’t be for radical changes like bankruptcy. But it is unlikely, under Obama, that such things would have happened. It would have been unlikely under McCain, as well, but at least he would have had Sarah and his wife to tell him what to do.
br549,
You apparently believe that the government is bailing out Wall Street, as do most of the population. It would take me a long time to explain to you what is actually going on. So, all I’m going to say is that the Fed and the Treasury are responsible to maintain adequate liquidity in the system to allow commerce to take place. Most of what they do is maintain confidence in the financial structure – banks, investment banks, credit card companies, savings and loans, etc. Due to some bad policy (mark to market accounting for illiquid securities, the CRA, etc.) and some unintended consequences (poor design of mortgage backed securities, poor supervision of short selling, and over leveraging by some investment banks, etc.) enough capital was destroyed within the system in a matter of months to seize up the credit markets and threaten a run on the banks. The Fed and Treasury are trying to maintain enough liquidity in the system to get things moving again. Their efforts, unfortunately, have not engendered confidence because they have not acted with strong convictions and confident leadership. Had they done nothing and allowed the credit markets to freeze up completely, we would be staring at a destruction of capital much worse than the 1930s.
I agree that the government needs to change its ways, that the American consumer needs to be more thoughtful and responsible, corporate governance needs to be reformed, and many other things. It has never been a perfect system and it will never be a perfect system. It is just a system that, so far, has provided more prosperity to more people than any other system.
Schiff was just one of the people who were talking about the housing bust and possible sub-prime mortgage problems. Gary Shilling, and Joe Battapaglia were both in that camp as well. That it has been as bad as it has is due, IMO, to the rapid dessemination of financial rumors in the MSM and on line. Fear spreads very fast these days. And it is not limited to our markets. When Wall Street coughs, all the world markets notice and come down with a fever.
For a more reasoned voice on the markets I would suggest Roger Nussbaum’s blog at:
http://randomroger.blogspot.com/
He is a voice of reason when many people are running around as if their hair was on fire. He is not always right and admits it, but he tries to keep a sense of perspective.
The problems WILL continue for another 4 years at least.
As my financial person significant other said to me last night….
the 3 year arm’s were realizing their higher ‘rate’ and people couldn’t afford the new rate in 2006. The 7 year arm’s and 10 year’s are still coming down.
The damage that this kind of teaser rate loans have done is tremendous.
I didn’t buy one.
I shouldn’t have to pay.
I refinanced in May 2004 to a fixed 6.000% rate. (Yes it’s exactly 6.000%).
Even though values have dropped 35% in Sacramento, CA my home is worth more than 40% more than I owe on it.
It is ridiculous that I have to subsidize people who bought into more home than they can afford (4,000 sq ft) when I have a meager home of 2,000 square feet.
This country needs to stop bailing out bad decisions. Bad decisions should realize consequences and then those entities would never make those bad decisions again. Unless really stupid.
Thanks, Jimmy J, I’ll go there and do some reading.
By the way, are you cb’s boss? Sounds like he’s bucking for a raise.
I add my vote of agreement and thanks for Jimmy J’s remarks. His caution re the role of the MSM should not go unheeded.
Well, Jimmy J, I still have a problem. Trouble is, none of it truly adds up, no one really knows where the answer lies, and we continue to do what we have always down with problems in this country – throw money at them.
Admittedly, I am becoming a little selfish. I am now deep in debt for the future, and it includes my children and grand children and others not even born yet, with the unsettling fact that these bills are going to be paid through confiscatory taxation. You seem to understand the situation, and seem to want to pat people on the head who just don’t know macroeconomics, etc. No, I am not an economics genius. But I am getting screwed – big time. I know that much.
Dodd thinks the head of G.M. needs to go. Dodd?
br549,
I’m sorry you are so discouraged. Maybe some historical perspective will give you more optimism.
Think what it was like for citizens at the end of WWII. At that time the national debt had risen to 120% of GDP. Yet that deficit spending was what won the war and pulled the U.S. out of the Depression. It had to be done; there was no other choice if the U.S. was to survive.
For some background on this go to:
http://www.optimist123.com/optimist/2005/01/national_debt_b.html
Today the national debt is at about 60% of GDP and the deficit spending we need to do to avoid another depression may take us back toward 100% of GDP. Bad? Yes! Unmanageable? No!!
If we take another depression it will set this country back by 50 years economically and may put us in the position of a secondary nation for good. Then there will be some real misery in this country. So, IMO, the present deficit spending is necessary. The big challenge will be to know when to slow the spending.
Debt can be reduced in two ways. Reduced government spending on non-essentials and through greater economic growth. Fortunately, the two are not mutually exclusive. With the right policies this country can recover and become wealthier than ever. Unfortunately, much of that depends on who is in power in Washington. If we could get rid of a majority the big spenders in Congress and enact pro-growth legislation this country could easily recover from this present deficit spending as it did after WWII. That is why paying attention to candidate’s policies and ideas is important. We will reap what we sow. If we keep electing big spenders to Congress we may eventually have too much debt to conquer as a result of profligate government and anti-growth policies.
Schiff is right on when he looks at the fundamentals of why things are breaking, like the housing bubble. That said, he’s still an investor, and he runs a business helping other people invest, so that inevitably colors his views about money and the fundamentals of an economy. The market isn’t the only component of an economy.