Thursday, November 27, 2008

Peter Schiff: The Real Thing

Here is investor and free-market economist Peter Schiff predicting exactly what is going on in our world now, up to two years before it happened -- and being laughed at (literally) for doing so. And laughed at by "experts" who are telling people to buy Merrill Lynch, Goldman Sachs, and Washington Mutual. (Hat tip to Terence Corcoran.)

This clip makes it pretty clear why he could be such an excellent prophet: he knows what will happen because he knows which effects go with which causes. In other words, he has the right theory. Can anyone think of a single, solitary Keynesian who saw all of this coming down the road?

One odd thought provoked by Schiff's now-famous exchange with Laffer: Schiff says that the soaring prices in speculative booms in the stock and housing markets are "not real wealth," and Laffer says "of course they are!" That of course is not per se an economic issue but a philosophical one. (The appearance of the word "real" is strong indicator of that!) Schiff, like the Austrians, thinks that what economics is about, at bottom, is real people making real goods and services. The others seem to have some sort of alternative view. What that view is, I'm not really sure, partly because the Austrian view seems so blindingly, intuitively obvious to me.

One of the effects of the other view, I suspect, is that it makes it possible to think that war is generally "good for the economy," even though it destroys real things and kills off the people who make them. If that is good for "the economy," then what the hell is an economy?


Anonymous said...

Mr. Schiff may have predicted some of the current economic isuues but as an investment manager he is awful the last couple of years .Percentage wise he is down much more that the US markets on his recommendations

Lester Hunt said...

I don't know anything about his work as an investment manager, but I would say that if you have followed he advice in The Little Book of Bull Moves in Bear Markets during the bear market of 2008 you would very likely have done better than the market, much better. You would also have missed out on the gains at the end of the last bull market, but strategies like his are intended to do that.

Anonymous said...

Schiff's views are correct. As far as I can tell, he's one of the only economists out there, publicly, that states the obvious. Dubious economic theories will eventually fail. The operative word is eventually. Might be a year, might take five or ten, or even longer. It took the ussr seventy years to collapse and liberal economists were extolling it's virtues right up till the end. Actually, their still extolling it's virtues.
So, using Schiff's economic analysis does not guarantee investment success anywhere in the near term.
The only other thing I would take issue with in your article is your statement that austrian economics only values things that are produced, or something like that, I think is wrong. Sorry, can't agree on everything.