Peter Schiff vs. the World, 2006 to 2007

Posted by: Ben Steverman on November 14, 2008

This video is fascinating for two reasons:
1. Watch as Peter Schiff of Euro Pacific Capital — in 2006 and 2007 — describes with amazing precision the very crisis that unfolded in the past two months.
2. Watch the reaction of reporters and especially other market pundits. It’s not just that they disagreed, it’s that they obviously had no idea what Schiff was talking about.

A caveat: What’s unnerving to me about this video is how certain both Schiff and his critics are that they are right. Obviously Schiff was proven right, to his credit.
But at the time, you could agree with Schiff’s general critique of the U.S. economy (that the country is too indebted, for example), but you could find little evidence that it would get as bad as he predicted.

That’s one reason everyone else looks so baffled on this video: At the time, Schiff (who I’ve interviewed) often sounded like he was from another planet. His view of the world so differed from both the market consensus and from certain supposedly objective measures of the U.S.’s financial strength.

I don’t think the lesson of the financial panic of 2008 is “always listen to Peter Schiff” or “we need better prognosticators.” It’s “you never really know what’s going to happen,” and “pay attention to evidence, not predictions.”

(via Andrew Sullivan)

Reader Comments

Snoz

November 15, 2008 11:25 AM

A wise Rabbi once said the greatest sin is self deception. We deceived ourselves that the foundation of our economy is sound with fancy words like global economy, fair trade, derivative-hedge-fund-default-swap, brick-and-mortarless economy, and other stock and trade vernaculars that seems to roll off our tongue without much thought. With the help of the media, we spread and popularize these nonsense notions throughout the nation until the masses as well as the CEOs start to believe the American economy can sustain itself with just trading financial papers and freely printed green-backs. In time, most of us got vested voluntarily or involuntarily into the fraud. Subsequently, our opinion and perception got skewed by our own wishful thinking and self interest. When fancy dressed and statuesque people of the media reinforce the same nonsense upon us they don't help our thinking clearly. Our belief in certain economic principles wanes while our doubts strengthen when people around us are moving into expensive housing and luxury cars. For many, it is too hard to resist the stampede. Very few, like Shiff, can speak the ugly truth about ourselves.

Matthew Kern

November 16, 2008 1:37 PM

Keynesians were right, neo-conservatrive supply side globalist bozos were wrong with their vodoo economics. Schiff was right. The "magic market) with god like properties that can heal itself, regulate itself, knows everything- that was wrong and regulation is required to check greed and corruption. AHA you say? Then you must comprehend that manufacturing is the next leg forward- and the housing/retail/import bubble is over. The more we fight it, the worse it will be.

Snoz

November 17, 2008 12:41 AM

There's a saying that "A prophet is never recognized in his time or respected at home." Despite the lack of respect for his economic view, Peter Schiff does not claim to be a prophet. He is just an astute economist who refused to listen to the nonsense propaganda coming out of the government news mill, business magazines including BW, and the so called "analyst" of Wall Street. As the video shows, there are con-artist, "analyst" and TV economists who have obvious self-interest in promoting the status quo to their advantage. The "bubble headed bleach blonde" news anchorwomen add nothing of substance to the debate except as a sexual diversion. Peter Schiff exposed not only the self-serving TV guests on these fake business shows but also these shows are staged info-commercials pretending to have serious thinkers. Surrounded by light-weight thinkers and imposters, should we be surprised that they attack Peter Schiff's idea? For those of us who got ambushed by the recent economic meltdown the fault is ours for not seeing beyond the fancy show graphics, sexy bleach-blonde with low-cut blouse, and empty buzz words from many of their "analysts."

Tom

November 21, 2008 7:21 PM

Great stuff. Time to bring this guy back for an update.

GK

November 23, 2008 3:12 PM


He is a god let him be the leader of the world

KS

November 26, 2008 7:21 AM

Wow Wow and Wow. Peter Schiff take a Bow friend. As Tom/GK have suggested maybe its Time to get Peter back on World stage and have Views from him to " Show the World the Way Forward" to get outa this Huge Tsunami of Financial mess .
Histrionics and Rhetorics dont feed the World..Money Does..! Get it back for us the Right way...

Keep it Comin'.

KS.

Steve

November 30, 2008 9:30 PM

I read about Peter early on in 2006. Read his blogs and others. I objectively looked at his views and looked up the info to confirm (it is all on the US GOV web sites to see) he was right! I sold and preserved my small savings while I watched others cringe at the drops in the market.

The question now is where do we go from here?

Mercury2wo

December 3, 2008 2:48 PM

Oh My God! Schiff was SO RIGHT!
Who ARE the rest of the idiots who were laughing at him?
I work as a wealth manager for one of the very firms that these jokers picked as the Top Pick for this year and I know what troubles we have been through!

Mike Norman, Bizradio network Host - Saying Houses going up 10%. What abnormal lending policies?
Ben Stein saying Credit Crunch is Overblown and go out and buy Merrill Lynch?
Charles Payne author of "Be Smart, Act Fast, Get Rich" saying go out at Buy Financials? Top Pick Washington Mutual?

Who put these idiots up there on Fox TV??

Wow! Schiff has shown what abnormal ability to think through various variables it takes to be able to stand up and see the future despite idiots laughing at you! I salute this man!!

David Galbraith

December 8, 2008 6:17 AM

Note that despite predicting the crash, he failed to predict how to capitalize on it. Schiff's top stock pick for 2008 was GLD, down 22% over the year.

He was not completely wrong, but not completely right either.

Benjamin

November 3, 2009 2:53 PM

As written by The Market Oracle in October 2008:

Why is gold dropping right now when anyone in their sane mind would expect it to rise? The simple answer to this question is, “because Comex-gold isn't gold” – and because it deceptively pretends to be 'the' price-setter for real gold.

Gold is gold, paper is paper, and “Comex gold” is nothing but paper masquerading as gold while simultaneously pretending to be the price-setting medium for actual gold in the world. Now, finally, Comex-gold is in the process of being unmasked.

The real supply and demand determinants for Comex gold are not actual gold investors but fund managers . Fund managers are inextricably intertwined with the world of contract-based credit instruments. They use bet on Comex gold contracts to hedge their other (currently horrendously losing) bets with something they all, in their in-bred belief in paper markets, believe will 'go up' in value while everything else is going down.

However, these very same fund managers and their paper-bound investment psychology are the exclusive reason why Comex gold is dropping in these times when everyone (including fund managers) expects gold to rise. As already stated, though, and as they now finally realize to their own dismay, Comex-gold just isn't gold – and that causes even further selling.

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About

Bloomberg Businessweek’s Ben Steverman focuses on the latest moves in financial markets and emerging trends in stocks, bonds, and funds, always with an eye toward giving readers a better understanding of the sometimes confusing and often chaotic world of money. Standard & Poor’s senior index analyst Howard Silverblatt will also provide his take on companies’ finances and the markets. Voted one of the “Top 100 Finance Blogs” in 2007.

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