Friday, November 14, 2008

Peter Schiff

We attended a two-hour talk by conservative economist Peter Schiff today (the above video is a montage of his economic predictions from the past two years). Against all the "prevailing wisdom," Schiff predicted the real estate bubble caused by sub-prime mortgages and the recent economic downturn (dare we say "recession"?). The video above includes the eternally rosy predictions by most of the other economists, including the alleged conservative Arthur Laffer, who has yet to pay Schiff the penny he wagered him on this TV show (you gotta admire the force of the man's conviction to bet a whole cent). And how about the fellow predicting that the Dow would be 16,000 right now? It is presently only slightly more than half of that.

Anyway, Schiff's talk was outstanding, a two-hour stream of consciousness without notes or manuscript - and without pompous knucklehead professors and know-it-all talking heads who are never held accountable for their inability to see what Schiff and other real conservatives saw coming. And, it was held on 41st floor of the Canal Street Marriott in downtown New Orleans - what a view! Plus, it was free.

Most of today's talk was a reiteration of the material in his recent books, but interpreted in light of how things have turned out recently.

The bottom line is this: the dollar's strength right now is temporary (as is the low price of foreign stocks). Now is a really good time to buy solid foreign stocks that pay good dividends. Now is also a good time to have some cash on hand (which means getting out of debt) and also to have some commodities - especially gold.

In speaking about the debt issue, Schiff spoke with great common sense. Most of us have all the "stuff" we need right now. Do we need more TVs, more cars, more clothes? Do we really need to spend more money and go further into debt? Do we really need a bigger home? If we want to get out of debt, we need to (obviously) stop spending money. What if we just stop buying stuff for a while?

But of course, the government hates it when we save. Why? They can't collect taxes. Their scheme of printing money to pay their obligations doesn't work as well when people are saving instead of borrowing and spending. Plus, the Federal Reserve system is entirely based on debt. This is why politicians of both parties want to give "stimulus checks" (hoping consumers will blow it all at Best Buy or at a car dealership) and "bailouts" to inefficient businesses and failed managers of the most badly run companies - all of course without cutting government spending or doing anything about the monster entitlement programs that are bankrupting us.

The only solution the politicians see is to spend our way out of the problem - which means going further into debt. The British central bank has just announced a rate cut to zero percent! That means their money is so worthless that they are literally giving it away. What is the next step, a negative interest rate? This is the direct result of being linked to the U.S. dollar (as the world's reserve currency) and that dollar being nothing more than an IOU. When the world, especially China, realizes they will never be repaid what they have loaned us, they will no longer underwrite our national debt. And then, as Peter Schiff put it: "we're screwed."

Schiff sees rough times under the Obama administration - which is expected to basically repeat the errors of the Bush administration - only worse. And there is the possibility of some pretty radical policy - such as making it difficult (or even illegal) for Americans to invest in foreign companies and currencies down the road. There is a possibility that we will see hyperinflation - even while the same "experts" in the above video are now telling us we can tax and spend our way out of the problem - especially in conjunction with printing more money out of thin air.

I was hoping to shake hands with Schiff and thank him for his books and cogent analysis, but Lion Boy was ready to hit the wall after two hours. We had to scram while Schiff was taking questions. But I really can't complain. We asked a lot out of Leo. We did make a visit to the Aquarium on the way back so he could see his friends in the shark tank (which incidentally are not the same bunch of politicians that are lying through their teeth to us).

As a bonus, here is a link to Schiff's commentary for the week. As you can see, Schiff is an engaging writer who takes economics out of the dusty textbooks and makes it lively and understandable.

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