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Source link: http://archive.mises.org/9620/why-the-meltdown-should-have-surprised-no-one/

Why the Meltdown Should Have Surprised No One

March 16, 2009 by

{ 110 comments }

Jareth March 19, 2009 at 5:57 am

Powerful.

My ears on Tuesday had to grind through a presentation about the “stimulus.” I grilled this guy afterwards about transparency. Note that this guy works at the Fed in one of the regional banks. He actually agreed with me and was critical with decisions that have been made, though he is still stuck obviously in the central banking paradigm. I went further and asked him about the Fed’s revenues via interest and how the Fed profits off money they give to the government when it’s the government’s money to begin with! Guess what he said? No comment. I’m not allowed to comment on that.

Xavier March 19, 2009 at 6:43 am

The question Peter never asked is a crucial one: How did America change from mostly industrial, goods exporting country into mostly importing, goods consuming country? It was not because of anything that FED or government did. Maybe it was because the government allowed something that should not be allowed. This structure change is the result of the “blessings” of global economy that benefits the owners of the companies, but destroys the wealth of the public. It creates uncompetitive environment that empoverishes the people in the post-industrialized nations and subsequently kills the production in the producing nations that was built on selling to them.
Can Peter explain how Americans are going to sell their cars to the Chinese with the difference in manpower cost in both countries (not mentioning the Chinese administrative protection of their market)? And, related, how is the market going to move the people from the service sector to the industrial production without inflating the purchasing power of the dollar?

JPM March 19, 2009 at 7:17 am

Ed post- Absolutely got it right about Schiff. “His client portfolios have done terribly in the past year or so. As for long term strategy, not much use if you are a client of his who has lost so much of their capital.”

Granted Schiff called the crisis but recommendations of foreign equities were hit just as bad. What solice is there in that? And now he has amnesia about that point.

Robert Prechter of Elliott Wave called it right (especially deflation) AND made correct recommendations…ie: Cash is king.
Schiff cost former followers like me a LOT of money.

newson March 19, 2009 at 7:58 am

to jpm:
yes, prechter was right about the melt-down, but if you’d shorted all the way up to the top which he’s been calling for years, you too would be broke. and i seem to recall his call that gold was headed for $250….
elliott wave theory: waves in waves in waves…pass the phenergan, please.
there’s no deflation, only deleveraging. look at the tms chart.

i respect gurus who ‘fess up.

newson March 19, 2009 at 8:08 am

to xavier:
i wouldn’t be so kind on the fed. bear in mind all trade is guided by prices. if a country like the usa is able to grow its money supply enormously, whilst not facing seriously competition until recently as the premium reserve currency, it’s possible that the usd has been overvalued for years.

add to this the chinese mercantilist preference for an undervalued yuan, and you have a sure-fire recipe for exporting a large amount of us manufacturing. massive and prolonged mispricing of currencies never occured under the (imperfect) gold standard.

fundamentalist March 19, 2009 at 8:38 am

Xavier: “How did America change from mostly industrial, goods exporting country into mostly importing, goods consuming country? It was not because of anything that FED or government did.”

The feds played a big role in it. Check out the chapters in Dr. Reisman’s book “Capitalism” on inflation. You’ll find that inflation destroys capital accumulation by 1) defeating the purpose of depreciation (the amount depreciated never keeps up with inflation so it can’t replace equipment) and 2) taxing inflated profits instead of real profits. Inflation leaves manufacturers with less money to invest in new equipment. In addition, taxes and regulation, as well as unions, increase the costs of manufacturing. The state and the fed have done everything in their power to destroy manufacturing in the US.

John Saputo March 19, 2009 at 9:03 am

I have read many of your comments but I think some of you are reading far less into what Peter is saying.
The so called meltdown has started but the floor has not crashed as yet. It is not as important to make huge profits on your money as it is to retain the value of your money on Euro and Asian stocks. When you get paid in foriegn currencies that are not so debt laden the value even in a flat stock will double or more your US currencies when hyperinflation hits and make no mistake it is coming! I look at gold and silver and if I am fortunate enough to buy currencies from a country like Australia or New Zealand and if I buy good solid stocks that are paying dividends and not losing huge amounts of value over the next five years I will feel like I am winning. But winning will be very sad for those not prepared. I am watching at the end of the month and first week of April the G20 meeting outcome very closely and I hope no surprise hits us regarding a “global agreement to re-valuate all currencies”. The new world disorder is upon us!
John
Jacksonville, FL

Rob March 19, 2009 at 9:24 am

For those of you who say Peter gave bad investment advice but can see that he is right about the collapse all I can tell you is this.

You saw on the MSM how everyone laughed at Peter for YEARS said he was wrong and kept “proving” it with how much the stock market moved up when he said it would collapse.

You people are now THOSE MSM takling heads saying “see Peter does not know anything, the dollar is climbing and his recomendations are falling.” The talking heads kept on worrying about the day to day market, but Peter keep his eye on the Big Picture and the LONG term.

He was right then and I believe that he is right now.

Remember 90% of people thought that the high market was real and only pulled out AFTER it was obvious what was coming.

Right now those same 90% are still following the herd off the cliff. When it becomes obvious that Peter is right it will be TOO LATE.

At that point the people who were buying these stocks while 90% were selling will make out like a bandit. But the herd will loose everything.

The BIG PICTURE Long Term truth is what is important not the insane fluctuations of an irrational market, which is what we have now.

I knew Peter was right but I also knew he would be early. I bought 100% gold and silver and held off on the stocks for that reason.

But I see a bottom in Asia coming soon and a little later Europe will climb as we fall into further chaos.
I will be buying with both hands very soon.

Remember everyone KNEW Peter was wrong before, just like you do now, I would not want to take that bet.

hungry March 19, 2009 at 10:05 am

Who needs GOV Money , the States can call an outside source for their lending needs , there are a ton of ETF funds out there fired up and ready to go , to compete with the GOv and all their funny money , Got Gold , look to it as your stimulus lender of the 21st Century !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

sam March 19, 2009 at 11:09 am

Brian Macker,

when I wrote he got the short term wrong, I didn’t mean from a investment advice point of view. I meant from a prediction point of view. He expected a temporary blip downward in foreign markets, but nowhere near as large as this.

His investment advice was long term, and I suspect he’s got that mostly right – the US dollar can’t stay high as the Fed prints money like crazy and the government borrows like crazy.

jrj90620 March 19, 2009 at 12:51 pm

Great common sense commentary.Didn’t even get seasick with his constant swaying on the boat.Next time do the speech on firm ground.

John March 19, 2009 at 3:05 pm

So Peter’s recommendations of foreign stocks, commodities and precious metals sold off with every other asset class. Shocking. Of course many of those asset classes have seen spectacular rebounds in the last few months. Many precious metal stocks for example are up 100% or more.

As others have pointed out, the real crash is still coming and that is the crash of the dollar. And when that day comes, Peter’s investment theme will be rewarded. As Peter says, he’s not playing to be ahead in the first quarter, he’s playing to be ahead at the end of the game.

Tom U March 19, 2009 at 3:35 pm

Xavier:

Re: “Can Peter explain how Americans are going to sell their cars to the Chinese with the difference in manpower cost in both countries (not mentioning the Chinese administrative protection of their market)?”

Simple. Soon the USD will decline in relative value due to all the reasons already pointed out. The standards of living between US and China will narrow significantly. US car makers would have gone bankrupt and new smaller makers will come in to replace them. Using US vastly superior auto technology, US will be able to design and make enough higher-end autos for the Chinese car market to reap a profit. Buick made in China is a hot seller in China you know. Can this be ‘outsourced’ back to America? This can happen. But will it happen? Probably not. Chinese government trade policy will make sure this never happen. While America turned free trade into stupid trade, the Chinese don’t do dumb trade, period.

Mashuri March 19, 2009 at 5:56 pm

You guys do understand that the ticking time bomb called Eastern Europe hasn’t really exploded yet and how deep Western Europe is in it, right?

http://news.goldseek.com/GoldSeek/1236193200.php

Austria, Britain, Italy, Greece and Spain are all in serious trouble and will bring the more fiscally responsible countries (like Germany) down with them. Couple that with the new wave of commercial/construction real estate and consumer credit defaults that will hit all financials this year and we’ll realize that the previous down legs were only warmups. Why anyone would choose to expose their capital to long-term bullish calls on ANY stock or bond worldwide is beyond me. The only thing I’m sitting on is my physical gold bullion stash. All other investments I have are reevaluated daily — and I try to respond to them by what the market is doing, not what it should be doing. To those of you that call my behavior speculative, I counter that, in today’s unprecedented turmoil, it’s less speculative than any non-physical-precious-metal, long-term bullish “buy & hold” strategy. You guys (and Schiff) have the macro fundamentals right already. Arm yourself with some education on technicals (and emotional detachment — easier said than done, I know…) and you will find yourself getting a better handle on the short and medium term behavior.

Gerald Brells March 19, 2009 at 6:09 pm

Have you noticed how difficult it is to get information on the foreign companies that Peter has recommended? Try to find a pe or earnings or anything else about his companies on the internet and you will find almost nothing.Does Peter get more information than his customers? My account went from 50000 to 23000 in less than a year.Also all of the dividends have nearly disappeared.
GKB dentist

Andrew March 20, 2009 at 8:43 am

Has anyone got a transcript(or the link to it)of Peter Schiff’s speech on ‘Why the Meltdown Should Have Surprised No One’? The net speed in my citi is slow to watch the youtube version.
Thank you.
Rgds.

Steven March 20, 2009 at 12:14 pm

I like the Austrian school phylosophy but to pursue free market to the extremes will likely to bring upon too high a human cost that a civil society are willing to bear.

For example, the natural law of selection don’t really care if 10million disable people perishes as long as the 290 million rest will be much much better off.

On the other hand, lefty wants the 10 million to live a decent standard of living even if the rest of the 290 million will be far worse off.

We need to strike a balance. 75% Austrian, 25% Democrat style government may be a solution. To the extremes, neither works.

C. Evans March 20, 2009 at 12:23 pm

Steven,
If you really think that humanity is so cruel as to allow its helpless members to perish, then how would creating a government which comprises these same callous individuals make life better? Seems to me if humanity is that corrupt, we’re doomed with or without a government, but at least without a government the decline will be slower.

I would also suggest should study more Austrian philosophy before you comment on this sight. There is no middle ground between freedom and socialism. As Mises pointed out in his essay Middle of the Road Policy Leads to Socialism, every government intervention leads to unintended consequences which the government deems worse than the problem it is trying to solve. The goverment intervenes again which leads to more unintended consequences which then leads to more government intervention. The cycle continues until the economy becomes socialist. If you have a rebuttal of Mises argument, then post it.

victorp March 20, 2009 at 2:28 pm

Alan K.
Real estate for rent is no good because if you have read Adam Smith you would notice that this is not a productive asset as the tenant need a job (source of income) to make money to pay you. So residential real estate, even if it look like an asset, is not.

victor

D. Mac March 20, 2009 at 4:14 pm

So what I don’t exactly understand, is how are foreign markets ever going to benefit if, and when, the the U.S. Economy collapses under the burgeoning weight of its service obligations for that debt?

For if any benefit were to be reaped, those countries would first have to completely divest themselves of the dollar. But then exchange it for what?

Perhaps if the U.A.E. and the Saudis have their newest Bank up and going after their recent 1.3 Billion in real Gold purchase, I could theoretically see a global flight to their currency as its actually backed by something other than SUV’s, Big Screen T.V.’s and defaulting homeowners.

Schiff has, as part of his investment strategies for his clients, the Perth Mint? This is nothing more than holding a foreign futures contract. And then only a benefit if you decide to flee the U.S. due to the fact that many of your investment assets would be stuck here. But seriously, the Perth Mint? Yeeeahh. And furthermore like the government of Australia wouldn’t just lock down any possibilities of financial flight should the U.S. dollar crash in a feeble attempt to avoid the same fate. Nothing against Schiff but good luck with that financial stratagem going long or short. Its just better to buy the real thing here and now. Paper is always going to be just paper, and when Rome is burning, I’ll stick with the less flammable.

While I completely agree with his logic and reasoning as to how we got into this mess. I can’t say he gives a complete picture on how exactly one can avoid these ills when they in fact will spill way beyond our currency’s borders given the inexorable financial ties; and thus, the unquantifiable entanglements with other world currencies. Not to mention factoring in the inherent complexities of an ensuing civil unraveling globally should that happen.

The very best way for bloodless revolution to ensue and to thus perpetuate the change necessary in my humble view is to simply switch to the very end game currency now; that being, Beans, Bullets, Gold and Silver. After all, if those that decree our money is valuable because they say it is, were to suddenly realize they have no clothes, how or who could stop it?

The “Federal Reserve” is a private consortium of banks that have perpetuated the lie that Debt, is really money. It would be a bloodless revolution should every single working man, or woman, one day just decide they wanted Gold or Silver for their daily wages instead. Sure the Government could outlaw Gold or Silver but if nobody wanted their phony money, where would their power be then?

Rich March 20, 2009 at 6:02 pm

Schiff is correct – everyone should feel it. I have been saying for years — “What does anyone do ?. In other words – I looked at my neighbors – stock broker, banker, real estate agent, insurance, lawyer — all service sector fluff. No real wealth creation – myself included (safety inspection company). The only one who made something of value was a high end home builder. All of the other stuff is parasitic fluff – shifting $$ – no wealth creation. Good for a time but in the end – it will all go away. Now I live in an area w/ a large Gov’t Army base – we may escape for a time with the superficial influx of Gov’t cash. But the market will, in the end, level the playing field – And the hangover will be painful. — Rich

akira March 20, 2009 at 8:29 pm

Thank you for inviting Peter to speak and posting this video to the web. Why can’t we get a genius like Peter to come in and level with the rest of the US and fix things before we’re forced to live through a total disaster??? oh well, another video to play in a couple of years and show people that there were people who knew the problem and the non solutions that were being touted by the Obama deception!

snoopyjc March 21, 2009 at 12:41 am

For all of you that are complaining about Schiff’s stock picks – I just looked at my EuroPac account, which I opened on 11/17/08 and saw:

Gold – up 28.8%
Anhui Conch Cement – up 19% (since 3/10/09)
China Life – up 6.3%
Skyworth – up 68.4%
TeliaSonera – down 3% (I’m trading this one in for Crescent Point)
Vitasoy – up 1.1% (since 3/9/09)

So, I don’t know what everybody is complaining about!!
–joe

Steven March 21, 2009 at 8:40 am

C Evans -

It is ridiculous to suggest that government action always lead to the society to be worse off. Some (probably a majority of it) actions probably lead the society to be worse, but some obviously does not. Even Milton Friedman etc does not exactly thing education should be wholely and solely run by private enterprises. Defence, police forces are unlikely to be better run by private enterprises. Small government does not equate NO government.

If there is a time machine, it would be nice to send you back to the 16th century american where there was very little government and let you be there with just a tiny bits of gold.

The key rebuttal against government intervention is that government does not have enough information (as provided by free market price signal) to make the right choice. Even if government does not have the information and simply stab in the black, probability dictates that they got to get some of those right.

There are also issues when private monopolistic enterprises grow so big that it behaves like government (set prices as tax, eliminate competitors through use of force). I don’t suppose that you also want anti trust legislation to be completely scrapped so that you can pay a bit more for the copy of windows on your machine and if you ever infringe the license, to have privately hired Microsoft police come knocking at your door ?

Very few things works when going to the extreme. If you believe otherwise, I suggest that you go to your local library and read up as many history book as you can.

Lawrence March 21, 2009 at 11:34 am

Peter has a solid grasp of the fundamentals and is a great communicator. he was also spotting the fundamentals early on even though as another poster correctly says, we have only just got started on this road to ruin. This whole fiasco is about to turn a lot nastier and the only risk is that as before people dont quite believe the end prognosis and get prepared. There is only one way this can all end and that is with a huge collapse in our living standards along with all the social unrest which comes with it. Anyone trying to dabble in the markets these days are plain fools. Start trying to preserve whatever wealthyou have with physical gold and silver.

Lee C March 21, 2009 at 1:31 pm

Great discussion great video!

I’d love to stay and add some value here but I have to run.

Just want to say I’m glad I was lead here.

All the Best, Lee

Bill March 21, 2009 at 1:48 pm

I have a minor in economics and have studied several market crashes. There are many correlations that this downturn has with past crashes – over expansion, over leverage, sudden inability of investment banks and trusts to sell bonds or equities related to the preferred industry of choice in which to speculate. In this case 2008 was housing/homes. In 1873 it was the US Railroad industry, In the 1990s it was the Internet Bubble, they’re all the same. Had I studied systems theory related to economic functioning I would have seen this coming. LIG Capital Management in Oklahoma City saw it and moved to cash in 2007. They pulled completely out of the markets for their clients. I bet those clients rewarded LIG handsomely…I certainly would have.

Schiff2012 March 21, 2009 at 1:59 pm

Thanks to Peter, I bought a stock in december 2008, and as of today March 21st, I’m up 49%. Anybody want to guess what it focuses on or what country its in? Anybody want to guess what currency or country it’s NOT in? (oh- my ‘exit’ strategy is called a trailing stop-loss order)

Peter Schiff now knows what NOAH went through. People don’t like to hear that they are WRONG…let alone that YOU are right. It’s part of being a fool, they cant help it.

Keep up the good fight Peter and if you goto my site, I’m putting up a dvd rip of this ‘sermon’ for download so you can burn to a disk and show a friend on their T.V.

May March 21, 2009 at 2:26 pm

Peter can easily put all the blames on the government for this time, how about the big depression? Back then, there were not Freddie or Fannie, not FDIC, no social security. Who does he blame for that disaster.

How can he assume that without FDIC, people would be more cautious on their deposit? Government never, ever guaranteed people’s house price would go up forever, people still jumped in.

Just as insufficient as the government is in handling the economy, free market is an illusion also. Because this free market is no magic but the collective action of uninformed, stupid, and greedy people. How stupid individuals will come together to run a magical, never-wrong free market economy?

tjmmz9843 March 21, 2009 at 4:39 pm

I am a big fan of Schiff’s. He is a really great teacher and speaker.

I’m such a big fan that I invested with his firm several weeks ago. The Mish article was making the rounds, so I knew the stories about people who lost 60% or more with Schiff because he invested them in foreign equities and commodities back at the dollar-height of those bubbles. But I figured, we’ve had massive corrections, and the dollar is riding high-ish… what could go wrong?

Well, I’m down around 15%. In 4-6 weeks. My Euro-Pacific broker picked 11 investments for me and 9 are down. He put me in a couple of Canadian oil trusts just before they announced dividend cuts. I thought I was paying him his 3% commission to know about stuff like that and steer me clear.

I understand about long-term investing. But in the last 4-6 weeks, the Hang Seng and FTSE indexes are *not* down. (They dipped, at which point I was down -25% at E-P. They came back up, bringing me to -15%.) In other words, the indexes are beating my E-P broker, out of the gate. I could be doing better if I’d gone with foreign index funds, like I’d originally planned.

So my advice is, listen to Peter Schiff, but don’t invest with his firm. If you want to move money into foreign stocks or commodities, open a Vanguard account and pick regional index funds, country and/or sector ETFs.

I’m not going to pull out of E-P, but I’m not going to put any more money there unless I can get a highly recommended broker. I gather that some E-P brokers are better than others. If anyone can recommend their E-P broker, please let me know the name.

tjmmz9843 March 21, 2009 at 4:53 pm

# snoopyjc – For all of you that are complaining about Schiff’s stock picks…

Great, joe! So who is your E-P broker? Mine put me in Skyworth and that is just about the only one he picked that is up. He didn’t pick the other names you mentioned.

Alex March 21, 2009 at 6:39 pm

In principle I agree with Peter’s logic but one thing missing is political situation we are in. If as advocated by Peter we should bankrupt all companies being currently bailed out this could bring unemployment to 20-30 million. At these rates I would not be surprised to see social turmoil and ultimately collapse of capitalistic system. The government is not talking about it but I’m sure it’s one of the major worries. We have to remember that China is still communist country.

John Young March 21, 2009 at 8:03 pm

What Peter is saying, that we are headed for an economic disaster that is unprecedented – I believe whole-heartedly. But this might only be the tip of the iceberg. Economic problems on this scale usually sponsor political difficulties and cause even wars. That is what I am most concerned about. If the unthinkable happens the economic problems will look like a banana cream pie!

Thank you Peter for the warning.

John

Gil March 21, 2009 at 9:21 pm

“You saw on the MSM how everyone laughed at Peter for YEARS said he was wrong and kept “proving” it with how much the stock market moved up when he said it would collapse.” – Rob.

If a prophet keeps declaring doom&gloom will occur this year for years on end – is he enlightened or just plain persistent knowing one year will be bad every now and then? I’m sure the baby boomers who bought a bomb shelter and spent years outfitting it might still yet get their money’s worth, but would they be considered ‘wise’ investors too?

“If as advocated by Peter we should bankrupt all companies being currently bailed out this could bring unemployment to 20-30 million. At these rates I would not be surprised to see social turmoil and ultimately collapse of capitalistic system.” – Alex

How many here would like social turmoil if it meant people had to start from scratch but it did allow the old mixed economy to die out and allow a primordial free-market capitalist system to emerge?

Robert March 22, 2009 at 5:59 pm

You people are all fools for believing in this garbage.
Peter Schiff’s forecasts are about as usless as my own forecats. Absolutely no one can forecast the future. Peter Schiff makes a living by selling his worthless newsletter to “suckers” who are dumb enough to buy it. Schiff is no different than a used car salesman.

Tom March 22, 2009 at 10:09 pm

So”schiff seriously erred in his strategy in recommending foreign stocks over american”?
Wait-for-it!The-last-two-weeks-emerging-stocks-rose-20%.Wait-for-it!

DanielinOhio March 23, 2009 at 11:09 am

Both Peter Schiff and Jim Rogers point out that they are not traders. They do not try to time the markets. They look at the longterm trends and invest accordingly. Their theory is that it is better to move too early rather than too late. Longterm that seems to work. There will be a lot of those in bonds/cash that will be caught off guar and will lose very big. If those of you who want to trade in and out of stocks etc. then you should not be following Peter Schiff or Jim Rogers. Buyer beware!

DanielinOhio March 23, 2009 at 11:18 am

I have not found anyone in the investment community who called this massive worldwide deleveraging that is taking place. The main reason being that nobody knows the amount and extent of the derivatives market since most of it is exempt from reporting courtesy of government. The Hedge Funds and some of the brokerages are exempt from regular accounting standards. HMMM… I wonder why?!

DanielinOhio March 23, 2009 at 1:41 pm

Steven,
You could not be more wrong in every point. Governments make monopolies possible. There are more restrictions by local State and the Federal government to prevent individuals from starting and succeeding in a business than could ever be implemented by businesses. This makes it possible for the large corporations to maintain their market positions. The current Bailout is nothing more than giving privileged Wallstreet Banks free money to buy up smaller banks. They are conslidating the banking industry courtesy of Congress and the Fed. Government always gets corrupted due to wealth and power. That is why the US is in such a bad position economically and financially. Those running government and corporations are totally corrupt. If we had an honset monetary system and individulas could keep what they earn there would be little need for all of the welfare programs for individuals and corporations. Remember that the most evil and corrupt people gravitate towards positions of power. Only governments have the ability to commit genocide. Only governments can ensure a systematic raping of the people both financially and freedom wise. Socilalism/Communism/Fascism all lead to nothing but massive misery for the maximum number of human beings. Allowing others to decide how much you can earn/keep what you earn is bad enough. But they also get total control as to where your paycheck is spent. This is despotism not freedom.

Doni Tamblyn March 24, 2009 at 8:00 am

So unregulated corporations would NOT seek to form monopolies? What corporate activities have led you to such a sanguine opinion of their social conscience?

It has long been my observation that the business model that virtually every corporation tends toward is “the company store” scenario of the coal corporations in the early 20th Century. I’m sure you know all about this: Trading at these stores was compulsory for the miners, using “currency” (scrip) issued by the coal corporations themselves. Not too surprisingly, prices at these stores were far higher than those charged by independent retailers. Store-keeping coal operators could actually undersell the market by cutting the price of coal below cost and making up their operating losses out of company-store receipts — one Ohio coal operator worked two mines for thirteen months and made a profit of only $287. During the same period his store earned him a net profit of $22,000!

Debt-peonage is the ideal business model, if you look only at the numbers, which corporations, of course, tend to do. I don’t recall the name of the humanistic businessman in the last century who commented that this was a far better system than slavery, because slaves didn’t pay you for the privilege of working for you.

Interestingly, this corporate tendency does not take place because corporations are inherently “evil,” but because their structure has nothing to do with morality. They are structured solely to make profit — to be profit-making machines, if you will. It’s like the way a shark is structured to eat anything that moves. You don’t blame the shark for this — indeed the shark performs an important ecological function. But you also don’t let sharks swim around in your kids’ wading pool. You acknowledge those tendencies of the shark that are dangerous to you, and act appropriately. This is what government regulation is *supposed* to be about.

I cannot understand how this very necessary regulation is so reviled here in the US. To cry “socialism” when governments “interfere” with corporate activities is quite ridiculous. Would any of us really like to have no socialism? Would you enjoy building your own bridges, roads, and water and power supplies, while educating your own children, policing your own plot of land, and maintaining your own medical facilities? Any time people form communities, you have socialism. Socialism is in no way synonymous with oppression, and I wish people would stop this sloppy thinking once and for all.

Governments “make monopolies possible,” as you say, when they are controlled by corporations, which they currently are. And they need not be. For a brief while at the beginning of US history, they were not. Only over the past century have we come to say that “the business of America is business.” Well, possibly it’s time to rethink that. When I lived in Canada for 20 years, it was harder to get rich, but frankly my quality of life in that more socialistic country was much higher. How long will we keep chewing on this meatless bone?

Zack4 March 24, 2009 at 9:51 am

I’m curious about what may happen to my income. My line of work is entirely dependent upon state and federal medicaid funds. If the gov’t becomes starved of revenue, I would imagine these funds would be slashed deeply. Mind you, I’m not saying they shouldn’t be, we have far too many people on medicaid. But it seems to me what would ordinarily be a quite secure job seems to suddenly be very insecure.

Brian March 24, 2009 at 2:32 pm

I’m amazed at the lectures from people who haven’t invested with Schiff on how those who did invest with Schiff should not criticize him because he is “long term”

Look folks, the guy is an investing idiot. Look up the following stocks:

Sterling Mining Corp
Babcock Power
Oz Minerals
Minera Resources

These are Schiff portfolio stocks. They are basically bankrupt. So how does my “long term” investing plan include bankrupt companies trading as penny stocks? His organization is a mess. I put a sell order in and it took them over a week. I just got my 2008 tax information from them and its March (and it was revised!). When I did sell they came up with a formula that basically guarantees a bigger comission then stated by percentages. I can ellaborate but basically if its a “losing” stock they charge more. They are incompetent investors and aren’t out for you. Real experiences trump what you may think about him through his speeches against the Fed. If he decides to run for office the opposition will have a field day with people who invested with him (and this is why he probably won’t run).

Keep in mind folks – bankrupt companies don’t pay dividends

Brian March 24, 2009 at 2:56 pm

As I pick up my mail today .. my 3rd tax statement for 2008 from Europac in the mail. 2nd revision I guess you would say. Incompetent. Am I to expect something after April 15th as well?

Mashuri March 24, 2009 at 4:24 pm

Wow, how timely for this Mises blog entry:

http://blog.mises.org/archives/009663.asp

This is what Peter missed and why Brian and many others can’t wait out their losses. Bankrupt investments don’t rebound.

michael March 24, 2009 at 5:26 pm

Brian and others,
I’m amazed at the lectures from people who have invested with Schiff and gave up after a few months, because they believed they would only go up and not one stock would turn bad!

And Brian, you forgot to point out the great dividends paid by never-going-bankrupt US companies.

On March 18, 2009 9:28 PM I wrote here:
“I started investing with Peter on September 30th, averaged-in ’til December, and am 8% down right now.”
On March 20th that had turned into 6% up overall. For example I have 4 stocks down 50%, but one up 130% and another up 200%.

To me everything is moving in the right direction!

Brian March 24, 2009 at 10:06 pm

Michael – I’m glad you feel good about your gain you have seen in your stocks. The numerous people I know that invested in Schiff have all lost big money with him. I mentioned four stocks in my post on Schiff portfolio stocks. Of my 20 stocks, 3 were in my “conservative” portfolio. I checked on them just now. They are all still in the mud (from dollars per share to cents per share). There is no recovery on these losses. I think you are the exception rather than the rule in investing with Schiff. I’ve known 3 other people who had my experience as well. Based on the way he conducts business, his poor research and frankly his inflated ego I would tell anyone not to invest with this guy. If Peter Schiff truly believed in capitalism then he should be out of business as he is a failure. Many good people trusted their savings to weather an economic storm and he didn’t give due diligence to protect them. And secondly now that they have been killed he goes around telling stories about how we was right. What baloney.

newson March 24, 2009 at 10:42 pm

the “long-term investment” is the short-term punt that went wrong. or that’s how it used to be when i sold shares.

Doug Geologist IN VA March 25, 2009 at 4:16 pm

Absolutely Outstanding and a Fantastic Finish….I have enjoyed the ride with Peter and Jim Puplava since at least 2003…WoW!!!! they were so RIGHT!!! Get Gold and Hold real Money…DONT FORGET TO SEND THE WHITEHOUSE A TEA BAG BETWEEN APRIL 1 AND 15…I THINK IT SHOULD BECOME A HOLIDAY…TIL THEY GET IT!!!

Steve Davis March 26, 2009 at 3:15 pm

Like Peter’s writing, this speech is a concise background on our econmic condition. One disappointing piece that I believe is a bit misleading is his assurance that foreign economies are in better shape.

Trusting this theory, I invested $100K in Euro Pacific last May in a nicely diversified portfolio of foreign investments. Today it’s worth under $50K and it sounds like foregin markets are in worse shape than ours.

I wonder why peter doesn’t address this issue. Hindsight is 20/20 and humility about future projections may be in order on his part.

Goodoldbirdie March 27, 2009 at 7:10 pm

Just wondering, why some of you (like Ryan and Newson among others) consider Marc Faber “Austrian” style or from the “Austrian school”??
He has not much in common with Austria, he was born and educated in Switzerland…! But I guess, for some people, that’s the same as they might not even know the geographic difference…?
Goodoldbirdie

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