Posted on 01/29/2009 4:38:39 AM PST by dennisw
Our colleague Mish Shedlock did quite a hatchet job on hyperinflationist Peter Schiff the other day - much of it deserved, if the evidence that Mish presented is to be believed. The two have never seen eye to eye, since Mish, like us, is an unreconstructed deflationist. But his indictments against Schiff have less to do with the Inflation vs. Hyperinflation argument than with allegations that Schiff’s actual performance as an investment advisor has not been so stellar as one might have inferred from his high-profile exposure as a doomsdayer. Mish says that while Schiff has been essentially correct about doomsday, his actual investment portfolio got the details completely wrong, especially in its short-dollar orientation. (The same could probably be said of another world-class self-promoter, Jimmy Rogers.)
We won’t go into Mish’s case against Schiff, since it is quite detailed and can speak for itself. (You can access it at your leisure by clicking on the link at the bottom of this commentary.) However, we would like to say a few things about hyperinflation, since, on this score, we think Schiff got it right. He believes that the Fed, having explicitly committed itself to holding interest rates down by purchasing unlimited quantities of Treasury debt, has put the U.S. on a hyperinflationary course. We agree. In fact, and as we noted in an earlier commentary here, Schiff has laid out such a strong case that it is hard to see how he could be wrong. That said, however, we stand solidly with Mish, who notes: “I called for deflation and it is here right now. I do not have to wait for it. The only debate is how long it lasts.”
Hey, Bozo!
We have been calling for deflation ourselves since the early 1990s - in fact had the topic entirely to ourselves for many years in writing about it for Barron’s, The San Francisco Examiner and other mainstream publications. During that time, we had just one question for inflationists: “What the heck are you smoking, bozo?” We even stopped responding to one well-known inflationist’s calls for debate, since we believed that anyone who took that side of the argument did not know his ass from his elbow. But there came a time when we had to acknowledge that any issue that could fool the World’s Smartest Economist, Gary North, was trickier than it seemed on the surface.
As indeed it was. For here were the world’s central banks, pumping like crazy; and yet, none of the asset inflation they had hoped to catalyze occurred. In fact, the opposite obtains: real estate values continue to sink, and financial assets remain on life support. We believe, as Mish evidently does, that this will continue for at least a few more years. One reason we see deflation dragging on for so long is that Obama, in his approach to “saving” the economy, is using fiscal, rather than monetary, stimulus. That is like using gunpowder instead of fissionable uranium. Not that uranium would have worked anyway, since money velocity is too, too dead - and will remain so for at least another 30 years — to bring banking reserves to an inflationary boil. In the end, we have no serious disagreements with Mish, although we do think that Schiff’s hyperinflationary scenario absolutely must play out at some point.
Obama’s Non-Choice
Meanwhile, for reasons that we have spelled out here before, Obama’s nostrums do not have even the remotest chance of success. Perhaps in a decade, when they are seen to have failed conclusively, Keynes will finally be buried forever, a stake through his heart. We would have thought the experience of the 1930s was clear enough to refute Keynesian quackery forever. In any case, urgency and expediency have impelled Obama’s WPA plan forward, and it is politically understandable why neither he nor his advisors has taken the only possible route that would guarantee success - i.e., letting the banks fail (and doing away with the Federal Reserve while this golden opportunity presents itself).
With the economy certain to keep sinking, those who have been hoarding gold have less to fear than investors who have diversified, since clarity has finally come to the Inflation/Deflation question. Whichever side of the debate one took, there was broad agreement about the end result: a Second Great Depression. We are very nearly there now, and nothing can stop it. But there is no longer uncertainty about how well gold might perform, since, as anyone can see, gold has done brilliantly in the midst of a global asset collapse. If the tide should turn, and hyperinflation plays out, it seems highly unlikely that gold would fare any worse, relatively speaking, than it has in these deflationary times. (If you’d like to have Rick’s Picks commentary delivered free each day to your e-mail box, click here.) And here’s the link to Mish’s exposé.
Schiff versus Mish link-—>>> http://globaleconomicanalysis.blogspot.com/2009/01/peter-schiff-was-wrong.html
Ping
"There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved."
-~~Ludwig Von Mises
Schiff is an outstanding communicator and does make a lot of sense. So much so, I went to his Euro-Pacific Capital website to check it out. One thing that did not impress me was that he was hawking Canadian Royalty Trusts (for oil and gas). While these currently pay very high dividends (~ 18%) and are well off their highs, there is a problem. Canada changed the law on these trusts, so their dividend payments (and hence their appeal) will go way, way down by 2011. I found no mention of this factoid on his web site.
That is true about Vanroys, but if you want an American version, look at BPT, or some oil and gas MLP’s like ATN or LINN.
Andrew Schiff, Karenna Gore - New York TimesKarenna Gore, a daughter of Vice President and Mrs. Albert Gore Jr. of Washington, was married yesterday to Dr. Andrew Schiff, a son of Mr. and Mrs. David ...
query.nytimes.com/gst/fullpage.html?res=9C01E1DF1E39F930A25754C0A961958260 - 37k - Cached - Similar pages -
Andrew Schiff, MDMohan Trikha
Andrew N. Schiff, MD
Andrew N. Schiff is an Associate of the Perseus-Soros Biopharmaceutical Fund.
Over the last ten years, Dr. Schiff has practiced internal medicine at The New York Presbyterian Hospital where he serves as an Assistant Professor of Medicine.
He has also been a partner of a family-run investment fund, Kuhn, Loeb & Co., and a consultant for Northwood Ventures, a Long Island, New York based venture group.In these capacities, he has been responsible for identifying investment opportunities and raising additional financing for portfolio companies.
http://www.zoominfo.com/people/Schiff_Andrew_10742316.aspx
Dr. Schiff serves as director of Adams Laboratories.Dr. Schiff is a member of the Board of Directors of the Deerfield Academy and the Henry Street Settlement of New York.He is also a member of the Board of Zanett Inc. as well as of the Overseers of the Brown University School of Medicine.Dr. Schiff has a B.S. in neuroscience, awarded with honors, from Brown University, a M.D. from Cornell University Medical College and an M.B.A. from Columbia University.
Peter Schiff was actually Ron Paul’s financial advisor.
He might of been taken out of the will.
Peter’s dad is Irwin Schiff... Connecticut IRS tax protester saying IRS is unConstitutional. .... I bought a book of his years ago
That must be one divided family. Probably all fighting for the fortune.
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