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They Just Don't Get it
Financial Sense University ^ | March 7, 2008 | Peter Schiff

Posted on 03/08/2008 5:31:18 AM PST by Travis McGee

Prior to my last appearance on CNBC in October 2007, I had made more than 50 appearances on the network over the prior two years. In those segments, I repeatedly exposed the superficiality of our prosperity, described the American economy as a “house of cards”, pointed out that borrowing and spending were a ticking time bomb rather than a viable plan for long term economic health, and explained how investors could prepare for the tough times ahead. At the time, those forecasts were met with ridicule and led to my being nicknamed “Dr. Doom”. Now that these predictions have come to pass, most on CNBC now claim that no one saw it coming!

In my 2006 and 2007 on-air appearances, to a chorus of sneers and laughter, I predicted the bursting of the housing bubble, the collapse of the subprime mortgage market, the credit crisis, tightening lending standards, waves of defaults, bankruptcies and foreclosures, weakness in financials, retailers and homebuilders, stagflation, surging gold, oil and other commodity prices, soaring federal budget deficits and a collapse in the value of the U.S. dollar. You would have thought that some of the reasons I gave for making those predictions would now be given some credence. They have not.

The current line at CNBC is that, prior to the “unexpected” contagion emanating from the subprime mess the U.S. economy was experiencing a “Goldilocks” era of optimal health. They now believe that if the Fed and the Government can divine the right combination of fiscal and monetary policy, Goldilocks will once again be blissfully picking daisies…or more precisely, buying SUV’s. Unfortunately, as I said then, Goldilocks was, and still is, a fairy tale. In fact, the unfolding economic disaster is a direct consequence of the misguided faith placed in that absurdly optimistic parable. And since they were incapable of diagnosing the disease, is it any wonder that their cures are completely ineffective?

This lack of understanding is further confirmed by the skepticism with which the mainstream financial community still regards my diagnosis. For example, in a Feb 22, 2008 article in TheStreet.com, entitled “Dr. Doom Zeros in on Inflation”, Mike Holland, a CNBC regular leveled two common criticisms often used to discredit me. Holland says “investors who listened to Schiff throughout the recent bull market missed out on some attractive returns in the stock market” and “A broken clock is right twice a day. If you say things are going to be bad long enough, eventually you're going to be right."

What attractive returns does Holland think my clients missed out on? Those who followed my advice invested in foreign stocks, bonds and currencies, as well as precious metals, oil and other commodities. Investors who listened to me instead enjoyed much greater returns by participating in the real bull markets. It’s amazing how few people have managed to figure this out!

The “stopped clock” analogy is one I have been dealing with for years. Those using it maintain that my early warnings invalidate my forecasts. It is precisely because my warnings were so early that they were so valuable to investors. In addition, such charges assume that the current downturn is unrelated to those warnings and that my critique of the U.S. economy was inaccurate until now. My critics, the real stopped clocks, still do not understand that the phony prosperity they were defending and that I was challenging lies at the root of the current crises. When the bubble was still inflating it is understandable that those trapped inside viewed me as a stopped clock. However, now that it has burst, it is amazing how many still cannot get the soap out of their eyes.

If a picture, or in this case a video, is worth 1,000 words, this CNBC match up from August 2006 between me and Arthur Laffer, a CNBC favorite, is priceless. Some of Laffer’s best one-liners include ‘the U.S. economy has never been in better shape”, and “monetary policy is spectacular”. I kid you not -- Click Here and enjoy the show.


TOPICS: Business/Economy
KEYWORDS: cnbc; economics; economy; peterschiff; schiff; vonmises
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To: Travis McGee
I only have 2 boxes of ammo and a pistol.

Am I screwed?

51 posted on 03/09/2008 5:57:32 AM PDT by Lazamataz (Why isn’t this in Breaking News????)
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To: RSmithOpt
Funny how that record figure of $38 billion in bonuses to Wall Street in December doesn’t get a lot of press exposure, neither. Reminds me of the looting in the aftermath of the LA riots and Katrina.

Looting is exactly right. Look at Countrywide's Mozilo: he quietly sold $100s of millions of his own stock last year, while recommending Countrywide as a strong buy to the sheeple and his own shareholders.

52 posted on 03/09/2008 8:14:33 AM PDT by Travis McGee (---www.EnemiesForeignAndDomestic.com---)
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To: meadsjn

Did they really believe it, or were they just knowingly pulling Mozilos? (See above)


53 posted on 03/09/2008 8:15:29 AM PDT by Travis McGee (---www.EnemiesForeignAndDomestic.com---)
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To: Lazamataz

You can always leverage them for more.


54 posted on 03/09/2008 8:15:55 AM PDT by Travis McGee (---www.EnemiesForeignAndDomestic.com---)
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To: Travis McGee

I like your investment style.


55 posted on 03/09/2008 8:23:00 AM PDT by Lazamataz (Why isn’t this in Breaking News????)
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To: Lazamataz

It can be dead bang certain. A lead pipe cinch in a pinch.


56 posted on 03/09/2008 8:32:35 AM PDT by Travis McGee (---www.EnemiesForeignAndDomestic.com---)
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To: Travis McGee
"Looting is exactly right. Look at Countrywide's Mozilo: he quietly sold $100s of millions of his own stock last year, while recommending Countrywide as a strong buy to the sheeple and his own shareholders."

Florida Times Union: FBI begins investigation into Countrywide Financial Corp. for securities fraud

/jasper

57 posted on 03/09/2008 8:59:34 AM PDT by Jasper (Stand Fast, Craigellachie!!)
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To: Travis McGee
You got it, dude!!!

Amazing that don't get more play in the headlines.

The suckers at the bottom 2 tiers of the Ponzi pyramid of the mortgage crap and the American taxpayer are left holding the bag.

Of course it would be very counter productive for the MSM to report the truth of what actually happens in business and government and politics.

58 posted on 03/09/2008 9:23:02 AM PDT by RSmithOpt (Liberalism: Highway to Hell)
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To: RSmithOpt
As I believe in Reagan's trickle down effect for a prosperous economy and I too believe it works in reverse too.

A raising tide lifts all ships - a falling one, lowers them.

Given the multiple effects of ballooning inflation, collapsing dollar, shrinking economy, higher commodity prices, more unemployment, lower home prices, tighter credit, and more government debt... what does one do?

Well, other than be poor?

59 posted on 03/09/2008 9:54:40 AM PDT by GOPJ (A baby can't say Chinese additives makes the formula taste “funny" ... or poisonous,)
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To: Travis McGee; ex-Texan; TigerLikesRooster; jas3; CodeToad; neverdem; ovrtaxt; nicmarlo; Pelham
As I believe in Reagan's trickle down effect for a prosperous economy and I too believe it works in reverse too.

A raising tide lifts all ships - a falling one, lowers them.

Given the multiple effects of ballooning inflation, collapsing dollar, shrinking economy, higher commodity prices, more unemployment, lower home prices, tighter credit, and more government debt... what does one do?

Well, other than be poor?

60 posted on 03/09/2008 9:56:44 AM PDT by GOPJ (A baby can't say Chinese additives makes the formula taste “funny" ... or poisonous,)
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To: GOPJ

You’ll find few people willing to admit that the current real inflation rate is around 16%, but give it 6 months and there’ll be no more doubters. The government’s statistics have been politically manipulated bullcrap for so long that they are completely unreliable measurements.


61 posted on 03/09/2008 10:00:06 AM PDT by Content Provider
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To: Content Provider

It started under the Klintoons. Manipulation of economic data for “the common good”. This whole no nonsense is akin to going on a drunken binge and finding out the tab is due after buying the house a round or two.


62 posted on 03/09/2008 10:09:10 AM PDT by VRWC For Truth (No mas Juan "Traitor Rat" McAmnesty)
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To: VRWC For Truth

The discontinuation of M3 was announced in 2005, and implemented in March 2006. The lack of substance to the reasons supplied by the Federal Reserve for that action leads to speculation that the move was made in order to mask the magnitude of the inflation that is the inevitable result of holding interest rates artificially low for an extended period of time.


63 posted on 03/09/2008 10:19:19 AM PDT by Content Provider
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To: meadsjn; DB

“Millions of Americans have been using their home equity for several years just to survive.”

Over the last few years a number of my coworkers were spending their home equity not for survival but simply to live well. Cars, swimming pools, furniture, remodels, electronics, toys, the California economy was booming and my office mates were helping it boom.

Alas, the bubble stopped and now some are worrying about economic survival. No longer can they run off to a loan broker for a credit fix each time they want to spend.

The fact that borrowed home equity isn’t free money is starting to hit home hard. One has lost three houses, a second is fighting foreclosure, and a third is running up credit card debt because her mortgage just increased $1200 per month to nearly $3k.

All of these people purchased their homes before the bubble with 30 yr fixed mortgages. If they had left their purchase loans intact none of them would be in jeopardy. All of them fell for the lure of easy money. It was like watching people get hooked on drugs.


64 posted on 03/09/2008 4:13:35 PM PDT by Pelham (Press 1 for English)
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To: raybbr

>>Yep. She’s not waiting tables or sewing garments or loading boxes to feed her children.

What a pompous ass she was.<<

I wasn’t saying what she “should” be doing. I was saying she clearsly is not qualified to have the soapbox she had. And she is not a pompous ass. She is actually a very nice person.


65 posted on 03/10/2008 7:50:40 AM PDT by RobRoy (I'm confused. I mean, I THINK I am, but I'm not sure. But I could be wrong about that.)
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To: raybbr

Never mind. I thought you were responding to a different post.

OOPS!!!


66 posted on 03/10/2008 7:51:31 AM PDT by RobRoy (I'm confused. I mean, I THINK I am, but I'm not sure. But I could be wrong about that.)
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