Why Peter Schiff Isn’t a Serious Economist

“He’s predicted twenty of the last four recessions.”

That was a quote from a libertarian economist who I have a lot of respect for; however I haven’t asked if he’d like to be quoted on this or not so he will remain nameless.

I was at a conference about a year ago; speaking to an economist I have a pretty heavy admiration for. He’s a hardcore libertarian, and from careful research he said something very rare for a libertarian today: he said, “The future of the economy does look good, but with some problems that could prevent future growth” and I thought, “Yes!”

I was so happy that a libertarian economist finally threw away this theory of “the next collapse”; a theory which has become, at this point, an almost Alex Jones level conspiracy (in which many libertarians are saying “any day now the market will crash!” almost looking forward to it).

The man we spoke about was none other than the poster child for “collapse” rhetoric, Peter Schiff of Euro Pacific Capital. Peter Schiff, the man who has predicted twenty of the last four recessions.

What I like about Peter Schiff

I think he is a very commanding speaker with an ability to explain economics to people well and talk about issues. He makes Ron Paul, Gary Johnson & Rand Paul look like complete morons.

At this point, he very well could be the best pick for the LP nomination for president in 2020, if no one better runs.

Unless we get Justin Amash, Bill Weld, Andrew Napolitano or Mark Cuban willing to jump in, I’ll take the financial entrepreneur worth $70 million who goes on national TV regularly to talk about the future of the economy.

I’ll certainly take it over over a fight between Austin Petersen, Adam Kokesh, and Larry Sharpe – fighting for Russia Today interviews and talking about whose blog discussing the NAP is the best.

I was a big supporter of Peter Schiff 2010 where he ran as a Republican for US Senate.

I donated about $200 to him and felt he was the most important man to elect in 2010. I preferred him over Rand Paul and still would prefer him in the senate over Rand, because he is a principled libertarian and just more knowledgeable than most.

I like how he is just a blunt freaking man. If he did run in 2020, and by some miracle made the debates, he would be the single best libertarian alive today to challenge Donald Trump on the issues. He’d have no shot in hell at winning, but it’d be a debate to remember, where he’d kick ass.

However, I buy stocks. I look at trading every single day. I read a lot on economics. And I’m just going to say, I take Peter Schiff’s advice on the economy as seriously as I take Trump’s kids explaining why they support war with Syria.

My Problem with Peter Schiff

My problem with Peter Schiff is quite simple. He has never not said the economy is about to collapse, and just runs with this notion that he was the lone economist predicting the recession, time and time again, which is a proven lie. So let’s prove why this is false.

First off, he says he predicted the recession of 2008. He says he was the man getting on TV saying there’s a housing bubble that’s going to burst and people laughed at him. He was this lone warrior.

Let me explain; millions of people, globally, called the housing market bubble for years. We can even go back to Jib Jab videos from 2005 talking about how the housing bubble is about to burst. That is nothing unique at all.

There recently was a very popular and shockingly real movie called the Big Short. It talked about a handful of guys (who were in actuality many, many, guys) who expected a recession to happen from the housing bubble and made millions and millions of dollars off of it.

There’s a decent amount of evidence to show that Peter Schiff’s fund didn’t really profit as much, off of the recession, as many other firms which bet against housing.

It also looks like he, and other libertarian minded fund managers, bet against the economy over just housing which short term had gains, but longer term didn’t.

There are interviews with Peter Schiff (since about 2003) where he calls out the housing bubble; we just never get specifics on it. We never get dates. He sees it happening, but we never get details, or numbers. We never really get anything other than this conspiracy-theory like idea that the economy will collapse. It’s handled in such a vague way; it could be 2004, 2008 or 2020 – It’s just not credible.

After 2008 and after his senate run, Schiff became the man to never shut up about how he predicted the recession, but this is a trend.

In the last few years I’ve watched the Schiff podcast saying gold might double again.

He’s said student loans are going to tank the economy. He’s said we would have a collapse before the 2016 election. He says the housing bubble is still about to collapse.

Schiff’s podcast also said credit cards are going to collapse the economy this year, but so far all I’ve seen is…nothing.

There have been no collapses and no accurate predictions for almost seven years. However, scaring a bunch of young libertarians and getting them to buy gold off of his website seems to be the plan.

It’s just bizarre. It’s a clear case of a guy who never claims the positive, but will run the story of the negative and eventually be right. It’s almost like a psychic on the streets of Manhattan, giving very generic and obvious prediction about someone and convincing them they are right, these things will happen. That’s what Schiff does when he speaks about the economy.

Interviewer: “Where’s the economy heading Peter?”

Schiff: “We are absolutely doomed. The debt is going to make it another ‘08. I was right before, so bail now.”

Interviewer: “Wow! When will this happen?”

Schiff: “It’s hard to tell. The government messed up things, but the longer it takes the worse it will be!”

Interviewer: “What can we do to stop it?”

Schiff: “My website sells gold…”

… And that’s all it is.

Peter Schiff has a place in the economic talks happening, but for the love of God, don’t put your paycheck into his podcast suggestions.

This post was written by Charles Peralo.

The views expressed here belong to the author and do not necessarily reflect our views and opinions.

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  • jmsgrdner

    This is a terrible article. Why don’t you teach us something about economics then? It is very easy to point fingers and judge other for sticking to and preaching what they believe. I don’t care if Schiff is wrong. The guy has the balls to speak his mind amidst overwhelming disagreement, including yours. That is why he is usually right.

    The US debt has been growing for more than a century – calling for a collapse 10 years early is about right on time in that sense.

  • Kenneth

    Why wouldn’t you want Austin Petersen to run? He’d be an amazing candidate for the LP.

  • Philip McVey

    I hear where you’re coming from and some of your points are valid. Peter likes to be a showman and use a lot of colorful metaphors. You obviously disagree with his conclusion however your main analysis seems to be against him and not his economic models or process.

    Peter isn’t thinking in months or years but inevitable consequences. The issue is that there is a complex world that doesn’t play by the law or rules. That makes timing impossible. Should he not predict anything then? If he did that then there would be no urgency for the change he is advocating.

    There is the concept of self-negating prophecy which is the inverse of the self-fulfilling prophecy. If Peter’s warnings cause change that stops a collapse then he will be “right” even though he is “wrong” from a prediction perspective. He’s thinking systems, policy, politics, incentives, and moral hazard.

    Over the past couple years I’ve read, watched, and listened to so many books, analysts, and commentators who all have different perspectives and experience that I’ve lost track of how much time. Somewhere between 2,000 – 3,000 hours.

    One of my favorite analysts is Jim Rickards precisely because of his process. He reminds me of the qualities of the best forecasters as described in the book “Superforecasters” by Philip Tetlock. They are data dependent and never operate from an absolute inflexible perspective (e.g. Harry Dent). They update as events unfold.

    Is this 100%? No. You can’t trade in this market with that analysis – it’s too manipulated and completely irrational. Trend-following is almost the only strategy that works in this environment.

  • Charles Peralo lacks credibility. His own words convict him.

    “I was a big supporter of Peter Schiff 2010 where he ran as a Republican for US Senate. I donated about $200 to him. ~ Charles Peralo

    A big supporter would have donated tens of thousands of dollars and would have engaged in fundraising that would have netted hundreds of thousands.

    Schiff never predicts the sky is about to fall. So Charles Peralo either is stupid and fails to comprehend what Schiff says or is disingenuous in his claim.

    Schiff complains that an economy geared with too much borrowing and spending by law givers, too much (consumer) credit, too much retail services and not enough manufacturing is bound to collapse when lenders stop buying government bonds. That is Schiff’s broken record.

    Theoretically, Schiff is right.

    Schiff is a pessimist much like Marc Faber and Jim Rogers are. They make entertaining TV in what otherwise would be dull TV — financial news.

    Currently, Schiff is wrong about the state of the economy as most people are. They are so precisely because they believe in the phony concept of “real dollars”, for example, deflating GDP quoted in current dollars by using past current dollar inflated GDP as the deflator.

    Anyone who hasn’t been indoctrinated by someone in an economics department at a university and who has suitable reasoning skills would see straight away in the fallacy of trying to measuring the length of something with an ever changing yard stick or measuring the weight of something with a scale that starts at random weights other than zero.

    The economy continues languish in the Greatest Depression after the collapse of the biggest credit bubble in the the history of mankind, the Greenspan-Bernanke Great Inflation.

    You can read about this on the True Dollar Journal. Click on my name above and in my profile click the link. On the main page is an article titled: Q1 2017 GDP IN TRUE DOLLARS™ SHOWS THE GREATEST DEPRESSION IS STILL ON. THE OBAMA PRESIDENCY WAS AMONG THE WORST, PERHAPS ALL-TIME.

    It’s strange, but this libertarian site does not allow links in DISQUS comments.

  • Justin C.

    Schiff’s analysis is largely correct if you look at actual stock market valuations.

    At the current CAPE ratio for the S&P 500, 150+ years of stock market history shows that you’re looking at a potential 3% upside in the long term, in exchange for a loss of at least 40% of your purchasing power in the near term (whether through correction or inflation) just to return to a median level of valuation.

    Priced in gold, stocks have barely recovered from their 1929 valuations, and have not recovered from their 1960s, 1999 or 2007 valuation.

    (Links are easily available to support both of these factual claims, but this website doesn’t appear to be approving this comment with them inserted.)

    That said, of course having stocks is wise. It’s just wise to buy stocks or indexes that are fairly priced, rather than ones that are wildly overpriced by any reasonable metric.

    Compared to his benchmarks (which are not the S&P) all of Schiff’s stock funds are actually among the very best performers in their class.

    Reading between the lines, it sounds to me like the author is secretly reacting to Schiff’s recent (and very sound) remarks on Bitcoin.

    The blockchain is here to stay, no doubt, just like the internet was in the 90s. But that doesn’t mean that investing in Prodigy and AOL is a winning look.

    Schiff is right about that much. The blockchain is great, but Bitcoin has no clear lasting competitive advantage over competing cryptocurrencies.

    That’s said, it could go to $20k before it collapses. Just don’t delude yourself into thinking its value is secure and that diversification into equities and real assets is unnecessary.

  • LeeHazelwood

    Why not listen to economists who did call the recession correctly instead? When I heard in 1997 that there would be a 2008 crash I was sceptical, even though it was from an economist who had predicted a late 80’s early 90’s recession back in 83.
    Well, we know how that call turned out.
    In fact it’s easy. 18=14+4
    So…
    2026 or thereabouts
    Look it up, make some money, learn some real libertarian laissez faire economics while you’re about it and stop listing to permabears whose ideology overrides the evidence every time.

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