Wednesday, 28 January 2009

Was Peter Schiff wrong?

Mike "Mish" Shedlock thinks all of you excited by Peter Schiff's outstanding criticisms of the Fed, his explanations of how the US Government wrecked their economy, and his predictions-in-advance of the coming crash should remember that he hasn't, and isn't, getting eveything right.
Schiff's overall thesis has four legs, reminds Mish, only the first of which has so far come to pass:
  1. US Equity Markets Will Crash.
  2. US Dollar Will Go To Zero (Hyperinflation).
  3. Decoupling (The rest of the world would be immune to a US slowdown.
  4. Buy foreign equities and commodities and hold them with no exit strategy.
It's worth reading his criticism, since it looks in some detail at the issues of decoupling, and specifically of what might be happening in China. [Read it here: Peter Schiff Was Wrong].
Robert Murphy, who amusingly calls this The Mish-Schiff Tiff, points to two dissenting opinions, from the Economic Policy Journal and Tim Swanson, who have rushed to Schiff's defence.
If these are issues that concern you, then it might be worth following the debate as it develops.


  1. Peter Schiff is wrong about these problems being restricted to the USA (but he is right about the rest of it). Housing bubbles are at the root of the problem, and these have occurred in most of the first world, for very similar reasons. One being investment money from countries like China, Japan, and Saudi Arabia. Another being environmental concerns resulting in urban growth restrictions that prevented supply responses to demand for housing, and forced prices up. Lastly, government's taxation policies also contributed to housing looking like "the best investment" for many.

    There is widespread denial about these factors, all over the world, and especially denial about the collapse or impending collapse of house prices and mortgage equity levels; for which the USA is merely a pattern (albeit a major one), not a unique case.

    NZ is an especially bad case of this denial.

  2. Oh please!

    Since the 1860s, at approxiately 20 year intervals, this sort of thing occurs; this is the 8th occasion for goodness sake!

    When someone starts talking about how 'this time it is different' and suggesting a 'nightmare scenario' you know an upturn is just around the corner.

    Sorry to disppoint everybody, but, as I say, this happens every 20 years or so and is over with a couple of years later.

    Just take your hand off your cock, batten down the hatches for a while, and LIFE GOES ON....

  3. Bailouts and stimulus initiatives may also help some. The post-mortems on the wrecked global economy, US market and dollar crash would continue for several decades. Is time to find viable and sustainable solutions? Businesses and banks still need bespoke turnaround survival strategies to reduce losses, improve organic and inorganic efficiency, increase revenue, gain sustainable competitive advantage, improve strategic positions, and outperform market competition. The results add real business values, attract investors; create new business opportunities and jobs. One client plans to reduce losses by 30% and increase production by 50% to attract investors who continue to target undervalued growth sectors, niche and captive markets where consumer demand still continues to grow in double-digits annually to 2030.


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