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Peter Schiff says we need a big dose of castor oil, and he's advocating near total collapse today because he "knows" that will be better than Obama's stimulus package.

we need less credit....the stimulus is the absolute worst thing you can do... we have to let that foundation collapse...you have to let (the economy) collapse so you can replace it with a viable one...Roosevelt made the depression worse...

http://finance.yahoo.com/...

Schiff got famous for being a bear who was right about the bubble, but historically bears are wrong more often than right. His clients lost money last year, and I did better in the market last year than Schiff. And when he starts blaming FDR for the depression, I'm afraid he just loses credibility with me.

Does Schiff take into account the chaos from shutting down the economy? The Democrats won't pull the plug on the economy just because he says so, even if the Republicans are eager to do it just for grins and giggles.

More importantly, Schiff seems blind to the real question that nobody is asking.....

I hear what he's saying - we are going to try to finance this budget, and when people refuse to buy the bonds, the dollar will crash.

But it looks like EVERYONE'S currency is about to collapse. Schiff failed to predict that the banking crisis was international - he thought it was magically isolated to the US and that the rest of the world would quickly learn to live without us.

It's not as if China can keep its currency afloat if the money we owe them is worthless and we aren't buying any of their stuff anyway. It's not really clear that the Saudis would like to see all their American IOUs made worthless either.

But maybe that's what it will take - we pay off our debt with mountains of worthless dollars printed on double ply toilet paper and settle in for a decade of barter.

But there is a larger question that has been going unspoken - are we willing to sacrifice the nation for the sake of the army? How about cutting defense by 1/2? Are we willing to dramatically reduce our standard of living to keep the US army roaming the planet in an era of limited energy, increasing costs of mobilization, and dwindling strategic interests (eg oil). Because if we want to keep doing that, we should do the WW2 thing - ration food, ration gas, ration tires, and ration fertilizer so we can maintain the army.

This is what the Russians did - made everyone live like slaves for the sake of the army. And you know what? Their economy collapsed anyway!

But the media is going to keep the subject of drastic defense cuts off the table, and Schiff didn't go there.

Originally posted to bernardpliers on Tue Feb 10, 2009 at 07:03 PM PST.

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Comment Preferences

    •  Now on the menu: tire rims and anthrax n/t (3+ / 0-)

      "If another country builds a better car, we buy it. If they make a better wine, we drink it. If they have better healthcare . . . what's our problem? "

      by mbayrob on Tue Feb 10, 2009 at 07:13:50 PM PST

      [ Parent ]

    •  here's what's going on: (9+ / 0-)

      A rapid collapse is equivalent, in thermodynamic terms, to a sudden discharge of energy.

      Wherever there is an energy flow, there is the potential to tap into it and create a net energy gain on a smaller scale.  For example you can stick a water wheel in a river and harvest a small fraction of the energy of the moving water.  

      An entity that gains energy from a prevailing entropic energy flow is called a dissipative structure.  All organisms on Earth are dissipative structures, whose biological processes are ultimately powered by the entropy of the Sun.  

      If an organism passively gains net energy from a surrounding entropy flow, it can be called a "passive dissipator."  

      If an organism gains net energy by actively increasing the entropy around it, that organism can be called an "active dissipator."  Humans in general can be considered active dissipators since human activity seeks to obtain benefit from actions that increase the entropy of the Earth in general, for example by converting fossil fuel hydrocarbons into heat (a substantial increase in the entropy of those compounds) or into fertilizers that produce edible plants (and from there to edible animals).  

      Within the sphere of economic activity, we can consider someone an active dissipator when they seek to benefit by taking actions that increase the net entropy of the economic system as a whole.

      Mr. Schiff would be one of those.  

      And, depending on a few other variables that boil down to whether or not he produces benefits for others, he might be a subset of active dissipators known as "parasites."  

      •  yeah...what you said ;-) nt (4+ / 0-)
        Recommended by:
        billlaurelMD, bablhous, CWalter, 417els

        "The revolution's just an ethical haircut away..." Billy Bragg

        by grannyhelen on Tue Feb 10, 2009 at 07:37:10 PM PST

        [ Parent ]

      •  Fear is chaos in economics (1+ / 0-)
        Recommended by:
        highacidity

        Think of that as an increase of entropy.

        "If another country builds a better car, we buy it. If they make a better wine, we drink it. If they have better healthcare . . . what's our problem? "

        by mbayrob on Tue Feb 10, 2009 at 07:47:37 PM PST

        [ Parent ]

        •  fear by itself isn't chaos... (0+ / 0-)

          And fear by itself doesn't produce an increase in entropy.  What does, are activities such as "creative destruction" and decreases in regulation, that reduce order and cause dissipation of resources.  Then the parasites position themselves to catch some of the "stuff" that falls.  At each cycle they enrich themselves with ill-gotten gains and walk away from the wreckage.

          Compare & contrast the entrepreneur who profits from putting effort into building up a productive business, and the naked short-seller who gains from causing damage to businesses.    

          •  Reduction of organization is increase in entropy (1+ / 0-)
            Recommended by:
            G2geek

            Pretty much by definition, IIRC.

            Since fear does that, that's enough.

            "If another country builds a better car, we buy it. If they make a better wine, we drink it. If they have better healthcare . . . what's our problem? "

            by mbayrob on Tue Feb 10, 2009 at 11:46:18 PM PST

            [ Parent ]

  •  We're going to have our perestroika moment where (3+ / 0-)
    Recommended by:
    shpilk, Bronxist, lams712

    we have to dramatically restructure the military-industrial complex.

    This will throw tens of thousands out of work in defense plants and the standing forces.

    However, it will have to come to pass as the returns on the enormous amounts spent are diminishing every year we try to keep the American empire intact.

  •  Ummmm..... (3+ / 0-)
    Recommended by:
    mbayrob, highacidity, abraxas

    This is what the Russians did - made everyone live like slaves for the sake of the army. And you know what? Their economy collapsed anyway!

    You do understand that there were many systemic problems with Soviet Communism that led to the collapse of the USSR...yes?

    "The revolution's just an ethical haircut away..." Billy Bragg

    by grannyhelen on Tue Feb 10, 2009 at 07:10:37 PM PST

  •  Shiff has that old Treasury View (8+ / 0-)

    "Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate.  It will purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, live a more moral life. Values will be adjusted, and enterprising people will pick up from less competent people."

    -Andrew W. Mellon

    Mellon was Hoover's Secretary of the Treasury.  Because Hoover's policies worked so much better than Roosevelts'

    Idiot.

    "If another country builds a better car, we buy it. If they make a better wine, we drink it. If they have better healthcare . . . what's our problem? "

    by mbayrob on Tue Feb 10, 2009 at 07:10:39 PM PST

  •  Everyone is in the same boat. (3+ / 0-)
    Recommended by:
    Crashing Vor, lams712, abraxas

    China is on the verge of revolution and that's from having it's growth rate fall from 12%+ to about 7.5% now. Huge masses of disaffected workers ready to riot. If we stop buying their country goes directly into hell.

    The Russians actually hold out better, they are more isolated and can control their resources [like they just threatened to do with natural gas].

    What is needed here in the US is a revolution from the top down: we need to reject the fossil fuel based economy outright and radically shift away towards alternatives. It requires visionary leadership, and we aren't going to get it, at least not in the short term.

    We need to reject the MIL/IND complex as ammo hauler stated, and more than that - we need to tax the elite and wealthy to equalize the playing field.

    •  And the damn boat is sinking (1+ / 0-)
      Recommended by:
      peglyn

      You can tell this from the way Congress is rearranging the deck chairs.

      "If another country builds a better car, we buy it. If they make a better wine, we drink it. If they have better healthcare . . . what's our problem? "

      by mbayrob on Tue Feb 10, 2009 at 07:23:09 PM PST

      [ Parent ]

    •  Chatter among academics is that China is (2+ / 0-)
      Recommended by:
      mbayrob, highacidity

      in big trouble. Shit is about to hit the fan and if exports keep falling, they are fucked.

      Rabindranath Tagore-"Bigotry tries to keep truth safe in its hand with a grip that kills it."

      by joy sinha on Tue Feb 10, 2009 at 07:40:45 PM PST

      [ Parent ]

      •  After 8 years of great leadership in US (1+ / 0-)
        Recommended by:
        highacidity

        China is worried?

        Worry

        Bush may be gone, but the Bush Legacy remains.

        "If another country builds a better car, we buy it. If they make a better wine, we drink it. If they have better healthcare . . . what's our problem? "

        by mbayrob on Tue Feb 10, 2009 at 07:44:50 PM PST

        [ Parent ]

      •  It's becoming unhinged. (0+ / 0-)

        People are going nutty and lopping off the heads of cops because of 'social insults'. You can get some stories out of the Indian and Malay press, but very little gets traction here in the West.

        The veneer that holds China together is very thin, it's coming apart .. and I'm worried what might come after this fake regime supposedly 'communist regime' melts away. It ain't gonna be western style democracy; it will probably be a form of fascist thuggery.

  •  The worse things get the more money the bears (1+ / 0-)
    Recommended by:
    lams712

    make. Some big investors made a lot of money on the Crash of '29. Schiff probably sees a lot of wealth coming his way if things collapse.

    •  Not too many, though (1+ / 0-)
      Recommended by:
      abraxas

      It takes more testicular fortitude (and reserves) to short a whole market than more than a handful of folks have.  And more to the point -- the market in '29 did not loose its value in one day.  I don't think the market hit bottom for another couple of years.

      You could have shorted the market successfully in October of 1929 and still lost everything thereafter.

      "If another country builds a better car, we buy it. If they make a better wine, we drink it. If they have better healthcare . . . what's our problem? "

      by mbayrob on Tue Feb 10, 2009 at 07:20:08 PM PST

      [ Parent ]

    •  Schiff Needs To Makes Some Money Back (2+ / 0-)
      Recommended by:
      highacidity, Crashing Vor

      The roof, the roof, the roof is on fire
      The roof, the roof, the roof is on fire
      The roof, the roof, the roof is on fire
      We don't need no water let the motherfucker burn
      Burn motherfucker burn

      -The Bloodhound Gang

  •  Eh, being pessimistic and wringing your hands (6+ / 0-)

    is the fashionable thing to be right now if you're an economist, or a talking head. I'm not swayed.

    Although I find the whole premise that we can let the entire foundation of the world economy collapse and then "swiftly re-build it". Um, history says No. Once the foundation of a society collapses, you are done for for centuries to come.

    Oh, I am sure there was some guy named Maximus Schiff that was saying that "WE SHOULD LET THE ROMAN EMPIRE COLLAPSE AND THEN RE-BUILD IT!" back in the day. But, as we all know that never happened.

    I'm sort of convinced that we are on the verge of a societal collapse not seen since Ancient Rome but to agitate for an even quicker collapse, and the chaos that would bring, is insane.

    "Cunnilingus and Psychiatry is what got us here," Tony Soprano

    by Larry Madill on Tue Feb 10, 2009 at 07:18:28 PM PST

    •  The Roman empire had many of the same structural (1+ / 0-)
      Recommended by:
      lams712

      problems as America today. For example, the wealthy got adept at not paying taxes. A large class of underemployed and unemployed poor arose in Rome (who had to be kept satisfied with bread and circus). The military became overextended and too reliant on mercenaries. Technology and science stagnated (when compared to the ancient Greeks). At least we have nukes so no matter how bad things get, the barbarians won't overrun our cities...

  •  Schiff's opinion (2+ / 0-)
    Recommended by:
    bernardpliers, lams712

    is that if you let the banks collapse, the excesses in the economy will work themselves out the fastest, and we can return to having a productive economy more quickly. He may be right about this, but like you say, he doesn't talk about the political or social ramifications of such an economic policy. This is the problem with economic ideologies which focus on narrow measures like money supply and ignore the human element.

    Total private credit market debt as a percentage of GDP is high in the US, but government debt as a percentage of GDP is low compared to many European countries. Military spending, half of our budget(not including wars, which go on the plastic), goes to economically unproductive and morally repugnant foreign adventures. If we are to reorganize our economy, this IS the obvious place to start.

  •  if "Roosevelt made the depression worse" (4+ / 0-)

    why did he get relected three more times?

    "There are many truths of which the full meaning cannot be realized until personal experience has brought it home." John Stuart Mill

    by kuvasz on Tue Feb 10, 2009 at 07:33:19 PM PST

  •  The future is tweets! (2+ / 0-)
    Recommended by:
    Catte Nappe, Murdershewrote

    "I'm hungry."

    "Me, too."

    "Got any food?"

    "No, you?"

    "Nope."

    "Damn."

    grumble grumble mutter mutter

    by Crashing Vor on Tue Feb 10, 2009 at 07:34:17 PM PST

  •  Who is this Peter Schiff guy? (0+ / 0-)

    Rabindranath Tagore-"Bigotry tries to keep truth safe in its hand with a grip that kills it."

    by joy sinha on Tue Feb 10, 2009 at 07:36:45 PM PST

  •  Schiff scares me (kind of)...... (2+ / 0-)
    Recommended by:
    adios, Wolf Of Aquarius

    ....I mean he WAS right about the collapse and everything, but he is further to the right of most others in economics. His desire for a complete collapse to bring about a trickle-down "Utopia" is scary.

    "...if my thought-dreams could be seen, they'd probably put my head in a guillotine...." {-8.13;-5.59}

    by lams712 on Tue Feb 10, 2009 at 08:05:50 PM PST

  •  There's Been a MASSIVE fdr-caused-the-depression (2+ / 0-)
    Recommended by:
    highacidity, Inky99

    campaign running for years. We'll be damned lucky if that's not the judgment of history once we're gone.

    We are called to speak for the weak, for the voiceless, for victims of our nation and for those it calls enemy.... --ML King "Beyond Vietnam"

    by Gooserock on Tue Feb 10, 2009 at 08:25:32 PM PST

  •  Great diary ... (1+ / 0-)
    Recommended by:
    bernardpliers

    ... you write with style. Been wondering when someone would address this topic.

    Say what you will about Peter Schiff - his clips on youtube are endlessly entertaining, as he provokes idiots like Kudlow, Laffer, and (gawd) - Luskin the Clown - into making abject fools of themselves.. His spiel is such a seductive mix of valid observation ("Americans don't make anything any more"), half-truth ("stimulus doesn't work"), and outright hooey ("the New Deal prolonged the Depression") that he seems compelling, if only for short stretches of time. Most strangely, he recommends his clients invest in the very countries whose economies in no way resemble his Randian ideal, without explaining the discrepancy. His devotion to the free market is delusional. Hard not to like the guy, however, considering the contrast he provides with cable's raving financial loons.

    His greatest weakness, however, seems to be his inability to consider the social unrest that would sweep the world while it waits for the 'magic of markets' to restore stability. Apparently he thinks we'll all just hunker down in our beach houses and ride it out. Maybe he will.

    Slap it. Shoot it. Kaboot it.

    by adios on Tue Feb 10, 2009 at 10:30:08 PM PST

  •  FT's Willem Buiter also argues against stimulus (0+ / 0-)

    http://blogs.ft.com/...

    For a fiscal stimulus (current tax cut or public spending increase) to boost demand, it is necessary that the markets and the public at large believe that sooner or later, measures will be taken to reverse the tax cut or spending increase in present value terms.

    Because I believe that neither the US nor the UK authorities have the political credibility to commit themselves to future tax increases and public spending cuts commensurate with the up-front tax cuts and spending increases they are contemplating, I believe that neither the US nor the UK should engage in any significant discretionary cyclical fiscal stimulus, whether through higher public spending (consumption or investment) or through tax cuts or increased transfer payments.

  •  Schiff pretty much sees every currency colapsing. (1+ / 0-)
    Recommended by:
    bernardpliers

    He's telling his clients to invest in gold.

    Not because he thinks it's going to double like the Rethug party line says. No no no. He thinks it's going to hit $5000/oz.

    How this happens in a deflationary spiral, short of a speculative bubble in gold, is beyond me.

    •  The Gold Bugs (0+ / 0-)

      You hear little talk of how the gold standard contributed to the Depression, but it can make your currency too strong (a gold bubble) or too weak (insufficient reserves). And if currency traders redeem your script for metal, you can be cleaned out.

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