Why We Should Listen to Peter Schiff's Bad News

Peter Schiff is loud--a decibel or 12 above everybody else. And it's hard to get him to stop talking. Ask the man a simple question and you get a 10-minute harangue in response. This harangue is likely to feature libertarian political opinions that are by Schiff's own admission pretty extreme--inherited as they were from a father currently in prison (at age 81!) for refusing to pay income tax.

Yet Schiff, 46, is not just some opinionated boor. He possesses a self-awareness that renders him a bit less obnoxious than I've described, and he happens to have done a better job than just about anyone else of forecasting in 2006 and early 2007 what was about to happen in U.S. financial markets. This wasn't a broken-clock-is-right-twice-a-day thing: Schiff appeared on the national scene just as the credit bubble was reaching maximum inflation and offered a critique of the nation's unsustainably debt-fueled economic trajectory that is now--after the fact--widely accepted.

As markets collapsed late last year, Schiff, who runs the Connecticut-based brokerage firm Euro Pacific Capital, briefly got to bask in the glory of his spectacular call. He ran a victory lap of sorts on the cable news networks. A fan put together a 10-minute YouTube clip of his precrash predictions on CNBC and Fox News--complete with smirking and dead-wrong rebuttals from the likes of Arthur Laffer and Ben Stein--that has been watched more than 1.3 million times. ("What makes that clip so good is not so much me as everybody else," Schiff says. "People like laughing at people.")



This year, though, Schiff's TV bookings are down 75% to 85%,. . . His investment record surely can't be the reason for his fall from media grace.

No, the main issue with Schiff seems to be that he hasn't changed his tune--and it isn't a pleasant tune to listen to. He thinks the "phony economy" of the U.S. is headed for even harder times. He believes that the crisis-fighting measures coming out of Washington are merely delaying the inevitable, debasing the dollar and loading future taxpayers with huge debts.

. . .I happen to disagree with most of Schiff's economic views. But there's a thriving line of academic research showing that including divergent opinions and models of how the world works makes groups better at solving problems. Our society failed spectacularly this decade at solving the problem of how to price houses and mortgage bonds. It would have done better if people had paid more attention to skeptical voices like Schiff's. "The fact that he was right this time doesn't mean he's going to be right the next time, but somebody will be," says University of Michigan social scientist Scott Page. "All models are wrong, and that's why you want a diversity of models." Seconds Schiff: "You're never going to get these correct calls coming from the mainstream. It's not even possible." Schiff's current predictions may well turn out to be all wrong. But that's no reason not to listen to them.

source: Time, "Why We Should Listen to Peter Schiff's Bad News" by Justin Fox. Monday, Jun. 01, 2009

Peter Schiff on the Daily Show

Peter Schiff believes Americans should return to a basic economy that grows based on savings, not consumer credit.

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The House Capitalism Built

Newsnight investigates the sudden rise in commodities prices and the fall in equity despite the recent promise by the Federal Reserve to inject a further 200Bn US$ into the US Banking system.

Report and review interviewing Stephen King (Chief Economist HSBC) and Sushil Wadhwani (Wadhwani Asset Management).

Followed by a Panel discussion by Jeremy Paxman, including Gillian Tett (Assistant Editor Financial Times), Dr. Irwin Stelzer (Senior Fellow, Hudson Institute) & Prof. Robert Reich (Author of "Supercapitalism").

Part 1:


Part 2:

FOOL’S GOLD by Gillian Tett

FOOL’S GOLD: How the Bold Dream of a Small Tribe at J. P. Morgan Was Corrupted by Wall Street Greed and Unleashed a Catastrophe

By Gillian Tett (293 pages. Free Press. $26)

The New York Times reviewed this book in an article entitled, "Greed Layered on Greed, Frosted With Recklessness" by Michiko Kakutani (read the entire review here).

In her useful new book, Gillian Tett of The Financial Times writes that the global financial meltdown, which economists estimate could result in total losses from $2 trillion to $4 trillion, was “self-inflicted.” Unlike many banking crises, she adds, “this one was not triggered by a war, a widespread recession, or any external economic shock.” Rather, the “entire financial system went wrong as a result of flawed incentives within banks and investment funds, as well as the rating agencies; warped regulatory structures; and a lack of oversight.”

To put it another way, the crisis was, in the words of the Newsweek business columnist Daniel Gross, “a man-made product that turned out to be immensely toxic and damaging” — not, as so many in the “Smart Money crowd” insisted, “a random, once-in-a-lifetime thing that fell out of the sky.”

It was also a disaster, he notes, with “plenty of blame to go around,” including “poor regulation, eight years of a failed Republican economic philosophy, Wall Street-friendly Democrats who helped stymie reform, misguided bipartisan efforts to promote home ownership, Wall Street greed, corrupt C.E.O.’s, a botched rescue effort” and poor judgment calls on the part of the Fed, and top bankers who in many cases did not even understand the derivatives their firms were trading in.

In short the current global financial crisis is a story about people who thought they were the smartest guys in the room and who turned out to be remarkably naïve, reckless or, in some cases, downright stupid. It’s a story — novelistic in its narrative and moral arc — about hubris and greed and heedlessness, about people, as Fitzgerald wrote in “The Great Gatsby,” who “smashed up things and creatures and then retreated back into their money or their vast carelessness” and “let other people clean up the mess they had made.”

Author Gillian Tett

Shameless Paparazzi

Poor Prince Harry can't even have a private comfort break in one of those classy Port-O-Potties.

GOP's Double Standards

The Washington Post writes, "Double Standard: Funny how the achievements on Sonia Sotomayor's resume suddenly count for so little."

ON PAPER, Supreme Court nominee Sonia Sotomayor resembles one of her would-be colleagues on the high court: Princeton undergrad, Yale Law School, an editor on the Yale Law Journal, experience as a prosecutor and years of service on the federal bench.

Yet Judge Sotomayor, President Obama's pick to replace retiring Justice David H. Souter, is not being compared by some conservatives to Princeton/Yale alum Samuel A. Alito Jr., widely acclaimed as smart and qualified when he was nominated. Instead, they are trying to peg her as "President Obama's Harriet Miers," after the nominee of President George W. Bush who took herself out of contention as conservatives savaged her reputation and raised doubts about whether she was smart enough for the job.

Why is that? After all, Judge Sotomayor boasts the very qualifications that these conservatives claimed Ms. Miers lacked. Ms. Miers was in part lambasted by conservatives -- unfairly, we noted at the time -- because she did not meet the now-cliched criteria of graduation from elite schools and experience as a judge. Judge Sotomayor's educational pedigree is top-notch, and she served six years on the U.S. District Court for the Southern District of New York before spending the past 11 years on the U.S. Court of Appeals for the 2nd Circuit.

Ms. Miers, conservative critics complained, lacked a substantial paper trail, leading some to worry about whether she was more liberal than her record let on. Judge Sotomayor can't be tagged as a stealth candidate, given her two-decade track record of opinions on topics as varied as immigration, eminent domain, corporate law and the First Amendment.

Because it is difficult to dismiss her academic credentials and her professional experience, some on the right have resorted to the politics of personal destruction. Curt Levey of the Committee for Justice said in a radio interview that Judge Sotomayor was picked because "she's a woman and Hispanic, not because she was the best qualified." Former congressman Tom Tancredo sank to even greater depths when he called Judge Sotomayor a "racist" for her past affiliation with the Hispanic advocacy group, the National Council of La Raza; Mr. Tancredo called La Raza "a Latino KKK without the hoods or the nooses." Former Bush adviser Karl Rove implicitly questioned Judge Sotomayor's intelligence, saying in an interview with PBS host Charlie Rose that "I know lots of stupid people who went to Ivy League schools." No doubt, but would Mr. Rove have said the same thing in connection with Justice Alito?

There are plenty of lines of inquiry that should be explored to better discern Judge Sotomayor's qualifications and judicial philosophy. We look forward to a vigorous debate about Judge Sotomayor's more controversial and consequential cases. We would like to hear more from Judge Sotomayor on how gender and ethnicity might help -- as she put it -- a "wise Latina" judge come to a "better" conclusion in some cases than a white, male jurist. (The president recently said Judge Sotomayor regretted her choice of words.) Above all, we'd welcome a confirmation process that sets aside rancid stereotypes and sexist assumptions in order to explore the record and philosophy of a woman whose work could affect the country for some time to come.

Prolifers Condone Extralegal Vigilantism?

The unhinged GOP base condones extralegal vigilantism?

Vigilantism does have deep roots in the USA. Let's see, Emmit Till, Medgar Evers, Malcolm X, JFK, Robert Kennedy, Martin Luther King, Jr., Abraham Lincoln, The Uni-bomber, Timmothy McVey.......I guess it's just the American way. Forget the laws, forget the court system, just sell military grade weapons and gin-up the bitter gun-toting GOP base.....and insto presto dead doctors in churches all across America.

Shoud we sing "America the Beautiful" or "God Bless America" for our special brand of vigilantism.

Frank Schaeffer Exposes "Pro-Life" Movement's Domestic Terror Role

Gitmo Woes

Up from the Projects

Richard Cohen of the Washington Post writes: With the nose of a trained columnist, I detect the whiff of elitism-cum-racism emanating from the nomination of Sonia Sotomayor to the Supreme Court. The whiff does not come -- Rush Limbaugh and Newt Gingrich notwithstanding -- from Sotomayor's own statements; nor does it come from her controversial decision upholding race-based affirmative action. It comes, instead, from the general expression of wow about her background. Imagine, someone from the projects is a success!

"Nobody expects you to be chosen someday for the Supreme Court when your father was a welder with a third-grade education," wrote Richard Lacayo in Time magazine. He is right -- the expectations are all otherwise. You can see them on display in many of the reports about Sotomayor's background. She was raised in public housing projects. She grew up in the Bronx, which the average person must think of as a particularly nasty part of Mumbai, and she is, finally and incriminatingly, Puerto Rican. This is all, apparently, very hard to imagine.

It once was not. It was generally recognized that being poor was not necessarily destiny. This was the gift of liberalism, especially New York City-style liberalism. The city would provide housing -- about 400,000 now live in public housing -- and it would provide good schools, and later, with good grades and the proper attitude, it would offer an excellent higher education: City College, Brooklyn College, Queens College and my own beloved Hunter College. The vast poor were the city's oil fields. Any kid could be a gusher.

The New York Times recently supplied us with the names of some public housing alumni. They included Jay-Z, the rapper, and Wesley Snipes, the actor, and Mike Tyson, the brute. They also include Gary Ackerman, the wittiest person in Congress (sorry, Barney), and Lloyd C. Blankfein, who runs Goldman Sachs. Howard Schultz, who conceived the current Starbucks, came out of the projects and so did Ursula M. Burns, who is black and a woman and now is the CEO of Xerox. Copy that, please.

The projects also produced Kareem Abdul-Jabbar and the former Caryn Elaine Johnson, who performs as Whoopi Goldberg. She lived in the Chelsea Houses. The Times mentioned them both. It did not mention, though, Millie Torado, who grew up in the Redfern projects and is an old, old family friend, or Joel Klein, the New York City school chancellor, who lived in Woodside Houses (Queens) and was told when he entered Columbia University that not all that much was expected of him. He disappointed by going on to Harvard Law School. No mention was made either of Ken Auletta, the media writer for the New Yorker. Obviously, there are far too many to list.

Inevitably, what these people have in common are one or two dedicated parents or guardians who knew that housing, public or otherwise, is where your body spends its time. Your mind can live anywhere. In the case of the young Sotomayor, it was between the covers of Nancy Drew novels and watching Perry Mason on television. She imagined she could become a lawyer. Now, maybe, a girl like her can imagine becoming a Supreme Court justice.

Franklin D. Roosevelt was a true American aristocrat, rich and landed, yet the poor never had a greater champion. The man who preceded him in the presidency, Herbert Hoover, was raised in poverty yet forgot who he had been. He feared government welfare programs would sap the poor of their industry. It's always dangerous to generalize. It is impossible to predict.

I do not agree with Sotomayor on the New Haven affirmative-action case and have written a column saying why. But if it can be said she sided with minorities over white men, recognize that two of the New Haven firefighters unjustly affected on the basis of race are Hispanic. But I agree with what Sotomayor meant when she said in her famous 2001 speech, "I would hope that a wise Latina woman with the richness of her experiences would more often than not reach a better conclusion than a white male who hasn't lived that life." Yes, in some cases. That is the virtue of diversity. You're instructed by your own life.

Sotomayor's life instructs her that the projects are chock-full of people like her. They are propelled by the greenest of fuels, their indomitable parents, and they are nourished by wonderful teachers, determined principals -- and the opportunities provided by a generous government. Sotomayor's coming out of the projects is no miracle. The tragedy is that we think it is.

The GOP's Feigned Outrage

From the editorial pages of Wall Street Journal: Those who followed news coverage of the "tea party" protests last month will recall that one target of the partiers' ire was the TARP bailout of the banking system -- a policy of the Bush administration that President Obama has carried on.

And yet, in a television interview last month, we find no less a representative of the late administration than former Vice President Dick Cheney endorsing the protesters' accusations with what is, for him, considerable enthusiasm. "I thought the tea parties were great," he told Fox News's Sean Hannity. "It's basically a very healthy development."

Former House Speaker Newt Gingrich, one of the Republican Party's few remaining stars, has also cheered the public's willingness to "fight back against Wall Street and Washington insiders."

A Republican who wants to fight Wall Street! A Bush official who thinks protesting Bush policies is "great"! Contemplating these curiosities, we begin to realize how easy it has been for conservatives to swing back into full-throated opposition only months after their cataclysmic defeat. And also to understand why the obituaries for the GOP might be just a tad premature.

After all, there's something about conservatives' ferocious "No" that precisely fits the temper of the times. For all the past year's Democratic victories, the GOP still owns outrage, still has an enormous capacity to summon up offense, to elevate every perceived slight into an unprecedented imposition upon both the hard-working citizen and freedom itself.

What really dazzles the observer, though, is conservatives' fury over things for which they are themselves responsible.

As an example of this habit of mind, consider the essay that Mr. Gingrich published in Human Events last week. "The current liberal bloodlust over interrogations," he wrote, referring to the Nancy Pelosi-CIA flap, is merely "the Left's attempt to hunt down and purge its political opponents." And yet, in a different essay he published on the very same day (this one in the Washington Times), Mr. Gingrich regretted that, in all the years of Republican rule, "there was a strategic failure to root out the left and the special interests of the left."

Mr. Gingrich's side failed to "root out" and destroy their opponents; now he imagines that this is what is being done to his team.

Psychotherapists might call this "projection," and something similar pervades the essay the remarkable Mr. Gingrich published only two days later in the Washington Post. Here the former speaker can be found calling for a populist revolt in the "great tradition of political movements rising against arrogant, corrupt elites."

A healthy sentiment, to be sure, except for the fact that "elites" are exactly what decades of conservative rule gave us by unleashing the banks, smashing the unions, and funneling the economy's gains into the hands of the rich.

Then there are the "lobbyists" whom Mr. Gingrich accuses of running state governments here and there. By this he means "lobbyists for the various unions" who get their way "through bureaucracies seeking to impose the values of a militant left."

Even so, rule by lobbyists is a subject Mr. Gingrich should know well. It was while he was House speaker, for example, that his No. 3, Tom DeLay, launched the famous "K Street Strategy," which sought to make Gucci Gulch the exclusive preserve of the Republican Party.

It was Mr. Gingrich's own beloved House freshmen of 1994, the last bunch of conservative populists to come down the pike, who made the Republican Revolution into a fundraising bonanza. And it was public outrage over the conspicuous purchase of government favors by the moneyed that led to the Democratic triumphs of 2006 and 2008.

Turning to the government of New York state, Mr. Gingrich declares that it has "impoverished the Upstate region to the point where it is a vast zone of no jobs and no opportunities." Oddly, Mr. Gingrich appears to believe that deindustrialization is the direct result of governance by a political machine in Albany.

In fact, deindustrialization also occurred all across the Midwest. As it ground on through the Reagan years and the '90s, it was the investor class who called the shots, not the hirelings of organized labor.

And as our factories and steel mills were shuttered an army of politicians and management theorists assured us that the waning of industrial America was the next stage in human development, the coming of the glorious age of information. The most ecstatic and even otherworldly of these was, of course, Newt Gingrich.

In his much-discussed speech last Thursday, Mr. Cheney intoned, "We hear from some quarters nothing but feigned outrage based on a false narrative." And so we do: A form of protest that persistently misses the point, a type of populism that only empowers the elite, and a brand of idealism that cohabits comfortably with corruption. (source: The Wall Street Journal)

Tim Wise - The Pathology of White Privilege

GOP Reactions to Senator Specter

From the The Washington Post: ED ROGERS (White House staffer to Ronald Reagan and George H.W. Bush; chairman of BGR Group):

Notice to Republicans: Arlen Specter changing parties is good for the Democrats and President Obama and bad for us. If you think otherwise, put down the Ann Coulter book and go get some fresh air. There's always a delusional element within the GOP that thinks if we lose badly enough the Democrats will gain so much power they will implement all their crazy plans, the people will revolt and purest Republicans will then be swept back into power. Even if this were true, it doesn't take into account the damage done while our opponents are in control.

Specter didn't want to be a Democrat. The party deteriorated to the point where there was no place for him. Who knows if he will be elected as a Democrat in November 2010? The damage will be done right away, when he votes with the majority. This is the latest in a series of wake-up calls the GOP should have gotten starting with the 2006 elections.

Despite this, I believe we have not lost the battle for ideas, because the Democrats don't have any. We have lost our majorities in Congress through corruption and mismanagement. Obama's victory in 2008 was an Obama phenomenon, not a Democratic Party phenomenon. What they haven't been able to do through legitimate party building, we've handed them on a silver platter. We need to stop.

Mexico

When President Obama walked downstairs to his office on his first day of work, he encountered a wall full of pictures from his inauguration the day before. His staff of photographers stayed up through the night printing pictures so that Obama wouldn't face empty walls and lonely hooks in his new office. (Slate)

Reclaiming America’s Soul

"Reclaiming America’s Soul" by Paul Krugman

"Nothing will be gained by spending our time and energy laying blame for the past.” So declared President Obama, after his commendable decision to release the legal memos that his predecessor used to justify torture. Some people in the political and media establishments have echoed his position. We need to look forward, not backward, they say. No prosecutions, please; no investigations; we’re just too busy.

And there are indeed immense challenges out there: an economic crisis, a health care crisis, an environmental crisis. Isn’t revisiting the abuses of the last eight years, no matter how bad they were, a luxury we can’t afford?

No, it isn’t, because America is more than a collection of policies. We are, or at least we used to be, a nation of moral ideals. In the past, our government has sometimes done an imperfect job of upholding those ideals. But never before have our leaders so utterly betrayed everything our nation stands for. “This government does not torture people,” declared former President Bush, but it did, and all the world knows it.

And the only way we can regain our moral compass, not just for the sake of our position in the world, but for the sake of our own national conscience, is to investigate how that happened, and, if necessary, to prosecute those responsible.

What about the argument that investigating the Bush administration’s abuses will impede efforts to deal with the crises of today? Even if that were true — even if truth and justice came at a high price — that would arguably be a price we must pay: laws aren’t supposed to be enforced only when convenient. But is there any real reason to believe that the nation would pay a high price for accountability?

For example, would investigating the crimes of the Bush era really divert time and energy needed elsewhere? Let’s be concrete: whose time and energy are we talking about?

Tim Geithner, the Treasury secretary, wouldn’t be called away from his efforts to rescue the economy. Peter Orszag, the budget director, wouldn’t be called away from his efforts to reform health care. Steven Chu, the energy secretary, wouldn’t be called away from his efforts to limit climate change. Even the president needn’t, and indeed shouldn’t, be involved. All he would have to do is let the Justice Department do its job — which he’s supposed to do in any case — and not get in the way of any Congressional investigations.

I don’t know about you, but I think America is capable of uncovering the truth and enforcing the law even while it goes about its other business.

Still, you might argue — and many do — that revisiting the abuses of the Bush years would undermine the political consensus the president needs to pursue his agenda.

But the answer to that is, what political consensus? There are still, alas, a significant number of people in our political life who stand on the side of the torturers. But these are the same people who have been relentless in their efforts to block President Obama’s attempt to deal with our economic crisis and will be equally relentless in their opposition when he endeavors to deal with health care and climate change. The president cannot lose their good will, because they never offered any.

That said, there are a lot of people in Washington who weren’t allied with the torturers but would nonetheless rather not revisit what happened in the Bush years.

Some of them probably just don’t want an ugly scene; my guess is that the president, who clearly prefers visions of uplift to confrontation, is in that group. But the ugliness is already there, and pretending it isn’t won’t make it go away.

Others, I suspect, would rather not revisit those years because they don’t want to be reminded of their own sins of omission.

For the fact is that officials in the Bush administration instituted torture as a policy, misled the nation into a war they wanted to fight and, probably, tortured people in the attempt to extract “confessions” that would justify that war. And during the march to war, most of the political and media establishment looked the other way.

It’s hard, then, not to be cynical when some of the people who should have spoken out against what was happening, but didn’t, now declare that we should forget the whole era — for the sake of the country, of course.

Sorry, but what we really should do for the sake of the country is have investigations both of torture and of the march to war. These investigations should, where appropriate, be followed by prosecutions — not out of vindictiveness, but because this is a nation of laws.

We need to do this for the sake of our future. For this isn’t about looking backward, it’s about looking forward — because it’s about reclaiming America’s soul.

Shepherd Smith "We are America"