Monday, July 29, 2013

Peter Schiff trolls Sargent and Sims

Some people on Twitter sent me this video of Peter Schiff, self-described "Austrian" and one of the world's most powerful EconoTrolls, ridiculing the two 2011 Economics Nobel winners, Tom Sargent and Chris Sims:

Schiff spends the first 9 minutes of the 11-minute video lambasting Sargent and Sims for (supposedly) not being able to answer the "poignant question" (sic) of what economic policy steps America should be taking. He repeatedly claims that Sargent and Sims can't answer this question because they don't "actually [understand] any economics". He contrasts this with himself, saying "I have real solutions based on a real knowledge of economics. I may not have a Nobel prize, but I got some street smarts."

Except Schiff's entire rant is pretty clearly just a hatchet job. Sargent and Sims didn't really fail to answer the question! Schiff just edited out the parts where they gave their answers!

Around the 9:30 mark, Schiff admits that Sims actually did give policy recommendations, and that these recommendations were very mainstream - monetary easing, short-term deficits, and long-term fiscal consolidation!

As for Sargent, Schiff doesn't cut him a break at all, but Sargent also answered the question. His full answer can be seen here. He basically says that the federal government needs to cut spending. (Update: As CA points out in the comments, Sargent might just be saying that we need to clarify which programs we're going to cut, since spending cuts are inevitable.)

So here's the question: Why does Schiff perform this unfair hatchet job on the Nobel Prize winners?

Of course I don't know the answer for certain. But it seems fairly clear that Schiff is trying to pump up his own credentials. He continually repeats that he knows more about economics than the Nobel Prize winners. And the fact that Sargent's answer dovetails with Schiff's well-known policy preferences means that Schiff either didn't understand Sargent (entirely possible), or else deliberately ignored the fact that Sargent agrees with him. That suggests self-glorification, at the expense of famous people, was Schiff's main objective.

Why would Schiff want to do this? It could be simply for fun! Being grandiose and self-congratulatory is fun (for some more than others). Or maybe it's a part of Schiff's business. As the head of a money management firm (Euro Pacific Capital), and as a seller of newsletters and writer of books about the coming collapse of the American economy, Schiff could always use some macro cred. Convincing investors that Schiff's everyman "street smarts" convey a superior understanding of the macroeconomy, while the bumbling know-nothing ivory-tower academics play with their irrelevant mathematical models, might make those investors more likely to stick with Schiff even as his repeated inflation predictions fail to pan out.

A sort of anti-intellectual folksy charm seems to be exactly what Schiff is going for. Notice how at around 9:06 he mispronounces Bernanke's name as "Bernacky". He then repeats this mispronunciation several more times (a quick search through older Schiff videos confirms that he often, though not always, mispronounces it this way). Now at first it might seem insane to hand one's wealth over to a macro investor who doesn't even know how to say the Fed Chairman's name. But who knows? Maybe there are deeply conservative people out there for whom handing a small sliver of their life's savings to Schiff is worth it purely for the sake of political affinity, as a sort of protest vote against Obama and the socialist money-printers. Or maybe Schiff just wants to signal his utter contempt for all things Fed. Or maybe after getting burned by repeated widowmaker trades, investors who buy into the "Austrian" schtick can console themselves that "Bernacky" just cheated, and went against the fundamentals of God and Market, but that that high-and-mighty bearded technocrat will get his comeuppance in the end! 

OK, I admit I really have no idea what's going on in this Austrian/Fox Business/right-wing-radio/macro-derp-herping world. At this point I'm just taking random swings for humor value. SORRY. Sorry.

But anyway, it occurs to me that the life of the Austrian investment guru is a tough one. Not only do you have to convince people that you know better economics than Tom Sargent and Chris Sims, but you have to fight rear-guard actions against others of your own kind, to prove you're The One True Austrian Guru. In 2009, a guy named Mish Shedlock, who runs his own money management business, called Schiff out on some failed exchange rate predictions and on the poor performance of one of Schiff's funds during and after the crisis. This is a bit funny, since Shedlock himself is a self-professed subscriber to "Austrian" ideas; his fund's name even sounds like Schiff's ("Sitka Pacific Capital Management" vs. "Euro Pacific Capital"). But his all-out attack on Schiff precipitated one of the great EconoTroll Battles of all time. 

Schiff quickly whirled to deal with the attack from behind. He gave Shedlock a brutal taste of his own medicine, pointing out Shedlock's own poor performance and mocking Shedlock's small amount of Assets Under Management. In response, Shedlock went for the jugular, calling out Schiff on his hyperinflation predictions and challenging Schiff to a debate. Schiff very wisely avoided debating someone with far less fame than himself, and stuck to dissing Shedlock harshly on his radio show. The highly entertaining three-year feud shows no signs of abating.

Anyway, what's the upshot of all my Schiff-trolling? The upshot is: If you see some guy making fun of top academic economists, fine. Maybe he has a good point! But if the alternative he's offering consists of a long string of failed macro predictions, loosely justified by hand-waving references to "the Austrian School" and seasoned with right-wing politics and folksy charm, beware. Chances are he's just pulling your leg. And if the top academic economists are reluctant to wade into political war zones, and unwilling to overstate the certainty afforded by their theories, well, that's probably to their credit rather than a reason to ridicule them.


  1. What we need is an organization somewhere to give an endowed prize in "Street Smarts".

    1. I thought that was what CNBC was for.

    2. You know who's really street smart?
      Nassim Taleb.
      Ask him, I'm sure he'll tell you the same.

  2. Why would Schiff want to do this?

    Possibly, he had a thought along these lines, "If I need to misrepresent facts and mislead people in order to excel in my chosen field, then that is what I'll do."

    It is nice to give people the benefit of the doubt, but there isn't much doubt about whether such behavior qualifies a person as a dirtbag.

    1. He really believes this BS. His dad was a huge goldbug/tax protestor, Irwin Schiff who is in jail right now.

      He really thinks he is helping the debate by being a jackass.

      Also, thanks for the link!

    2. Anonymous10:55 PM

      It is all part of his sales pitch. His whole life rotates around generating a commission, fee, sale, spread by spreading doom, fear and worry.

  3. Anonymous12:13 PM

    Noah - in a similar vein, you should do a deep dive into Mauldin - another one of those street smart guys that have a knack for latching into the current strand of economic angst - but whose predictions are almost surely going to lose one money if followed.

  4. Noah, I know this is a post about Schiff, but I must object to your statement that Sargent recommended that the government cuts spending. Sargent recommended that the government ends the uncertainty of how it is going to cover the unfunded portion of its future outlays, given that projected tax revenue are not enough and that borrowing the difference would put the debt in an unsustainable trajectory. This is about coming up with a credible plan for the long-run thereby reducing uncertainty, not about cutting spending.

    1. Sargent said that spending is going to have to be cut whether we like it or not.

    2. What I hear him say is that the current spending trajectory violates the government budget constraint (which is an area he has done lots of research on) so there is no way the government can meet its promises. See also Kotlikoff's work on this, cited in his book "The clash of generations". Sargent feels that uncertainty about who will not get paid in the future (social security? Medicare? Welfare recipients?) is affecting individual behavior now in ways that hurt the economy. This is not the same as advocating spending cuts! Instead, the policy implication is for the government to present a credible plan of how it is going to meet its future obligations, and if it can't, to clarify now who is not going to get paid in the future what they have been promised.

      As far as Schiff is concerned, yes, he is a wakadoo!

  5. Anonymous2:22 PM

    Unfortunately, individuals like Lew Rockwell and Peter Schiff do a disservice to what I think is a legitimate economic school -- the Austrian School.

    Individuals would be better served listening to EconTalk and reading economic books and papers from F.A. Hayek.

    1. Anonymous2:52 PM

      This sounds like a reverse "no true Scotsman" - the implication being that there are some rational, thoughtful Austrian School believers out there, and all the others are just frauds. (Or maybe the better comparison is "True Leninists (before Stalin ruined the Party edition)".

      Perhaps that's true, but at some point, the Austrian School ends up being what most of those that self-identify with it claim. Maybe it is doing a disservice to the Lone Few Real Austrians out there, but they'll have to defend their own (lonely) turf.

    2. Milton Friedman once said that "there is no Austrian Economics, only good economics and bad economics". Here is a thorough and very interesting, albeit long, analysis of why there is no such thing as Austrian economics.
      Having said that, some economists who are stubborn enough to continue to label themselves as "Austrian" have interesting ideas. Unfortunately, they are a very small subset of the group of self-described "Austrians".

    3. Anonymous5:31 PM

      The real question is what Rockwell(Knights of Malta) and Schiff(a distant cousin of FED founder Jacob Schiff) after?

      IMO, destruction of countries and full legal power to capital owners. They use guys like Ron Paul to tell the story how great pre-Civil War "North" America was and it was a perfect utopia of market forces.................which was hardly the case. It was a time of mass inefficiency as small capital owners worked closely with the family to produce and keep what they earned. But it was a very hard life and low life expectancy. Capitalists figured out if they "collectivized" they could expand business further and make more money, thus the basis for modern financial capitalism was drawn and the family business was over. This created a lot of inequality as you would expect despite the surge in wealth. The governments role in the Civil War was huge. The fiscal expansion caused by it created a new sect of businessman. Just about every robber baron that would come afterwords, got his start from the war and the government checkbook. The innovation it triggered, however, changed the world forever.

      To me, Schiff is just another modern materialistic hegelian. Speaking his dialect. Ron Paul does it. Lew Rockwell does it. They want to strip money creation from countries and common political groups(such as the EU), giving it to private international capital owners. As they say, who owns the gold, owns the world.

      The "left flank" of the dialect is imo, struggling because they won't use "reactionary" nationalist bravado. They should pump their fist at the world and say the US has the right to print as much damn money as "we" feel fit and no globalist scumbag has the right to tell us otherwise. By being wimpy and multi-cultural, you hurt your "hegelian" brand when you need to target the main source who would be effected by your programs.

    4. John S9:13 PM


      You wrote: "This sounds like a reverse "no true Scotsman" - the implication being that there are some rational, thoughtful Austrian School believers out there, and all the others are just frauds."

      Do you believe that there aren't any "rational, thoughtful Austrian School believers out there"? Surely, the work of the scholars in this link qualifies as "rational and thoughtful":

      It's perfectly legitimate to point out that under the broad tent of "Austrian economics" there exist some traditions more worthy of respect (Hayek, the modern GMU Austrian school) that others (Rothbard, the Mises Institute).

      What qualifies Schiff--who hasn't published any academic research at all--to be anointed an official spokesman of the Austrian school (in any capacity, let alone its entirety)? This would be somewhat like calling David Graeber (a non-economist) the official spokesman for Post-Keynesians/MMT. Graeber's idiocy should have no bearing on these non-mainstream traditions, which should be analyzed, critiqued, and accepted based on the work of reputable scholars, not demagogues.

    5. Anonymous,

      "To me, Schiff is just another modern materialistic hegelian."

      Hegel wasn't a materialist, and Marx, who was kind a of "materialistic hegelian," was a much better economist than Schiff, who is, as Noah suggests, just a loudmouth trying to make money. So, the moral is: Don't associate an idiot with thinkers who really do have interesting things to say, even when they may be mistaken.

  6. Anonymous3:14 PM

    Here's the thing, and this is a serious question. How come Peter Schiff has got so much money, while I've got hardly any? It's easy to see some public figure and say, wow that person is wrong about something very basic and testable, that person is so clownish, but at the end of the day, these guys still have all the money. How does that work?

    1. Really? Luck. Randomness. They were right once before in a big way and are wrong now. Any number of scenarios that do not vindicate them as visionaries.

    2. "You only need to make one big score in finance to be a hero forever."

      - Merton Miller

    3. Also, guys like Schiff don't have "all the money". They have only a little bit of the money.

    4. Anonymous1:45 PM

      A lot of these people like Schiff make money whether they make money for their clients or not, so basically they make money through fear-mongering and the type of political pandering Noah describes.

      If you are going to use the McCloskey-type "if you're so smart why aren't you rich" criteria (which is fine I think) I'd prefer to pay attention to a Soros or Buffett, who have provable predictive success with their own money, and whose policy prescriptions as it turns out are much, much closer to Sims than Schiff.

    5. RAstudent3:13 PM

      I have seen many a time a poker player who bets all in (or at least a big bet) on the river card holding say a 2 of hearts and a 9 of diamonds with a 3 spades, 5 clubs, 6 diamonds on the flop and a king of spades on the the turn. Obviously they are looking for a 4 of any suit hoping for the straight. At that point they have a 4 out of 46 chance of hitting on the river and the person is clearly an idiot. Crazy thing is, sometimes they hit it and win and think they are great. Does the fact that they made a lot of chips on that hand mean that that person is a good player, no. Sometimes, though, an idiot wins big on a bad bet.

    6. Keynes, who didn't have the highest opinion of businessmen, was asked, "If businessmen are stupid, how do they get rich?" And Keynes supposedly answered, "By competing against other businessmen."

    7. Schiff seems to base his predictions and investment strategy solely on basic economic fundamentals and monetary policy. This strategy results in making him look like an ignoramus in the short and intermediate terms. In the long term to very long term his predictions will likely pan out, mainly because they are based on pretty basic economic principles. For instance, the principle that artificially low interest rates combined with extraordinarily aggressive currency creation by the central bank with eventually result in extraordinarily higher prices. The problem for Schiff is that it could take a decade for those higher prices to show up. But if you have a long term investment outlook, then it's not too much of a problem if you can handle the big swings in your portfolio in the interim. Remember how all the people on TV were laughing in his face when he was predicting a housing market collapse back in 2005-2006? The truth is he thought housing was in a bubble even long before that time. The guy is early because he sees the direction that the captain is taking the cruise ship, and he knows there is no way the captain will be able to turn that big ship quickly enough to avoid hitting the iceberg. The american economy is a cruise ship, not a Ferarri. It doesn't move very fast and it doesn't turn on a dime. The lag time between policy enactment and the consequences of that policy may be many years. The higher prices are coming. It just might not be for a few more years.

      You know, if Mises was right, then the U.S., despite the fact that it sounds absurd, is on the path to hyperinflation. I'm not saying that they're going to ultimately get hyperinflation, but if you judge their actions thus far along with their current policy, they are on that road. Credit expansion that is implemented in order to avoid financial crises is a recipe for hyperinflation. There is still time for the FED to alter course and tighten monetary policy, but if they continue to expand credit, eventually the public will start to lose confidence in the currency. Once that happens, it's pretty much all over. It might take ten more years for it to happen. It might take only five. Market psychology is a tough thing to time.

    8. There's not going to be hyperinflation because this story is missing an important point.

      Quantitative easing isn't creating money in the same sense that it would be if Bernanke were literally dropping newly printed cash from a helicopter. Instead the central bank is buying up bonds from the banks; taking bonds off their balance sheet. The crucial thing to understand is that the bonds are in themselves a variety of money distinguishable from the kind we use to buy bread & butter in two important respects: 1) a bond is interest bearing and 2) it cannot be used for the purposes of satisfying the bank's depositors/investors.

      But why is a bond money? The bond sits on a bank's balance sheet as an asset, the value of which is used as leverage in the ordinary way, so that the bank can make investments against the value of it's assets. Now, if the central bank is swapping one kind of money for another kind, how does that change to size of the money supply? In fact it does not. It only only makes the money supply more liquid because ordinary cash can be used either for (2) preventing a bank run, or barring that, to immediately reinvest in ordinary market operations.

      If anything QE is deflationary because of fact (1) which is to say, the bank's assets are not going to be increased by the interest being paid on the bonds that it no longer holds.

      Schiff either does not know this or he does not care. His followers almost certainly do not know this, which is why they seem to think that the purpose of QE is to reduce the debt burden--which is emphatically not the case.

    9. QE is, nevertheless, creating money that was not previously in existence. And they are doing so at the rate of $85 billion per month. Keep in mind that this is in addition to a FED funds rate that has been held well below the inflation rate for going on five years now. This in itself is inflationary.

      You wrote: "Now, if the central bank is swapping one kind of money for another kind, how does that change to size of the money supply?" By creating money that did not previously exist and using it as the swapping money, that's how. I thought we already established this. It would be different if the FED was simply cashing out the short term treasuries already on its balance sheet and using the proceeds to purchase longer term bonds, which is precisely what the FED was doing in Operation Twist. This was not, in and of itself, inflationary.

      The FED had to end Operation Twist because it ran out of short term treasuries to sell. So they had to return to the printing press. They need to keep buying long term bonds. If they stop completely, the housing market will once again collapse, and the large financial institutions will go down with them, which will take the stock market down too. The FED has to continue printing in order to keep buying the bonds.

      The FED should just let the market collapse. But as we saw in 2008, the political leaders do not have the stomach for that. They need to keep propping up the market with new money, thereby preventing the housing and stock market collapse that would otherwise ensue.

      This can go on for some time, but not forever. Eventually the inflation will start to show up in consumer goods, and when it does, it will be extremely difficult, if not impossible, for the FED to stop by making changes in monetary policy.

  7. Anonymous5:36 PM

    I'm not convinced that "luck" is a complete explanation here, that there aren't some mechanisms at work elevating people who are wrong about things and rewarding certain forms of public display. A related phenomenon is how hedge funders and other money managers might publicly disagree with each other yet end up holding similar portfolios. And why haven't top academic economists crowded street-smarts folksy types out of the capital management business? Something funny is going on.

    "Luck" is I think more applicable, say, to fashion models, where they are lucky to be pretty and lucky to be discovered. I don't even know, do economists have a good understanding how to circumscribe the role of luck, like they might model uncertainty and risk?

    I think something with real social consequence is going on here and we don't understand it.

    1. Anonymous12:13 AM

      It's not just luck. It's also extreme ignorance of the risks one actually takes. I know (closely and personally) many people who have as much wealth as I have who are stone idiots and made huge bets they didn't understand, won, got other people's money, made more huge bets they didn't understand, and made even more money, before making even larger bets they didn't understand that lost spectacularly, but since they had already squirreled away enough loot and cheated enough people, they still live quite comfortably. This happens. It is not a mirage. It may not be everyone, but there are enough that you have to question everyone, no matter what their wealth. Schiff, based on the objective evidence, is almost certainly a fraud. Charlie Munger is almost certainly not. Though we can never have absolute certainty, it makes no sense to be paralyzed by probabilities so small in outlier cases like Schiff and Munger, but everyone else is fair game.

    2. We don't understand it? Well, yes and no.

  8. "Sargent also answered the question. His full answer can be seen here. He basically says that the federal government needs to cut spending."

    That surprised me, so I went to the tape. That's not what he said, at least not literally (maybe you know of some in the loop way of interpreting those words).

    First, he looked like he could have just been talking about long run recommendations, not what we should be doing to address the short run (or shorter run).

    Second, he never said just cut spending. He said there has to eventually be some combination of cuts and/or tax increases if the current trajectory continues.

    And, when you look at these very long run extrapolations that's true, but only because medical inflation is unsustainable. Bring that to the level of average inflation, and it's not that hard to sustain.

  9. John S10:28 PM

    Schiff is an equal opportunity econotroll. Here he applies the Hans Herman Hoppe strategy to Scott Sumner:

  10. Anonymous11:03 PM

    Maybe it is unfair to look to economists for policy advice. Good theoretical economists can develop very interesting and innovative models of possible economic behavior in certain kinds of economically possible worlds given certain economically possible boundary conditions - without thereby possessing any special expertise on the actual conditions that characterize actual economic world in which we happen to live.

  11. Noah wrote:

    Notice how at around 9:06 he mispronounces Bernanke's name as "Bernacky".

    I can't believe I'm doing this, but oh what the heck...

    No Noah, you are wrong. Go listen to it again. His voice somewhat cracks, but he clearly puts the second "n" in there. His sin, if that, is to pronounce it "Ber-NAN-key" instead of "Ber-NAYN-key" but he's not missing the "n" as you claim.

    And if you watch the YouTube videos "Peter Schiff was right" and "Ben Bernanke Was Wrong" you will get more of a sense of how the crazy Austrian nutjobs might like the former over the latter.

    1. The Austrian School of Linguistics?

    2. Anonymous7:54 AM

      Aren't there a bunch of videos of Schiff shit-faced on his radio show incoherently lecturing people on stuff? Maybe that explains it?

      I wonder why people think these guys are nutjobs... hmmm...

    3. Anonymous7:57 AM

      Best part is @2.13.

      "Here's s'more of what the prusudunt had to sayee... KET NINE-UH!"

    4. Anonymous8:00 AM

      There's also an Encyclopedia Dramatica article on Schiff that is fun.

    5. Anonymous8:06 AM

    6. OMFG both of those links had me LOLing. My Japanese neighbors are going to be very worried.

  12. So I think the idea of "good Austrians" and "bad Austrians" is pretty misguided. What was influential in Hayek's work was largely his formulation of the price mechanism. To the extent he did "macro", it was roundly refuted as a pretty thorough disaster.

    So there really isn't any "good" macro coming out of the Austrian school. Heck, there isn't anything we'd properly call economics coming out of it, since the idea seems to be that we can't model anything (because the real world is complicated), and all data are lying (if they don't confirm our worldview). Heck, they even make up their own vocabulary that no one else recognizes (expanding the money supply IS inflation; of course QE is inflationary!).

    In that sense, having an economic discussion with them is utterly useless; the usual tools that economists use (models, data, falsifiable hypotheses) aren't things that they recognize. Their "macro" has about as much in common with what Keynesians/monetarists/etc. do as metaphysics has to do with physics.

  13. Anonymous5:29 AM

    Ever see Schiff's father, Smith. This guy trolled so hard that the partyvan came to pick him up. Twice!

    12 years baby!

  14. Schiff is a huckster and a scam artist. If you invest on a website like Etrade and use a reputable investing service like Morningstar, Google will shoot you pop ads and if you click them you'll get emails from investment services (like say Motley Fool). Most of these are worthless, but not as bad as Schiff, who would have lost you a lot of money.

    He's also a narcissist, an ideologue, and a general clown. But the profit motive comes first.

  15. I always figured he just wants to sell more books...

    I don't think Euro Pacific is all that big - I mean $295 million sounds big, but if they collect 1% of that per year in fees - they're not exactly minting it, with 53 employees. Remember, his brother is just scraping by on $350k/yr!

    1. Anonymous12:04 PM

      4% upfront load on funds

    2. If you're able to pay your brother a $350,000 annual salary, then I'd say you're probably making bank.

    3. Anonymous11:02 PM

      Over 3% in fees, loads over 4% and 8% on pms.

      The brother basically looks stuff up and sends him articles that he can spin. $350K newsfeed.

  16. Anonymous9:28 AM

    The "Austrian School of Economics" is worthless. How do I know this? Two sources: 1) "Why I Am Not an Austrian Economist" by Bryan Caplan (who is a right-wing nutjob himself as far as I'm concerned, which just goes to show something, don't ask me what) which you can read online, the main point of dwhich is that whatever was valuable in Austrian Economics has been incorporated into the mainstream, leaving the nonsese to be identified as Austrian, and 2) Paul Krugman said so.
    I see no excuse for wasting my limited time (I'm not a young person) learning in detail why drivel is wrong when there is a infinite amount of valuable information I don't know but would like to.

  17. The because "Paul Krugman said so." meme is particularly potent.

    Love him or hate him, in both economics and politics there's precious little he's been wrong about.

    1. Anonymous11:10 AM

      Wasn't a fiscal crisis supposed to happen after the invasion of Iraq?

      Weren't most of his writings on Japan in the late-90s wrong?

      No, wait... this is Paul K we're talking about here! Hang on while I fawn!

  18. Irrelevant, but in what part of the US do people talk like Schiff?

    1. Anonymous11:26 AM

      In most bars that open around 10am.

    2. Anonymous12:06 PM

      Does Peter like to peel the labels from his bottles of Bud?

  19. Noah: "So here's the question: Why does Schiff perform this unfair hatchet job on the Nobel Prize winners?"

    Because he's an Austrian and a lying wh*reson - although I repeat myself.

    What do you expect from a quack? Truth? Honesty?

  20. I thank you all for reaffirming the obvious truth that there isn’t a Keynesian in the galaxy that understands Austrian concepts or analysis. Mr. Smith certainly does not.

    OK, I admit I really have no idea what's going on in this Austrian/Fox Business/right-wing-radio/macro-derp-herping world. At this point I'm just taking random swings for humor value. SORRY. Sorry.

    There is no “Austrian/Fox Business” relationship. Fox Business canned Judge Napolitano’s show long ago. Funny money dilution is the source of funding for their endless war lust.

    Then there is O’Reilly and his Ka-nee-zian economics

    There is no “Austrian right wing radio” relationship either. Limbaugh, Hannity and Levin avoid it like the plague for the same reason Fox Business does: Funny money funds their endless wars.

    Then we have Mr. Schiff’s 2006 prediction of an imminent collapse in housing prices.

    Keynesians are obviously deeply insecure regarding their own beliefs as demonstrated by their pathetic fear of even engaging Austrian concepts and analysis. You’ve lost. We’ve won. It’s over.

    1. Dear Bob,

      "Keynesians are obviously deeply insecure regarding their own beliefs as demonstrated by their pathetic fear of even engaging Austrian concepts and analysis."

      Try this:; as well as many back issues of Critical Review, where "Austrian concepts and analysis" are addressed head-on by Barkley Rosser and many others.

    2. Now this is worthy of a serious internet chuckle, especially in context after a run of people who do not want to associate with Austrians: "You’ve lost. We’ve won. It’s over."

      This is like the whole "expanding the monetary base IS inflation" thing, right? Where "won" means "are largely irrelevant except as a crutch for cynical conservatives when they want one?"

    3. This comment has been removed by the author.

    4. I've heard the "You’ve lost. We’ve won. It’s over." meme a lot from Young Earth Creationists too. They keep declaring victory every few years just to remind everyone unless it gets forgotten in the constant deluge of empirically confirmed evolutionary hypotheses in biology, genomics, and geology.

      I would think the dearth of real research being done by self-proclaimed Austrians would be enough to rest the subject among anyone with enough education to understand the importance of such research. But then again, Praxeology claims that empiricism cannot tell us anything useful that isn't already told by deductions from the Action Axiom. So why bother with dirty stuff like data or mathematical models?

      Austrian "economics" is pseudo-science because, whatever else it might claim, it's methodology is totally bunk.

    5. 1. I’ve been accusing Keynesians, monetarists, socialists and commies of having no familiarity with Austrian concepts and analysis since 1973.

      I always assumed that a proper response to such a challenge would take the form of:

      “You are wrong. I am familiar with and understand Austrian concepts and analysis. For example:

      This never happens. Instead, the response generally takes the form of:

      “Fringe fringe fringe! Neo-confederate! Racist racist racist! Austrians can’t do math!”

      Such responses suggest to me that the accused has no familiarity with Austrian concepts and analysis. I then wonder why Keynesians have such a hysterical and vicious reaction to something that they clearly do not understand at all.

      2. Mr. Hill: I submit that the basic Austrian concept is the concept of economic calculation. Under socialism, economic calculation is virtually impossible because free exchange and thus unadulterated prices have been abolished. Poverty ensues.

      In a related fashion, fiat money loans induce distorted prices which impair economic calculation. A house that originally cost $50,000 is artificially bid up to $250,000 solely from fiat money loans created out of nothing. At some point it will become evident that there will not be buyers with $250,000 worth of goods and services to exchange for that house. At that point, the house (and most everything else) will need to be repriced by the market (but the Keynesian response is to move heaven and earth to prevent the necessary repricing). As such, I don’t view the recent housing bubble and bust to be a “classic” Austrian business cycle because economic miscalculation can arise in a multiplicity of situations. Nevertheless, it was the result of economic miscalculation caused by fiat money loans.

      It is inexplicable to me that people cannot see the entire fiat system as creating phony and unsustainable prices and investments. But they don’t. If they did, they would get rid of the system. I fail to see how that phenomenon refutes Austrian analysis.

      I don’t particularly care for the term the “natural rate” of interest. Society requires unadulterated market interest rates which a central bank can never replicate. Interest rates are nothing but prices. As Hayek explained in a different context in 1975:

      The primary cause of the appearance of extensive unemployment, however, is a deviation of the actual structure of prices and wages from its equilibrium structure. Remember, please: that is the crucial concept. The point I want to make is that this equilibrium structure of prices is something which we cannot know beforehand because the only way to discover it is to give the market free play; by definition, therefore, the divergence of actual prices from the equilibrium structure is something that can never be statistically measured.

      Similarly, one cannot know what the “natural” rates of interest will be until the market for interest rates is given free play.

    6. It is inexplicable to me that people cannot see the entire fiat system as creating phony and unsustainable prices and investments.

      So you don't understand why everyone doesn't agree with you. Then why do you accuse "Keynesians" of not understanding Austrian analysis? You admit you are equally guilty!

      Except there is ample evidence that many, many people have looked earnestly at what you call Austrian economics and made good faith efforts to understand it. Greg Hill is living proof. Did you read the link he posted?

    7. Mattski:

      Did you read the link [Hill] posted?

      Yes. In his post, Mr. Hill stated:

      Here’s the inconsistency: if a credit bubble can only be discerned after the fact, then it’s silly to criticize the Fed for what no one could foresee; and if a credit bubble can be discerned in its early stages, then market participants will take actions, e.g., reducing credit-financed expenditures, which will burst the bubble in its early stages. Therefore, Austrian economists should either be more circumspect in their critique of the Fed, or they should retool their model of the business cycle.

      Mr. Hill does not appear to understand that these problems all begin with the mis-pricing of assets, goods and services because they are being artificially bid up with fiat money loans created out of thin air or Fed purchases made with money created out of thin air. If you understand Austrian analysis, you know that. If you don't, you don't. One should be constantly horrified by the process of perpetual mis-pricing most everything.

      The main purpose of "monetary policy" is basically to prevent and distort the pricing process. If you understand Austrian analysis, you know that. Mr. Hill states, "[T]hen it’s silly to criticize the Fed for what NO ONE could foresee…"

      Austrians could foresee. The Fed, Keynesians, monetarists and the various inflationist schools REFUSE TO SEE.

      That is not an "inconsistency" in our theory. Further, it supports my view that no Keynesians UNDERSTAND OR ARE FAMILIAR with the concept of the distortion of the pricing process by fiat money. It's clear you don't understand it.

    8. It's clear you don't understand it.

      You have already admitted you don't understand why people disagree with you, so we're on even ground at least as far as you are concerned, right?

      Actually, I don't understand why a loan in dollars that are backed by gold doesn't create currency out of thin air also. Unless my loan takes the form of gold coins which I must physically return to the lender, then it seems to me the loan itself constitutes money created from nothing.

      But, from my perspective you are simply horrified by the nature of money. Money is a social convention. You may walk around in a state of perpetual horror but that doesn't have any effect on the nature of money.

    9. from my perspective you are simply horrified by the nature of money.

      Such a deep and thoughtful analysis.

    10. Mr. Roddis,

      "If you understand Austrian analysis, you know that. Mr. Hill states, "[T]hen it’s silly to criticize the Fed for what NO ONE could foresee…"

      Austrians could foresee. The Fed, Keynesians, monetarists and the various inflationist schools REFUSE TO SEE."

      I'm afraid you missed the point. Let me pose a question that might prompt you to think a little more critically about your point of view. I think you'll agree that firms with a better understanding of their markets than their rivals' understanding will increase their market share while the latter firms will lose market share. Now, it seems to follow from this view that firms with Austrian economic advisors, who can foresee bubbles, recognize mispriced assets, etc., will outperform firms with non-Austrian advisors. Is this what you see happening?

    11. Now, it seems to follow from this view that firms with Austrian economic advisors, who can foresee bubbles, recognize mispriced assets, etc., will outperform firms with non-Austrian advisors. Is this what you see happening?

      There probably are not enough Austrian advisors at this point to make a difference. I suppose in the future if there are enough such advisors, your question would be a good test of the analysis.

      There is also the problem that if someone has a lot of nerve and skill, an investor can make a lot of money riding the boom while knowing exactly when to get out of the market. Just knowing Austrian theory in general is no guarantee that someone can pick the right time to get out before the bust ensues. Or that they would necessarily know which lines of production are the most susceptible to a collapse. And/or when.

    12. There probably are not enough Austrian advisors at this point to make a difference.

      Guess there isn't much of a market for them is there?

      (Bob, the evidence on this thread is overwhelming that you deal with counter-arguments by ignoring them.)

    13. Guess there isn't much of a market for them is there?

      Since no one has basically even HEARD the basic Austrian analysis or HEARD OF the basic Austrian analysis thanks to perpetual avoidance and suppression by Keynesians who control the government supported education systems worldwide and who basically control all major media worldwide, it's amazing to me the amount trouble we're still able to cause. Even though Hayek won the Nobel Prize for his work on the Austrian Business Cycle Theory, it has always been beyond the pale for Keynesians to bother to learn what that theory is. Keynes and Hayek had been going at it for years, but "The General Theory" meticulously avoids any mention or discussion of Austrian analysis or concepts. There's a reason for that. Keynes would have lost the argument and Keynes did not want the world to even know about the opposition to his hoax.

      There have been no "counter-arguments" other than white knuckle fear constantly expressed by Keynesians that they are probably wrong and the cause of our problems which is expressed by their suppression, marginalization and distortion of their most vigorous opponents. As you have done up and down these comments.

    14. Daniel Kuehn: However, this is the first time since the Great Depression that Hayek’s business cycle theory (as opposed to his broader philosophical perspectives) has registered at all in the public imagination, raising the obvious question: is there anything to the theory?

      BTW, I lean towards Rothbard and have numerous problems with Hayek myself. That does not change the fact that Keynesians know nothing about basic AUSTRIAN (vs Hayekian, which they don't know either) concepts and analysis.

    15. Anonymous8:35 PM

      @Bob Roddis i don´t agree with you on almost anything when it comes to economics or politics.But i don´t have anything against you at all on the personal level.I honestly believe you are a decent person in private life and probarly a nice guy.I guess you are honest in your believes in libertarianism,idealistic and in my view unrealistic in extreme.
      But i respect your views,you believe in what you think is right,and that not for your personal gains.But i think you do your own cause a great deal of harm defend such a guy as Peter Schiff a person i heard so many libertarian friends hate more then a Joe Stalin or Keynes or what ever is worst to a Austrian Libertarian.They hate for the reason that they think he is useing the Austrian school cred just to peddle his stuff whatever it is,and discredite the Austrian school.They hate the guy more than anybody else,and their sick and tired to be compared with Peter Schiff,they told me,and i hear it all the time.They serouisly want that the mises istitute and the other whatever Austrian organisations distance tem self from that charlatan they told me.I can´t understand why a guy like defend such Snake Oil Salesman,that just use your cred.I don´t care a bit but i just wonder why?

    16. Anonymous: I only pointed out that Schiff called the housing bubble in 2006 and was mocked for it. I don't feel strongly one way or the other about him. I didn't predict imminent hyper-inflation back in 2009 since I thought most of the new funny money would go into jacking up the price of worthless and/or "troubled" assets for the elite. I was right about that but never thought the American people would have tolerated it like zombies for as long the way they have.

      I'm also sick and tired of a few mistaken forecasts for high inflation in the post 2009 period being the basis for claiming all Austrians (or Austrian analysis itself) made such a forecast.

      I also figured that it was so obvious that the housing bust and bad times were caused by Keynesian and "progressive" policies that this would be seen by everyone. I certainly never predicted that such an obvious hoax and scheme for the elite to loot average people would become so popular with hip "progressives". So that's my bad prediction.

    17. Since no one has basically even HEARD the basic Austrian analysis or HEARD OF the basic Austrian analysis thanks to perpetual avoidance and suppression by Keynesians who control the government supported education systems worldwide and who basically control all major media worldwide...

      I guess I just have to say, Yikes.

    18. Mattski: I thank you again for your thorough, fact-based and thoughtful analysis.

    19. Bob, no disrespect, but you didn't respond to the substantive points I made. First of which was, by your own admission you are guilty of precisely the same defect that you accuse "Keynesians" of, ie, "not understanding" the position of your opponents.

      Second, even if the dollar is "backed" by gold, a standard loan would still create money out of thin air. Because the issuing bank is going to credit my bank account with an electronic deposit. They aren't going to send an armored vehicle to my house and deliver a sack of gold coins.

      And you fundamentally ignored the careful arguments put forth by Greg Hill. And frankly, that last rant of yours sounds seriously paranoid. But all that aside, I wish you the best.

  21. I thank you all for reaffirming the obvious truth that there isn’t a Keynesian in the galaxy that understands Austrian concepts or analysis.

    Do you understand why Hitler wanted to exterminate Jews? Neither do I.

    1. Anonymous11:17 PM

      Sorry to bite on Godwin and wander further off topic...

      But it does seem like European ideologues actually believe the things they say, whereas American ideologues are so very clearly just in it for money. It's like a release valve, paying them off, so we've been immune so far to the more severe effects true believers. Knock on wood!

      But then again, I always said we didn't really believe in austerity because it was something we imposed on other countries but never ourselves. And then...

  22. Anonymous1:17 AM

    I think the most useful way to understand trolls like Peter Schiff is through the framework of total class war. His goal is to advance the power of his tribe, the conservatives, and defund the welfare state.

    Why should he care if the hoi polloi are misled by his disinformation? That's the whole point. The proles are stupid and easily misled, and in any case not entitled to his wealth. He just has to spread just enough doubt about pro-government policies, and his work is done.

  23. Schiff is such a clown. Good piece!

  24. The simple fact that you zero in on and search to find mispronunciations of "Bernacky" speaks volumes to your type of concrete thinking, without any curiosity to the abstract ideas.

  25. Funniest thing is despite being wrong about most things macro for years like inflation,quantitative easing, decoupling and relative price rise in gold (gold $5k)- still this plonker doesn't have the backbone yet or I suspect never will, to come out and admit that he was wrong - it's always the markets that are wrong but never him haha!nobody really understands the "fundamentals" as well as him, to call him a narcissist is an insult to real narcissists. He's an absolute megalomaniac, who probably really believes he is god's gift to mankind when he really is a gadfly bottom feeder who preys on ignorant muppets who really don't know much about anything let alone money or even economics in general.

  26. Anonymous5:40 PM

    I think you guys are missing the point.

    Why should Schiff apologize for spreading misinformation? That's his *intent*.

    This is a war.

    1. I'm not so sure about the war part, or that he sees it that way, but it seems to me that as long as there are people willing to entrust him with almost $300 million, on which he charges fees that give him and his brother a couple million a year, why on earth would he say he had ever been wrong about anything?

  27. Anonymous10:52 PM

    Mish bashed Schiff for precious metals and mining stock investing for years and years. Now Mish is investing precious metals and mining stocks. Ring - goes the bell.

  28. Anonymous12:47 PM

    Two late thoughts:

    1) Luck -- here's a link making the rounds about the role of luck, noticed it on Economist's View.

    2) Schiff and the like -- if people are paying substantial costs for their beliefs (losing money, going to jail), it seems plausible that they do actually believe what they're saying.

  29. Regarding Schiff and Mish….

    Predicting when a bust is going to begin is always hard and the determination is empirically based. Predicting what is going to happen after a bust begins is also hard. If the authorities are not going to allow an effective repricing of everything quickly and insist upon squirting new fiat money into the system, the new fiat money is generally going to raise the price of those assets and lines of production that receive the new fiat money first. Mish assumed a big collapse in assets prices would inhibit CPI inflation. Schiff assumed that new money would be going to consumers. I assumed that the new money would go to prop up the prices of assets owned by the elite and super-low rates would cause perpetual bad times. I was right.

  30. Anonymous11:01 PM

    Peter is more qualified than those other economists, which pisses him off and makes him bitter, obviously. He predicted and laid out specifically why the 2008 crash was going to happen. If he was appreciated a little more by leftist media and the keynesian school economists then perhaps he wouldn't be so ready to mock them when they continually received Nobel prizes while he got no recognition for pointing out an event that negatively changed the lives of billions. You know what it's like loosing your financial security for the future? I'm 100% sure you don't or have not realized it.

    And why are you even blogging about Peter Schiff while admittedly knowing nothing about Austrian Economics? Where are your literature reviews on nanotechnology research? What about your physical theory of the universe? Oh right, if you engaged in those discussions you would only be making them more full of bs fueled by senseless arrogance, right? What makes you surgical blog about topics? Is it the fact that you can make inferences on ones credentials and professionalism based on the pronunciation of others names? Where is your library of blogs with this kind of analysis?