Peter Schiff Defends His Forecasts and Rails Against College Propaganda (Audio)
In his latest podcast, Tom Woods talks with Peter Schiff about Peter’s track record of forecasting, past and present. Peter defends the performance of his investment strategy, explaining why he thinks mainstream naysayers will soon be proven wrong. After that, Peter and Tom discuss the terrible and absurd condition of college education and the looming student loan bubble. You can download a free white paper on that topic here: The Student Loan Bubble: Gambling with America’s Future
Government wanted to make college more affordable. They made it more expensive. And at the same time, they destroyed the value of the degree. It costs more to get a degree, and the degree is worth less, because everyone now has one. If you actually want to differentiate yourself, you got to get a master’s degree. You got to get a PhD. A college degree means nothing. I think a college degree today has less marketable value than a high school diploma did before the government started subsidizing college. This whole bubble is going to burst…”
Highlights from the interview:
“I think China is going through a bit of a transformation. I have been forecasting this for many, many years. I wrote about it in my original book Crash Proof. China has been exporting much of their production to America and lending us the money to pay for it. I think right now their economy is transitioning to rely more on domestic consumption and services, which I think is going to lead to an improvement in the standard of living of the Chinese. Not that they’re going to stop producing. They’re going to continue to produce. They’re just going to consume what they produce domestically, as opposed to making their production available to Americans on credit. I think this is the beginning of that big transformation. I think you’re also seeing the Chinese beginning to allow their currency to trade a little more freely, as they are also going to unload some of their huge holdings of US Treasuries. This could be the beginning of a major exit from the US Treasury market, not just from China, but from emerging markets in general…
“There’s a lot about Trump that is appealing, except a lot of the stuff that he says. What he’s doing is he’s trying to appeal to maybe the ignorance and the frustration within the Republican party, which I share. Basically, our leaders have betrayed the real Republican principles and have just gone along with growing the welfare state and the warfare state, and government keeps getting bigger and spending more, and our liberties keep getting fewer and fewer. There is a lot of frustration in the Republican party, because they can’t get any results, even if we manage to elect Republicans, we keep marching down this road to socialism or serfdom…
“For years, people were laughing at my forecasts on the housing bubble, the same way they’re laughing at my forecasts now. But it’s all part of the same problem. The housing bubble was a manifestation of Fed policy being too loose. That policy continues. In fact, monetary policy is easier now, it’s looser now. The mistakes that are being made under Yellen and were made under Bernanke are much bigger than the mistakes that were made under Greenspan. In fact, Yellen and Bernanke make Greenspan look like Volcker. It’s all the same problem. The people who didn’t recognize it prior to 2008 still don’t recognize it…
“People were criticizing me for that [missing short-term stock market gains in between crises] the last time around, when I was talking about the housing bubble and US stock market… People were saying, ‘You’re missing out on all the gains.’ The reality was actually from 2001 to 2008, we had much bigger gains. My strategy of investing internationally and investing in commodities served me extremely well during the inflation period of the housing bubble. I was making a lot more money long foreign stocks and commodities than my critics were, who were long the US stock market. Now that has not been the case for the last few years. You can certainly criticize me validly for being on the wrong side of the markets for the past few years, because I have been long foreign stocks rather than US stocks. Given the strength of the dollar, that has undermined my strategy. This time around, we’ve had a dollar bubble that I think is kind of similar to the bubble we had in the late 1990s. There, when I was worried about the stock market bubble, I missed out in the gains in the dot-coms and tech stocks, because I was thinking it was a bubble. It was smaller than the one we have now… The profits I made from 2001 to 2008 dwarf the losses that we had temporarily from ’96 to 2000. People following my advice from 1996 to 2008 did much better than people who followed the advice of the mainstream to just buy US stocks.
“I think the same thing is going to happen again. I think the losses that people who are following my advice are suffering now, because of the dollar bubble. I think we are going to be vindicated again when this dollar bubble bursts, which I think is much bigger than the one we had in the 1990s. I think over the longer term, my approach of avoiding the US dollar and US markets and investing in sounder economies and sounder currencies abroad, even though it’s off to a slow start these last few years… I think I’m going to be vindicated once again on the long-term success of my investment strategy…
“There are problems everywhere, but a lot of people don’t realize America is the source of those problems, because we export our bad monetary policy all around the world… We’re still the primary reserve currency. What we do with our monetary policy and interest rates affect other economies… There are real safe havens… Look at countries like Switzerland or Singapore or New Zealand, just to name a few, where look – there are problems there, but on a scale relative to the United States, they are very, very low. They have more economic freedom, generally have lower taxes, fewer regulations, better balance of trade, higher domestic savings rates. They’re really doing things right…
“You have all those people who were bearish on gold. I was going on television in ’04, ’05, ’06 – I was bullish on gold. Everyone was bearish, making fun of me as gold prices kept going higher and higher and higher. Gold was beating the US stock market, but now all the people that were bearish all the way up are now saying, ‘See, I told you so. Schiff’s a broken clock. Look, gold is down $1140. He’s been wrong, he’s been wrong for three years.’ Yeah, but they were wrong for 10 years. They kept saying it’s going to go down… I understand the dynamics behind gold’s move, and because I understand the dynamics I know that gold’s not finished moving. I know that gold’s going a lot higher. But a lot of the speculators that finally jumped into the gold market at $1700, $1800. They’re now short….
“I wrote a lot about student loan problems in my book The Real Crash… It’s a perfect example of the government creating a problem, then presenting itself as a solution to the problem it created, then making the problem worse. College used to be very affordable… Not everybody did go, because not everybody needed to go to college… The government all of a sudden sees a bunch of college students and they want their votes… ‘Hey, we’ll make it easier for you, so you don’t have to go out and get a job to go to college. We’ll loan you some money. And we’ll guarantee your loans so you can borrow money at a really, really low rate of interest… So it will be like a US Treasury… because the US government is going to guarantee it… You don’t have to work. You can spend all your time at your studies, and just pay off the loan when you graduate…’
“Government wanted to make college more affordable. They made it more expensive. And at the same time, they destroyed the value of the degree. It costs more to get a degree, and the degree is worth less, because everyone now has one. If you actually want to differentiate yourself, you got to get a master’s degree. You got to get a PhD. A college degree means nothing. I think a college degree today has less marketable value than a high school diploma did before the government started subsidizing college. This whole bubble is going to burst…”
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