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abitare (99.31)

Peter Schiff - Don't Stimulate Me Bro!

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January 06, 2009 – Comments (17)

December 29, 2008 - Peter Schiff educates economists about how Hoover and Roosevelt destroyed the United States economy in the 1920's through 1940's with government intervention against the free market. Schiff peels off the illusion that FDR was a great president. He contributed to the Great Depression along with the Federal Reserve.

17 Comments – Post Your Own

#1) On January 06, 2009 at 11:04 AM, TDRH (99.85) wrote:

Wish I could play it at work. Seems like he has been right on everything else, they should appoint him to treasury secretary or fed chair.

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#2) On January 06, 2009 at 11:25 AM, FleaBagger (34.02) wrote:

He doesn't think the FED should exist, but that might make him the best FED chair ever.

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#3) On January 06, 2009 at 11:39 AM, nthought (< 20) wrote:

He's out of his mind.  Inflation is not a problem right now.  There's more deflation right now than we see.  Sticky prices and sticky wages are keeping deflation from truly being priced in to things.

 

Dollars are not flooding the market.  They're disappearing.  Housing prices, being linked to wages, will not bottom this year.  Consumer spending is down,  housing is down, wages are down.  It's a triple deflationary whammy. 

 

The stimulus, besides being critical for national security, isn't simply an inflationary tactic of printing money.  It actually will create productive work.  How else are we going to upgrade the power grid?   Fix roads.  Fix schools.  I want specifics.  You can't just say, "capitalism" for everything.  

 

This guy is so wrong about everything.  If Roosevelt did nothing, which is in essense what Hoover did, the economy would have been even worse. 

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#4) On January 06, 2009 at 11:53 AM, kdakota630 (31.77) wrote:

nthought

The popular belief is that Hoover did nothing is completely incorrect.

"After his successful election in November 1928, Hoover entered office with a plan for reform of the nation's regulatory system. A dedicated Progressive and Reformer, Hoover saw the presidency as a vehicle for improving the conditions of all Americans by regulation and by encouraging volunteerism. Long before he entered politics he denounced laissez-faire thinking."

As a measure to fix The Great Depression, he also passed the Smoot-Hawley Act which most economists at the time said would make matters worse, and most current economists claim did make matters worse.

Hoover was very hands-on, and FDR even more so.

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#5) On January 06, 2009 at 12:11 PM, awallejr (80.08) wrote:

I'm not sure who is worse, Jim Cramer or Peter Schiff. On the one hand he says Gov't should stay out, let the free market romp.  Then he says we need to go into commodities and improve infrastructure.  As an aside I do, however, agree with the thesis of buying high dividend stocks and energy as a long term investment.

He does seem to forget that it was the excesses of the "ROARING 20's" where the free market ran rampant that built up to the bubble crash (no real margin requirements, anyone could basically buy and own stocks on a phone call - sort of like naked shorting).  He also ignores the whole knock on Hoover for his lack of intervention  on behalf of the banks and just basically letting  them crash.  He also doesn't know that when FDR took office the Supreme Court kept knocking down his legislation as unconstitutional 5-4.  It wasn't until FDR won re-election by a landslide and real threats of increasing the size of the Supreme Court (which would then allow FDR to stack the Court) that Chief Justice Roberts switched his votes from against to in favor of all the new legislation (hence the phrase "a switch in time saved nine"). 

Schiff also ignores the fact that similar to the 1920s you have had the 2000s where regulation was dormant, the free market ran rampant and excesses grew out of control. 

So it was the free market that got us into this mess, we should then just let the free market get us out of this mess.  Gotcha Peter.

Give me more Roubini please.

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#6) On January 06, 2009 at 12:32 PM, nthought (< 20) wrote:

kdakota, facing a depression, Hoover did try to do something, just not the right things.  I said, in essence nothing, translate, what he did had no effect.  Roosevelt won a landslide in 1932 because he proposed a stronger fiscal response than Hoover.  Hoover, of course, called him a communist. 

 

Hoover was a Republican, and fiscally conservative.  As mentioned earlier, he let banks crash, and in an insanely stupid move, he tried to balance the budget.  The fed policies tightened the currency, which has been noted by many modern economists such as Milton Friedman as a disastrous policy that led to the Great Depression being the worst economic collapse ever. 

 

Now what is Schiff's agenda?  tighten money supply, let banks fall flat, do nothing, wait for a bottom.  He wants what the fiscal conservatives who caused the depression in the 1920's wanted, he just doesnt want to say that.  Let's get it right the first time this time around. There's no need to repeat history.  I'll risk inflation, but I think given that we just deleted trillions of dollars worth of real estate and we're shedding jobs, I doubt this is an issue for 2009. 

 

And as far as doomssayers are concerned, Schiff's half-baked analysis doesn't hold a candle to Roubini.    

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#7) On January 06, 2009 at 12:32 PM, abitare (99.31) wrote:

ALCON,

Thanks for the replies. 

FYI - here is a good summary of Peter Schiff.

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#8) On January 06, 2009 at 12:37 PM, starbucks4ever (99.52) wrote:

"After his successful election in November 1928, Hoover entered office with a plan for reform of the nation's regulatory system. A dedicatedProgressive and Reformer, Hoover saw the presidency as a vehicle for improving the conditions of all Americans by regulation and by encouraging volunteerism. Long before he entered politics he denounced laissez-faire thinking.[19] As Commerce Secretary he had taken an active pro-regulation stance. As President, he helped push tariff and farm subsidy bills through Congress.

Hoover expanded civil service coverage of Federal positions, canceled private oil leases on government lands, and by instructing the Justice Department and the Internal Revenue Service to go after gangsters for tax evasion, he enabled the prosecution of gangster Al Capone. He appointed a commission which set aside 3 million acres (12,000 km²) of national parks and 2.3 million acres (9,000 km²) of national forests; advocated tax reduction for low-income Americans (not enacted); closed certain tax loopholes for the wealthy; doubled the number of veteran's hospital facilities; negotiated a treaty on St. Lawrence Seaway (which failed in the U.S. Senate); wrote a Children's Charter that advocated protection of every child regardless of race or gender; built the San Francisco – Oakland Bay Bridge; created an antitrust division in the Justice Department; required air mail carriers to adopt stricter safety measures and improve service; proposed federal loans for urban slum clearances (not enacted); organized the Federal Bureau of Prisons; reorganized the Bureau of Indian Affairs; instituted prison reform; proposed a federalDepartment of Education (not enacted); advocated fifty-dollar-per-month pensions for Americans over 65 (not enacted); chaired White Houseconferences on child health, protection, homebuilding and homeownership; began construction of the Boulder Dam (later renamed Hoover Dam); and signed the Norris-La Guardia Act that limited judicial intervention in labor disputes.

 

Hoover's stance on the economy was based largely on volunteerism. From before his entry to the presidency, he was a proponent of the concept that public-private cooperation was the way to achieve high long-term growth. Hoover feared that too much intervention or coercion by the government would destroy individuality and self-reliance, which he considered to be important American values. Those ideals, as well as the economy were put to the test with the onset of The Great Depression. At the outset of the Depression, Hoover claims in his memoirs that he rejected Treasury Secretary Mellon's suggested "leave-it-alone" approach.[23] Critics[who?], on the other hand, accused Hoover of sharing Mellon's laissez-faire viewpoint. It is often inaccurately stated that Herbert Hoover did nothing while the world economy eroded. President Hoover made attempts to stop "the downward spiral" of the Great Depression. His policies, however, had little or no effect. As the economy quickly deteriorated in the early years of the Great Depression, Hoover declined to pursue legislative relief, believing that it would make people dependent on the federal government. Instead, he organized a number of voluntary measures with businesses, encouraged state and local government responses, and accelerated federal building projects. Only toward the end of his term did he support a series of legislative solutions.

In 1929, President Hoover authorized the Mexican Repatriation program. To combat rampant unemployment, the burden on municipal aid services, and remove people seen as usurpers of American jobs, the program was largely a forced migration of an estimated 500,000 Mexicansand Mexican Americans to Mexico. The program continued through 1937.

Congress approved the Smoot-Hawley Tariff Act in 1930. The legislation, which raised tariffs on thousands of imported items, was signed into law by President Hoover in June 1930. The intent of the Act was to encourage the purchase of American-made products by increasing the cost of imported goods, while raising revenue for the federal government and protecting farmers. However, economic depression now spread through much of the world, and other nations increased tariffs on American-made goods in retaliation, reducing international trade, and worsening the Depression.[24]

In 1931, Hoover issued the Hoover Moratorium, calling for a one-year halt in reparation payments by Germany to France and in the payment of Allied war debts to the United States. The plan was met with much opposition, especially from France, who saw significant losses to Germany during World War I. The Moratorium did little to ease economic declines. As the moratorium neared its expiration the following year, an attempt to find a permanent solution was made at the Lausanne Conference of 1932. A working compromise was never established, and by the start ofWorld War II, reparations had stopped completely.[25][26]

President Hoover, in 1931, urged the major banks in the country to form a consortium known as the National Credit Corporation (NCC).[27] The NCC was an excellent example of Hoover's belief in volunteerism as a mechanism in aiding the economy. Hoover encouraged the member banks of the NCC to provide loans to smaller banks in order to prevent them from collapsing. Unfortunately, the banks within the NCC were often reluctant to provide loans, usually requiring banks to provide their largest assets as collateral. It quickly became apparent that the NCC would be incapable of fixing the problems it was designed to solve, and it was abandoned in favor of the Reconstruction Finance Corporation.

By 1932, the Great Depression had spread across the globe. In the U.S., unemployment had reached 24.9%,[28] a drought persisted in the agricultural heartland, businesses and families defaulted on record numbers of loans, and more than 5,000 banks had failed.[29] Tens-of-thousands of Americans found themselves homeless and they began congregating in the numerous Hoovervilles (also known as shanty townsor tent cities) that had begun to appear across the country. The name 'Hooverville' was coined by their residents as a sign of their disappointment and frustration with the perceived lack of assistance from the federal government. In response, President Hoover and Congress approved the Federal Home Loan Bank Act, to spur new home construction, and reduce foreclosures. The plan seemed to work, as foreclosures dropped, but it was seen as too little, too late.

Prior to the start of the Depression, Hoover's first Treasury Secretary, Andrew Mellon, had proposed, and saw enacted, numerous tax cuts, which cut the top income tax rate from 73% to 24%. When combined with the sharp decline in incomes during the early depression, the result was a serious deficit in the federal budget. Congress, desperate to increase federal revenue, enacted the Revenue Act of 1932. The Act increased taxes across the board, and the percentage increased with income, to near pre-1928 levels for top income earners. It also implemented a 13.75% tax on corporations.

The final attempt of the Hoover Administration to rescue the economy was the passage of the Emergency Relief and Construction Act which included funds for public works programs and the creation of the Reconstruction Finance Corporation (RFC) in 1932. The RFC's initial goal was to provide government-secured loans to financial institutions, railroads and farmers. The RFC had minimal impact at the time, but was adopted by Franklin Delano Roosevelt and greatly expanded as part of his New Deal.

[edit]Economy

In order to pay for these and other government programs, Hoover agreed to one of the largest tax increases in American history. The Revenue Act of 1932 raised income tax on the highest incomes from 25% to 63%. The estate tax was doubled and corporate taxes were raised by almost 15%. Also, a "check tax" was included that placed a 2-cent tax (over 30 cents in today's dollars) on all bank checks. Economists William D. Lastrapes and George Selgin,[30] conclude that the check tax was "an important contributing factor to that period's severe monetary contraction." Hoover also encouraged Congress to investigate the New York Stock Exchange, and this pressure resulted in various reforms.

National debt expressed as a fraction of gross national product climbs from 20% to 40% under Hoover; levels off under FDR; soars during World War II. From Historical Statistics US (1976)

For this reason, years later libertarians argued that Hoover's economics were statist. Franklin D. Rooseveltblasted the Republican incumbent for spending and taxing too much, increasing national debt, raising tariffs and blocking trade, as well as placing millions on the dole of the government. Roosevelt attacked Hoover for "reckless and extravagant" spending, of thinking "that we ought to center control of everything in Washington as rapidly as possible," and of leading "the greatest spending administration in peacetime in all of history." Roosevelt's running mate, John Nance Garner, accused the Republican of "leading the country down the path of socialism".[31]

These policies pale beside the more drastic steps taken later as part of the New Deal. Hoover's opponents charge that his policies came too little, and too late, and did not work. Even as he asked Congress for legislation, he reiterated his view that while people must not suffer from hunger and cold, caring for them must be primarily a local and voluntary responsibility.

Even so, New Dealer Rexford Tugwell[32] later remarked that although no one would say so at the time, "practically the whole New Deal was extrapolated from programs that Hoover started." 

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#9) On January 06, 2009 at 12:47 PM, bigkansasfool (< 20) wrote:

Peter Schiff is a nut job that's been preaching dooms day for a long time. He is the son of a notorious tax protester (currently in federal prison). Peter Schiff and his father Irwin Schiff co wrote the book "The Great Income Tax Hoax: Why You Can Immediately Stop Paying This Illegally Enforced Tax". 

 Enough Said.

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#10) On January 06, 2009 at 12:54 PM, nthought (< 20) wrote:

Schiff's a speculator too.  He's exploiting this crisis by pumping up gold through fear.  Have any of his minions actually taken into account that the "$1 trillion" stimulus package is a two year deal?  It will take a long time, and if you ask me too long, for this to have an effect.

 

If they don't propose more than this, we'll have Obamavilles, not inflation. 

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#11) On January 06, 2009 at 12:59 PM, awallejr (80.08) wrote:

LOL, really?  I never knew that about Schiff.  I do have to say that his eye movements in all these videos are spooky.

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#12) On January 06, 2009 at 3:41 PM, DemonDoug (98.85) wrote:

Hoover was a "spend spend and spend some more" republican, not fiscally conservative at all.

exactly when have republicans ever actually been fiscally conservative?  Talk about a dog who barks loud and has no bite.

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#13) On January 06, 2009 at 3:58 PM, kdakota630 (31.77) wrote:

I'd say that the 104th Congress was pretty fiscally conservative which (arguably) got Clinton his balanced budgets.

You're right on the mark with Republican presidents though.  Wouldn't you have to go back to Calvin Coolidge?

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#14) On January 06, 2009 at 4:52 PM, PaperIsPoverty (< 20) wrote:

Schiff is right about almost everything. The government apologists who slander him told us to buy bank stocks at their peaks. They couldn't see a bubble if it was two feet in front of them. And they still won't admit they were wrong. Schiff wins. Inflation apologists lose.

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#15) On January 06, 2009 at 7:16 PM, awallejr (80.08) wrote:

Can't keep playing that "I told you so" card.  Yeah he and OTHERS were warning about the excesses and dangers, but that has now come to pass.  It's the cure that is in question and NTHOUGHT'S comments above regarding Schiff in that department are spot on.

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#16) On January 06, 2009 at 8:25 PM, thecage41 (97.89) wrote:

I don't see how anyone can say Schiff is right about everything.  I consider myself a libertarian, but just because someone says everything bad is caused by the government doesn't make it so.  Clearly the Fed kept interest rates too low and had some bad regulation, but clearly private enterprises made some horrible decisions as well.  Blaming everything on the government is short sighted and naive.

I do agree with him that the bailouts are counter-productive though.

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#17) On January 06, 2009 at 10:50 PM, GS751 (28.01) wrote:

the great depression was a liquidity problem among banks, thats what led to most of them failing... today we have a solvency problem that bernanke is treating like a liquidity problem...

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