About 6 months ago, while watching every video on the Ludwig Von Mises youtube channel, I stumbled across a meandering, rambling, unscripted, incendiary, merciless rant by some dude named Peter Schiff.
He is the CEO of Euro-Pacific Capital which, as the name suggests, makes investments anywhere but the USA (heavily in Canada though).
Schiff is born-and-bred libertarian, with his dad (Irwin Schiff) being so awesomely looney that he's actually been in and out of jail for the past 60 years for civil disobedience in the form of not paying federal income taxes. He recently was sent to jail once again, at age 84. He will be there until 2016.
Schiff is far more pragmatic than his father. He reluctantly bows to governmental and social pressures by following laws and recognizing social mores (like not being an aging jailbird struggling hopelessly to slay goliath using a couple books and the constitution).
The latter, in my opinion, is evidenced by him running as a Republican in the Connecticut senate race instead of the obvious and more applicable "Libertarian" moniker.
I. Euro-Pacific Capital
My current mutual fund has adopted a rather unorthodox strategy of measuring a prospective investments growth in terms of the size of the fire that could be stimulated by shoveling my money directly into it. I've decided, therefore, to shift the few dollars I have left to another company and possibly owning stocks directly. I've been following Schiff's public statements on Youtube for the past few months, and was highly entertained by his entrance into the Republican senatorial primary, so I looked up Euro-Pac and found there was a branch office nearby... "Well... why not?"
EPC is a smaller company, so I expected some moderate-rent digs, even though this was the 'rich' side of town.
So I walked into this beautiful, lavish office building with this ultra-hot receptionist at the front desk (and an idle secondary receptionist just adjacent to the primary one, in case one surpassed thermal tolerances and needed to be swapped out). They called the representative down to meet me and as he escorted me through the labyrinth of people and cubicles, I finally asked, "is this all Europac?" "No," he replied "just this part up here." He gestured towards this bundle of much smaller, windowless closet-esque offices ahead of us. I'm down with minimalism, but it was ironic given the lobby with the fembots and whatnot
What first jumped out at me were the items on the desk which were obviously permanent fixtures: calendar, plant, computer, and a copy of Peter Schiff's new book. In fact, though there were not many 'personal items' in the office, among the few were FIVE different books by Peter Schiff, including two duplicate copies. There were no other books on the shelves of the office, as if to say no other book authored by man or ape need be read.
In fact, the first words out of the guy's mouth were "So, where did you hear about Peter?" My reply was "Wait, why would you guess I heard about this place through him?" We kind of chuckled and he responded with "Well that's kind of 'our thing'." ... or something to that effect.
I knew Schiff was a walking advertisement for his own company, but I didn't actually realize his company was his company. It's almost like being a EPC client is like being granted membership into the Peter Schiff Fan Club or maybe even the Cult of Peter.
At several points in the discussion when poking around for different investment ideas, the broker introduced a stock by saying "This is what Peter likes" or "Peter's real big into..."
It was a little aggravating, as you can imagine. Is Peter handling my account personally? Will he call me every month with suggestions and updates? Will he blow me if he accidentally co-mingles my money with his Thai Hooker fund?
Schiff's employees bear striking resemblance to the Oompa Loompas, who practically worshiped the eccentric Willy Wonka and labored as slaves, catering to his every whim... Okay maybe it's not that bad, but if his reps all had orange skin and green hair I think I'd be morally obligated to give him all my money.
All that said, their rates seemed very reasonable apart from their first-ever mutual fund which was hatched about 2 months ago. Said fund is exclusively Chinese stocks, so their excuse was naturally something along the lines of "there are a bunch of fees and exchange difficulties yadda yadda It's freakin China--literally". I suppose that's reasonable explanation, but the fund would have to yield roughly 6% just to overcome the fees.
I have some real trepidations about China. I mean, it's freakin China. I don't know anything about China, and I'm willing to bet a lot of white investors don't either. For the time being I'll wait until it actually has a past-performance to look at.
Euro-Pac does specialize in a lot of strategies I'm leaning towards. They're able to purchase currencies, stocks in essential goods and services, commodities and do it all in foreign denominations immune to American inflation. They don't just do Asia, either; they're big into Australia, New Zealand, Europe, and Canada. The MERK hard currency fund (symbol MERKX) can be accessed through there and it does extremely well.
Even though I have some misgivings, this firm is still my top candidate for my next investment firm. I mean, even if Schiff takes his antics to their logical conclusion and he and his company go all Heaven's Gate on me, I'll still own the stocks so it won't leave me broke.
Update: Apparently Fidelity has some really good international common stock mutual funds as well.
II. Irwin Schiff
I was going to start off trying to persuade you to respect this True American Patriot™ (forgive the hackneyed language, but I use this term sparingly). However, that's really not the way I feel about Irwin Schiff.
Here's the deal as I see it: If you don't think Irwin Schiff is a terrific bad-ass, you're an idiot.
There's really no way around it. This guy recognized that the income tax violates a HANDFUL of the amendments known as "The Bill of Rights." He then devoted his whole life proving not only that to be true, but also that even in the weighty tome that is the personal income tax code, there exists no line that says you actually have to pay it.
Of course, as a practical matter, since everyone believes this to be true, the government doesn't even have to be right.
In one of the many cases against Irwin Schiff, the prosecution and even the judge (carefully selected by the government to see this case) told the jury essentially that even if no particular statute could be found, Irwin Schiff could still be held in violation of it. And they won with that. Because that's how it works.
So to sum up: You may think Irwin is a cooky libertarian nut who has a fetish for prison. However, he's been in and out of jail for DECADES defending the Bill of Rights (albeit futilely). He sacrificed greatly for something he believes in, and that's something that will almost certainly never be said about any of us. By anyone. Ever.
Unless the next recession occurs before the Republican primary, He's F$cked.
I'm not saying it's impossible. I'm saying (again, forgive the cliche) the paradigm has not shifted... yet.
Some are still confused as to whether or not we're out of the woods economically speaking. The economy is THE ONLY issue Schiff could be potentially popular on. When (or if) it becomes well known that we are actually in the middle of a depression, Schiff's record will be a tremendous boon and could propel him to the front.
The problem is time: We had this first recession and the next one is sure to follow. However, will it be deep and alarming enough for people to actually drastically reconsider their political approach? Will it be in time for Schiff to win the Primary? Who knows?
Happy Note
On a happier note, I'm going to talk about prostate cancer.
Prostate cancer is one of many cancers that is actually fairly preventable through changes in lifestyle and such.
Who do you think are least likely to get prostate cancer (other than women, smartass)?
Prostate cancer survivors.
After years of tear-jerking pleas from doctors, cheeseburger binges, and pretending to be an obese couch-ornament, they all at once change their ways. Men who survive prostate cancer tend to change their whole lifestyle after their little 'brush with death', now realizing the full consequences of their actions.
I believe this depression--this 'brush with death'--may actually purge the notions of keynesianism and monetarism from the minds of short-sighted, self-indulgent, opportunistic politicians (and the people that elect them). After decades of printing and borrowing trillions to support decadence and irresponsible non-investments, America will "go on a diet." Either that or we'll meet a horrible f$ckin end; how should I know? Someone call that soothsayer Schiff. (67,987)
This is more of a political take on why we're on the path towards a collapse in the dollar.
UPDATE: More technical data available here... looks like this video is going to need updating pretty soon.
Rough Transcript:
[cycle through lbt faces]In my last video, I outlined why it is that so many libertarian-minded people believe the dollar is headed towards collapse.
If you're new to this subject, it's natural to assume that we're all exaggerating, and are probably overstating the problem in order to scare people for our own personal gain--whether it be for votes [rp], money [ps], or youtube popularity [me].
[thumbs up]This level of cynicism is perfectly healthy. In fact, anytime anybody is [al gore] trying to convince you that the sky is falling, it's probably a good idea to assume that they're full of it, because most of the time, you'd be correct.
[7mike moore] There is money to be made and [8george bush] power to be gained out of fear. Anyone who believes everything they're spoon-fed by a person or political party [9picture of idiots1] is probably an idiot.[10picture of idiots2] Regardless of who your idles might be, they're human after all, so always keep that in mind.
[11clear]That said, there are plenty of reasons to believe we're on the path towards a collapse in the dollar. Most of them are historical.
[12 stop collapse]First of all, there is only one way to avoid a collapse in our currency, and that's to stop printing money. [13 stop collapse2]This sounds simple enough, but as I explained in my last video, to do this you must balance the budget. There are only 2 things you can do to balance the budget. [14 stop collapse3] You either have to increase taxes, reduce government spending, or some combination of both.
[15 deficit]If you know your history, you know that only time our budget has been balanced within the past 40 years was a brief period that occurred a decade ago unde r president Clinton. Many believe that even this tiny blip of fiscal sanity was actually an accident.
[erase 16,17]
[18 - spending] As you can see from this graph, never in his 8 years of office did clinton EVER reduce government spending. The reason the budget became balanced was in a small part due to an increase in individual income taxes, but mostly due to an UNEXPECTED increase in tax revenues due to the boom and bubble in our economy occurring at the time.
[19 stop collapse3]A boom like that of the late 1990's is extremely unlikely to occur within the next few decades. In addition, raising taxes in the foreseeable future would have a devastating effect on the our already beleaguered economy. This would lead, paradoxically to even less revenue. [20 stop collapse3 - no taxes]Therefore, the only option that remains is to dramatically reduce government spending and to pay down the national debt. This is where the trouble begins.
[21 spending]Government spending has risen, in real terms, almost every year for the past 60 years. Obama has promised to cut the 2010 budget from its all-time high in 2009,[22 New Deficit] but if you exclude 2009, his budget projection still requires a deficit three times as big as the record set by President Bush.
[23 Budget 1]Obviously the bailouts were to blame for most of the spending increases in 2009, but when you look at the 2008 budget, you can clearly see that our problems will not end when the bailouts do. The budget is still far too large and the debt grows larger every day. Many believe that simply pulling out of Iraq would solve the budget shortfall. The problem is that the numbers just don't add up.
[24 Budget 2]Even if you took out Iraq spending, the deficit still remains.
[25 - New Revenue] On top of all that, the tax revenue for 2009 going forward is going to be much lower. This would require an even GREATER reduction in spending to balance the budget.[26 - New Debt] When you factor in the bailouts, things get even worse. Even by extremely conservative estimates, like this one provided by the government itself, our debt will overtake our GDP in less than 2 decades.
[26 Question mark] So what do YOU think? Does it look like we're doing anything about our currency situation? Based on the horrible track record of our politicians, is there anything out there to suggest we're taking care of this? Would any of our politicians risk losing an election in a futile attempt to persuade congress to save our currency? What if the necessary spending cuts are in medicare or social security? Coming out in favor of cutting either of those programs is practically a death sentence to politician's career.
[1 lbt]With all that in mind, do the warnings of hyperinflation and collapse in the dollar seem all that far-fetched? Do you really believe the republicans and democrats in power are going to recognize and do what is necessary? (101,155)
I don't start my next rotation until tomorrow, so I decided to do another one:
Rough Transcript:
[slide 1] This box right here represents the yearly federal budget.
We're going to divide it up into 2 parts: [slide2] the part paid for by tax dollars, [slide3] and the part paid for by everything else. For the purposes of this video, we'll say about [slide 4] 2/3 of the budget is paid for with tax dollars, but you should know that in this year, 2009, taxes account for much less.
[slide 5]Now we're going to divide this up further and look at just the portion paid for by using money outside of taxes. [slide 6] On the left, we'll put the part paid for by privately purchased treasury bonds. [slide 7] This will contribute to the infamous national debt, which is currently approaching $11.7 trillion dollars.
[slide 8] The other part is paid for by printing money. This is done by an institution known as the federal reserve, also known as The Fed.
The Federal Reserve is NOT officially part of the government. Theoretically, the reason for this is to make sure that the government cannot print money directly to pay its bills. The Fed is supposed to act independently and not print money unless it is in the interest of the economy. However, the end result of this is that the government gets all the printed money it asks for, regardless of the effect it may have on inflation and the economy.
Whenever a government or central bank prints money, it causes inflation.
Inflation is a classic double-edge sword. [slide 10] By making the currency worth less, people who owe money in that currency OWE less. This includes the US Government.
Many shortsighted economists see this as a Godsend to quell the ever-expanding national debt. However, there are many downsides to inflation as well.
[slide11]Stocks and property tend to rise in price along with everything else. Therefore, people who have their savings in stocks or hard assets aren't as affected by inflation. However, the less wealthy the individual, the more they deal in cash. It is in this way that inflation affects the poor more than the rich.
[slide12]In addition, by helping debtors, you are by definition hurting lenders. This includes those who own treasury bonds. Generally speaking, these lenders are not in the business of losing money. [slide13] Some lenders will therefore choose to put their money elsewhere.
[slide14]In order to try and entice the lenders into coming back, interest rates on the loans will have to increase.
[slide15]The problem with both of these outcomes is that they lead directly to even MORE inflation.
This type of thing has happened in numerous other countries in the past. It happened to Germany after World War I, and it's happening to Zimbabwe now.
[slide16]As this is happening,[slide17] the budget will be growing exponentially as interest payments on the national debt balloon.[slide 18] This will compound the problem.
[slide19]This cycle of printing and lending will continue until [slide20] the treasury is no longer able to find any lenders to buy the bonds at all. [slide21]At that point, inflation will get out of control. This is known as Hyperinflation.
[slide22]This is where the economy really starts to suffer. People will start losing their jobs or quitting because their paychecks aren't worth the paper they're printed on. That, combined with higher prices, will lead to people saving less and spending more. Taking money out of savings increases the money in circulation. This will further contribute to inflation.
[slide 23]More unemployment leads to LESS revenue. [slide 24] With the budget remaining the same or even growing, [slide 25] this leads to yet even more inflation.
Eventually, people will lose faith in the dollar and stop using it. [slide26] This is known as a currency collapse.[slide 27]
The question is: where is the United States in this cycle? [graph1] The answer is quite complicated. As you can see from the graph of the money supply, over the past 40 years, we have done everything we could to destroy our currency. Even still, our GDP is so strong, the world still sees our treasury bonds as a good investment. [graph2] It's only been recently, with the Fed printing more money than it ever has before, has the world started to grow wary of our position.
This is the reason people like [pic]Ron Paul ,[pic] Jim Rogers,[pic] and Peter Schiff all come out strongly against our current monetary policy. (98,205)
Share
