Mish...Schiff was wrong!

[FRED]

Re: Mish...Schiff was wrong!

That answer was predictable. Subscriber's bubble will soon deflate.

Predictable, except that you did not predict it.

But since you obviously don't want to find all of the inconsistencies in Mish's deflation calls we created these handy charts back in early 2008 for trolls just like you!

iTulip Ka-Poom Theory of cycles of asset price inflation, disinflation, and reflation.
The last line with the arrow is the disinflation forecast.
The rest of the chart is right out of economagic. How's that for a disinflation forecast?



Mish's "Deflation All The Time Theory" sees deflation even when inflation is rampant

[bart]

Re: Mish...Schiff was wrong!

That answer was predictable. Subscriber's bubble will soon deflate.

That answer was predictable. Mish's bubble will soon deflate. :rolleyes:

[Ann]

Food fight!

What fun! I read both EJ and Mish and never, ever see iTulip a-trolling Mish's site. Pathetic as writing "Schiff is Wrong" articles.

Of course Schiff is wrong! So? If Mish's brother ran a PR agency and Mish was up for jetting around the nation to take on Wall Street shills on CNBC, CNN, et cetera, et cetera, et cetera, then: Hey! Mish is The Guy Who Was Right. But, no! Schiff is photogenic, articulate, passionate, a complete press whore, and not afraid of flying. Mish? 100% "behind the keyboard" so to say.

This is the main thing. Schiff has an axe to grind: Daddy is in prison for fighting The Man. Schiff hates The Man. Imagine growing up in the Schiff household. "The government is evil! They're all crooks! The money is debased! Taxes are unlawful!" Taxes suck but paying them is THE LAW Don't be shocked if you find yourself eating government food behind bars if you don't pay them.

Mish, if you are reading this, free advice from a simple mind like mine: Never question in public the integrity of a man with a Daddy in prison. Goes double for a man and his brother who runs a PR agency who both have a Daddy in prison.

[metalman]

Re: Food fight!

What fun! I read both EJ and Mish and never, ever see iTulip a-trolling Mish's site. Pathetic as writing "Schiff is Wrong" articles.

Of course Schiff is wrong! So? If Mish's brother ran a PR agency and Mish was up for jetting around the nation to take on Wall Street shills on CNBC, CNN, et cetera, et cetera, et cetera, then: Hey! Mish is The Guy Who Was Right. But, no! Schiff is photogenic, articulate, passionate, a complete press whore, and not afraid of flying. Mish? 100% "behind the keyboard" so to say.

This is the main thing. Schiff has an axe to grind: Daddy is in prison for fighting The Man. Schiff hates The Man. Imagine growing up in the Schiff household. "The government is evil! They're all crooks! The money is debased! Taxes are unlawful!" Taxes suck but paying them is THE LAW Don't be shocked if you find yourself eating government food behind bars if you don't pay them.

Mish, if you are reading this, free advice from a simple mind like mine: Never question in public the integrity of a man with a Daddy in prison. Goes double for a man and his brother who runs a PR agency who both have a Daddy in prison.

thanks. never though about it that way. duh... schiff's on a mission to redeem his dad. now i feel bad for posting the links dissing his dad

[Spartacus]

Re: Mish...Schiff was wrong!

Mish's entire deflation thesis now rests on out-dated data.

Completely out-dated and now completely the reverse of what he argued.

The FED charts he relied on have gone ballistic since he last discussed them.

I'm waiting to see how he spins the charts (the ones that iTulip recently turned into a movie, the FED actions charts)

[bradzepfan]

Re: Food fight!

Taxes suck but paying them is THE LAW Don't be shocked if you find yourself eating government food behind bars if you don't pay them.

I love Peter Schiff's father. God Bless him.

Having the hammer come down on you by a totalitarian government and being found "guilty" by 12 sheep too stupid to know any better doesn't necessarily make it THE LAW, but your point is well taken.

[metalman]

Re: Mish...Schiff was wrong!

that shut his trolling pie hole, didn't it.

[simitpatel]

Re: Food fight!

I love Peter Schiff's father. God Bless him.

Having the hammer come down on you by a totalitarian government and being found "guilty" by 12 sheep too stupid to know any better doesn't necessarily make it THE LAW, but your point is well taken.

Very well said.

[Guest]

Re: Mish...Schiff was wrong!

Comments on the Mish / Schiff extravaganza from Tom Szabo, a reasonably impartial observer. (Mish scores a few points but gets panned on the macro call).

MISH SKEWERS PETER SCHIFF AND TRIES SAME WITH HYPERINFLATION BUT FAILS.

January 28th, 2009


In a recent post called Peter Schiff Was Wrong, Mike Shedlock (Mish) of SitkaPacific Capital Management takes fellow money manager Peter Schiff to task for getting just one thing right in the past year, that the U.S. stock markets would crash. Schiff, however, apparently did not pursue a short play against the U.S. equities but rather put his clients into long investments in foreign stocks and commodities, which have actually fared worse. Mish goes on to lay into Schiff quite brutally and I’d say he seems to be right for the most part except when he starts to lecture about hyperinflation.

Far from future hyperinflation, claims Mish, we (I assume he means the U.S. but perhaps he is including the whole world) are actually in the midst of undeniable deflation that will continue for perhaps another 10 years. To support this, Mish points out the economy sure looks, feels, walks and talks like there is deflation. Also, the bottom is very far down because the top was very far up. Various articles and charts are trotted out to demonstrate this. And yet I’m not convinced. Maybe it’s because these arguments are too sensical, as if purpose-built for consensus. Let’s take a closer look.

First, we’ll point out that Mish bolsters his case using an analysis he did early last December based on stale Federal Reserve data. According to Mish, the chart of the St. Louis Fed’s Base Money Change % From a Year Ago shows that the current increase in monetary base is not a big deal compared to the Great Depression. Unfortunately, his chart is a bit dated as it represents Fed activity only through October, which is just a few weeks after things started to unravel. Mish may wish to look at the updated version of the chart to see if the current expansion in the monetary base has historical precedent (click to enlarge):

Clearly this is not your average liquidity operation, even by Great Depression standards. The real question of course is whether or not the current spike will be offset by a spike in the opposite direction. To answer that, I think one need only look at the result of the reversal in monetary base expansion during the 1930’s, which likely contributed to a second recession that extended the Great Depression another few years.

Next, let us examine Mish’s claim that banks are contracting credit. Mish sure looks to be on solid ground with this one based on everything we read and hear, but it turns out that M1 actually grew at a seasonally adjusted rate of 39.6% between September and December 2008 and M2 grew at a pace of 18.4%. I’m not paying attention to M3 since it is not a major component of bank credit expansion but I’ll wager it has been growing at a healthy clip as well. Thus, banks might very well be tightening credit in some sectors but they are still lending on a net basis.

Moreover, Mish is adamant that the $800 billion of bank reserves currently held in the system (still being kept aloft by the updraft of Bernanke’s helicopter rotor) will never get loaned because banks will get as ridiculously stingy with their lending at the bottom as they got ridiculously generous at the top. While this might be one of the neatest economic theories based purely on symmetry that I have yet to run across, I wouldn’t count on it happening for the simple reason that it ignores the cumulative effect of government bailouts and guarantees. When something is infinitely elastic like government spending, it is unreasonable to expect normal distributions and reversions to the mean. The bottom line is that banks will enthusiastically lend at positive interest when they effectively have zero capital at risk, which is a condition that can be easily achieved via government interference.

Note that at a reserve ratio of 10%, $800 billion of bank reserves can be fractionally multiplied into $8 trillion of credit and new money supply at the M1 and M2 levels. The Fed may try to put its foot down well before that happens but it could be too late if the monetary expansion is already snowballing by then. In addition, the Fed will find it quite difficult to “sterilize” the excess bank reserves because it will soon be forced to start buying U.S. Treasuries in order to cap long-term interest rates.

Perhaps Mish hasn’t heard that the federal budget deficit will be something like $1 trillion this year? If China, Japan and other big exporters were in great shape they might perhaps continue their recent pace of buying a few hundred billion dollars of Treasuries every year. But we are talking trillions here and the export “tigers” simply don’t have the dollar reserves to swallow that much Treasury paper.

Maybe the Fed and Treasury can hold out until June, July or even later, but at some point in the next few months they will have to start running the printing press. We aren’t talking helicopters here either; printing press money gets the job done immediately. Under these circumstances it is preposterous to think that the Fed will be able to maintain control over $800 billion of bank reserves.

What I’m describing above is of course a template for hyperinflation. No, not Zimbabwe or Weimar hyperinflation but something still quite serious — like entrenched double digit annual price increases with periodic spikes (perhaps reaching triple digits) capped by sequential and increasingly ineffective price controls. This will be more severe than the late 1970s since neither interest rates nor monetary contraction will be available as policy tools.

Now please don’t get me wrong, I’m not saying the U.S. dollar will collapse to zero as Peter Schiff and many others claim. I do, however, think that it could break down to the .5200 level on the Dollar Index especially if depressed worldwide economic conditions and inflationary pressures spark a global race to devalue currencies. This could take the shape of very unusual looking “trade wars”: instead of imposing punitive tariffs or embargoes, trading partners would aggressively seek to buy the cheapest goods from each other. This may result in export quotas erected to make sure that critical supplies are adequate for domestic markets but I would expect global trade to still expand overall. Such “trade wars” would be quite effective in devaluing currencies while also offsetting some of the resultant inflationary effects on import prices.

Ultimately, the relative weakness of the U.S. dollar in the years ahead will not reflect poorer economic conditions in the U.S. compared to the rest of the world — I expect the U.S. will actually start to recover sooner than most other countries — but rather the massive amount of debt owed by Americans. A substantial portion of this debt is foreign owned. It cannot be serviced under the original terms. It cannot be defaulted upon as long as the U.S. dollar remains the world’s reserve currency. Therefore it will need to be “inflated away”. I’m fairly certain the little men behind the curtain are all too aware of this reality, even if they won’t admit it. Even if Mish won’t admit it.

Tom Szabo

[metalman]

Re: Mish...Schiff was wrong!

Comments on the Mish / Schiff extravaganza from Tom Szabo, a reasonably impartial observer. (Mish scores a few points but gets panned on the macro call).

MISH SKEWERS PETER SCHIFF AND TRIES SAME WITH HYPERINFLATION BUT FAILS.

January 28th, 2009


In a recent post called Peter Schiff Was Wrong, Mike Shedlock (Mish) of SitkaPacific Capital Management takes fellow money manager Peter Schiff to task for getting just one thing right in the past year, that the U.S. stock markets would crash. Schiff, however, apparently did not pursue a short play against the U.S. equities but rather put his clients into long investments in foreign stocks and commodities, which have actually fared worse. Mish goes on to lay into Schiff quite brutally and I’d say he seems to be right for the most part except when he starts to lecture about hyperinflation.

Far from future hyperinflation, claims Mish, we (I assume he means the U.S. but perhaps he is including the whole world) are actually in the midst of undeniable deflation that will continue for perhaps another 10 years. To support this, Mish points out the economy sure looks, feels, walks and talks like there is deflation. Also, the bottom is very far down because the top was very far up. Various articles and charts are trotted out to demonstrate this. And yet I’m not convinced. Maybe it’s because these arguments are too sensical, as if purpose-built for consensus. Let’s take a closer look.

First, we’ll point out that Mish bolsters his case using an analysis he did early last December based on stale Federal Reserve data. According to Mish, the chart of the St. Louis Fed’s Base Money Change % From a Year Ago shows that the current increase in monetary base is not a big deal compared to the Great Depression. Unfortunately, his chart is a bit dated as it represents Fed activity only through October, which is just a few weeks after things started to unravel. Mish may wish to look at the updated version of the chart to see if the current expansion in the monetary base has historical precedent (click to enlarge):

Clearly this is not your average liquidity operation, even by Great Depression standards. The real question of course is whether or not the current spike will be offset by a spike in the opposite direction. To answer that, I think one need only look at the result of the reversal in monetary base expansion during the 1930’s, which likely contributed to a second recession that extended the Great Depression another few years.

Next, let us examine Mish’s claim that banks are contracting credit. Mish sure looks to be on solid ground with this one based on everything we read and hear, but it turns out that M1 actually grew at a seasonally adjusted rate of 39.6% between September and December 2008 and M2 grew at a pace of 18.4%. I’m not paying attention to M3 since it is not a major component of bank credit expansion but I’ll wager it has been growing at a healthy clip as well. Thus, banks might very well be tightening credit in some sectors but they are still lending on a net basis.

Moreover, Mish is adamant that the $800 billion of bank reserves currently held in the system (still being kept aloft by the updraft of Bernanke’s helicopter rotor) will never get loaned because banks will get as ridiculously stingy with their lending at the bottom as they got ridiculously generous at the top. While this might be one of the neatest economic theories based purely on symmetry that I have yet to run across, I wouldn’t count on it happening for the simple reason that it ignores the cumulative effect of government bailouts and guarantees. When something is infinitely elastic like government spending, it is unreasonable to expect normal distributions and reversions to the mean. The bottom line is that banks will enthusiastically lend at positive interest when they effectively have zero capital at risk, which is a condition that can be easily achieved via government interference.

Note that at a reserve ratio of 10%, $800 billion of bank reserves can be fractionally multiplied into $8 trillion of credit and new money supply at the M1 and M2 levels. The Fed may try to put its foot down well before that happens but it could be too late if the monetary expansion is already snowballing by then. In addition, the Fed will find it quite difficult to “sterilize” the excess bank reserves because it will soon be forced to start buying U.S. Treasuries in order to cap long-term interest rates.

Perhaps Mish hasn’t heard that the federal budget deficit will be something like $1 trillion this year? If China, Japan and other big exporters were in great shape they might perhaps continue their recent pace of buying a few hundred billion dollars of Treasuries every year. But we are talking trillions here and the export “tigers” simply don’t have the dollar reserves to swallow that much Treasury paper.

Maybe the Fed and Treasury can hold out until June, July or even later, but at some point in the next few months they will have to start running the printing press. We aren’t talking helicopters here either; printing press money gets the job done immediately. Under these circumstances it is preposterous to think that the Fed will be able to maintain control over $800 billion of bank reserves.

What I’m describing above is of course a template for hyperinflation. No, not Zimbabwe or Weimar hyperinflation but something still quite serious — like entrenched double digit annual price increases with periodic spikes (perhaps reaching triple digits) capped by sequential and increasingly ineffective price controls. This will be more severe than the late 1970s since neither interest rates nor monetary contraction will be available as policy tools.

Now please don’t get me wrong, I’m not saying the U.S. dollar will collapse to zero as Peter Schiff and many others claim. I do, however, think that it could break down to the .5200 level on the Dollar Index especially if depressed worldwide economic conditions and inflationary pressures spark a global race to devalue currencies. This could take the shape of very unusual looking “trade wars”: instead of imposing punitive tariffs or embargoes, trading partners would aggressively seek to buy the cheapest goods from each other. This may result in export quotas erected to make sure that critical supplies are adequate for domestic markets but I would expect global trade to still expand overall. Such “trade wars” would be quite effective in devaluing currencies while also offsetting some of the resultant inflationary effects on import prices.

Ultimately, the relative weakness of the U.S. dollar in the years ahead will not reflect poorer economic conditions in the U.S. compared to the rest of the world — I expect the U.S. will actually start to recover sooner than most other countries — but rather the massive amount of debt owed by Americans. A substantial portion of this debt is foreign owned. It cannot be serviced under the original terms. It cannot be defaulted upon as long as the U.S. dollar remains the world’s reserve currency. Therefore it will need to be “inflated away”. I’m fairly certain the little men behind the curtain are all too aware of this reality, even if they won’t admit it. Even if Mish won’t admit it.

Tom Szabo

hmmmmm.

a. mish is NOT a money manager. he's a certified financial adviser. so is my neighbor's 26 yr old son who mowed my lawn a few years ago... who, like mish, also drives a hundai
b. the rest reads like 10 yr old itulip... no deflation or hyperinflation, big inflation, etc.
c. what does tom szambo have to add to the discussion?

i'm dying to read a new view. hudson was a breakthrough... someone on that scale.

i can't remember.... didn't you find hudson? can't you find another one?

[deflateIT]

Re: Mish...Schiff was wrong!

The charts still do not provide any evidence of Mish flip flopping.
I provided a prove of his stance on deflation in the recorded 2006 audio interview. You stated that he changed his view "numerous" times.

Please provide a supporting reference / evidence that he changed his view, if you have any. You've made a statement - back it. Otherwise this is what iTulip does best - fills air with words.

[deflateIT]

Re: Mish...Schiff was wrong!

I am in a different time zone outside the US and cannot respond to all the quotes promptly.

[deflateIT]

Re: Mish...Schiff was wrong!

that shut his trolling pie hole, didn't it.

Here is my response to you:

http://dailybail.com/home/2009/1/25/...following.html

[Spartacus]

Re: Mish...Schiff was wrong!

Provide a piece of evidence of Mish changing his position to support your statement.

http://globaleconomicanalysis.blogsp...was-wrong.html

But what I find interesting is that a Europacific advisor believes that Keyensian economics can be trumped (I do as well, Japan proved it), but also that Andre Sharon at least in part is calling for "Result: deflation, bankruptcies, high unemployment, etc..."

I would advise Schiff to toss his hyperinflation theories out the window and listen more to his research analyst. However, Schiff cannot and will not change because he has two books calling for hyperinflation.

On the other hand, I can change. I called for deflation and it is here right now. I do not have to wait for it. The only debate is how long it lasts.

At the appropriate time, I expect to transition my stance towards a stagnant slow growth period in which there will be inflation but not by a lot. In such a scenario, the US would hop in and out of recessions for up to a decade, much like Japan.

From this interview you keep referring to, did Mish say this:

"deflation then periods of inflation. The deflation may be a week or month or a year"

That's what he's writing now, and it's identical to what Eric's been saying since the Ka-poom thesis was written. So if deflation lasts for a short time & then there's inflation for years, Mish was correct (with what he's writing now). If deflaton lasts for 10 years then there's inflation Mish was correct (with what he wrote for the last 4 years before changing his tune). Convenient.

And the US situation is like Japan - above, "the US would hop in and out of recessions for up to a decade, much like Japan".

but ...

http://globaleconomicanalysis.blogsp...can-style.html
" Those how argue "It's Different In Japan" need to weigh the impact of those differences. The pent up deflationary forces in the US are such that Deflation American Style figures to be far worse than Deflation Japanese Style."

So previously the US is much worse off than Japan, but now it'll be be no worse than ("much like") Japan?

Oh .. OK - much worse, but the same. I ... think I understand ...

http://globaleconomicanalysis.blogsp...7_archive.html

Thursday, August 31, 2006
....
"Bernanke’s worst nightmare took another big step forward today with these price cuts. If t"

That was one small snippet. You can read the whole thing.

So it (deflation) is all about price cuts. Nothing but price cuts. When it's convenient to his arguments, it's all about price cuts and nothing else. Other times (when the charts seem to temporarily go his way), it's all about money supply. Other times it's all about credit.

there's also this little set of claims:
a. official intervention does not work
b. the FED is powerless
c. the current problems are largely the FED's fault

Completely consistent, no flip-flopping involved

http://globaleconomicanalysis.blogsp...-in-cards.html
There it is in a nutshell. From where we are, continued inflation, or wimpy forecasts of stagflation are simply not possible. Show me rising wages and I will accept that inflation might be a possibility. I see no reason to believe rising wages are about to happen and although Housing may (for some time) continue to support consumption, WHEN not IF housing turns the result can NOT be anything other than DEFLATIONARY (emphasis added - original emphasis was different))

Not years where you may have a little inflation, but "inflation ... simply not possible"

That was then ... today (see first entry above)

And not a flip-flop, just a simple mistake on a most basic thing. During the great depression the price of Gold fell. The only reason the Gold price rose was that the government (which is, yes, powerless, whose interventions, obviously never work) reset the price. Prechter has made a huge case for this, and you can just google

depression "set the price of gold"

http://globaleconomicanalysis.blogsp...8/on-cusp.html
Thursday, August 31, 2006

Am I declaring victory in my call for deflation?
No way. I will instead sit back (probably for quite some time) and watch the inflationists explain away things that "can not happen" that are happening.

So he's not declaring victory, but ONLY because he is waiting for inflationists to explain. Inflationists explaining deflation will do away with deflation. I'd like to meet those powerful inflationists - more powerful than the FED & the money-copter. Interesting stance.

Well, no inflationist explained, so Mish's declaration of victory stands ... the US had "worse than Japan deflation" in Aug 2006. Of course, Aug 2006 until someday is one of those periods (from the first blurb above) where (the same as Japan, but much worse) deflation is interrupted by periods (the same as Japan, but much worse) of inflation.

From the first blurb above
Mish: "On the other hand, I can change. "

why do you think he put that in?

He's admitting what people had been saying all along -several people who debated him (Puplava and Jansen) claimed that he changed his story to suit himself.

just a note for the un-necessarily rude, I've updated my ignore list.

[deflateIT]

Re: Mish...Schiff was wrong!

I really appreciate the time you put into this analysis. I have to re-read it to absorb the info.

The impression I am getting is that nobody really knows how things are going to play out, but analysts like to pretend they do. Keeping an open mind is the key.

When US dollar was falling I remember the iTulips' downward spiral with smart investors flying out of the US in an airplane filled with dollars, that was enough to get anyone with real dollar savings into panic mode.

But what actually happened - investors flew right back into US into Treasuries, deleveraging did not crash the dollar as Schiff was sure it would. Schiff bet against the dollar and put OPM on outside of the US. Look at his client's losses. Long term investments? He now needs 230% gains to recoup 70% losses, is that realistic? The world is in recession. It was the key to recognize that it will be. It's worse in Europe, than it is in US. As far as prices are concerned 2 brand new cars for the price of one is not raising prices. CPI is falling, it is cheaper to buy gas, food, real estate, cars if you have the cash.

The bottom line: doing nothing (sitting in cash) from a year ago would be better than doing anything and it's probably still a good option.