If you all are clueless as to what the Octagon is, please put your purse down before you continue reading. This fight over economic theory is going to get bloody. It’s about the near term and long term future of America’s economy.
Fighting Economic Theory and Analysis are Two Contestants:
Peter “Dr. Doom” Schiff is like Chuck Liddell. You think he’s a heavy but he’s really not. He believes in Hyperinflation or severe inflation. Allegedly, his clients have lost a hell of a lot.
Mike Shedlock (aka “MISH”) for those in the know. MISH is the challenger but he’s sharp like Randy Couture and has Schiff’s number like Rampage Jackson had Liddell’s. MISH holds that there’s not enough cash to service the bad debt let alone the good debt. MISH’s management fund is smoking and has been so for several years.
Fight Commentary: ROUND 1
Peter Schiff has been over hyped like some genius regarding the catastrophic fall of the economy. To wit, Fortune Magazine published this drivell: “Dr. Doom’ became a star by predicting last year’s market meltdown. And now his 2009 forecast is even scarier.”
MISH is a rising star in the blogosphere and its where the writers at the OATH have been for the past several months. He points out in several places how wrong Peter Schiff is and how much money he’s lost for his clients.
I almost feel bad for Schiff because he stuck his Austrian neck out only to have it in MISH’s guillotine. MISH is another Austrian who is untrained in economics. Incredible! Absolutely incredible that someone with little training could display such a grasp in this economic time.
The main issue comes down to whether there is going to be INFLATION or continued DEFLATION. Schiff argues for the former. At the moment, Shedlock has got him.
But here’s a response from Schiff’s management fund attempting to stop the blood flow that includes a response from Schiff’s brother Andrew Schiff. (Apparently Peter is dumbstruck by Shedlock’s decisive speed and needs more help.) Curious, though. If Shedlock is wrong about the losses and the claim is that he’s trying to get more business for himself, why hasn’t Schiff filed a libel / defamation suit? Answer: Truth is a defense.
Round 1 goes to Shedlock. We’ll see if Schiff can continue.
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Neither one of these guys are ‘geniuses’ – whether ‘trained’ in economics or not. I had conversations with my old man as far back as the late 1980’s regarding the loss of our manufacturing base, (along with the then new-forming economic paradigm of Borrow & Spend, replacing the tried and true path of wealth creation – that of course being to Save & Produce), and how the loss of those old standards would eventually bring us to economic ruin.
We’re in both known and unknown territory now. There is also a huge divide in social perceptions (along with government intervention at every turn) of how an economy should be run – given we’ve had the Borrow & Spend paradigm for going on 30 years.
Our leaders – Fed/Treasury/White House/Staff/etc., are mainly products of the borrow & spend school. And borrow & spend is what they’re going to do.
It would be reasonably possible for us to have massive price inflation in areas of the economy that don’t involve big-ticket purchases or the lending that goes with them. You know, like say FOOD and other consumables necessary for every-day life as an example?
Seen any ‘deflation’ in food prices of late?
And how many geopolitical ‘events’ are we away from a return to $150/bbl. oil do you think?
Or, how long before our foreign creditors must stop lending us money to fund what’s left of our economy? And consequently, how far is the USDX away from .72 if they do, or we keep ‘printing’, both?
I think Mish and Peter both make strong cases.
-C.C.
You said, “how long before our foreign creditors must stop lending us money to fund what’s left of our economy? And consequently, how far is the USDX away from .72 if they do, or we keep ‘printing’, both?”
That is a GREAT point and indeed the key and the weakness in MISH’s argument. I hadn’t thought about that and don’t rightly know how to address either. However, this is where MISH claims to be flexible.
I do agree with you that they both produce strong arguments but they can’t both be right. That’s why it’s critical for Schiff to respond. After all, I don’t believe MISH is arrogant but is deeply concerned about the economy.
So far, one cannot deny the success that MISH’s company, Sitka Pacific has produced. Results are telling and for the past three years, Sitka Pacific has beaten Schiff’s firm hands down. If you had $50K to invest in either one, which would it be? My money is on the track record.