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Robert Prechter debates Peter Schiff on SchiffRadio.com: Inflation vs. Deflation

I'm sorry if someone else posted this, but I think many would like to know that Peter Schiff hosted Robert Prechter on Monday, Nov 8 on SchiffRadio:

Full program available here (segment with Prechter interview starts at 20:17):

http://www.schiffradio.com/programhighlights

The focus of the discussion, not surprisingly, was inflation vs. deflation.

It seems recently (with QE2 and rocketing price of silver), that inflation has pretty much won over the DailyPaul sentiment...

But after listening to this debate, I'm wondering if owning physical currencies (Prechter recommends US Dollars and Swiss Francs along with gold) is worth considering to create a more diversified financial safety net.

What are your thoughts?

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Prechter's whole premise

is that even after telling people they don't have any money they will still want FRNs. He believes first off that:

1) New politicians will come into power
2) They will stop pandering to their constituents
3) All debt will be wiped out and following that
4) U.S. citizens will still want to use FRNs when the Fed is the creator of those notes the source of the collapse in their pensions, savings, stocks, debt, mortgages

So all credit cards will be useless, all banks will be closed, stocks and bonds in limbo, and somehow FRNs will be exchanging.

I'd say he's wrong mainly because he is making sweeping guesses and predictions. That doesn't mean he will absolutely be wrong but I'd guess it would be more likely.

Also he's not taking into account Robert Zoellick, Ron Paul and others discussing the gold standard and the National Security issues around it as well as other central banks buying and holding gold. His comparison of gold and silver to the dotcom and RE bubbles is ridiculous. Regular people were scrambling to use their savings to go into internet stocks and they went into massive debt for RE but few people are able to even be convinced that PMs are an investment and most Joe and Jane 6 Pack are selling jewelry not buying Au or Ag.

Additionally as the Fed keeps printing and the banking system collapses who is going to want FRNs internationally on the Fx? What value will FRNs have against other currencies? Nothing I'd say and when FRNs don't buy pounds, euros, renminbi, yen then why would anyone want them?

History does not long entrust the care of freedom to the weak or the timid.
Dwight D. Eisenhower

the other argument you see is

the other argument you see is that the money being printed by the fed is being destroyed faster then they can print. this argument is ridiculous. Just because a house once was a price of 500k and now is selling for 350k is not currency destruction. The money they claim that is being destroyed is in the pocket of the buyer instead of the seller. Prechter may be the most visible Elliot wave theorist but there are other elliot wave theorists who are totally opposite of Prechter.
Look up Alph Fields. And yes I have read prechters books. I thought I would wait to purchase Gold at 100.00 an ounce and silver at 2.00, so what I did was purchase gold at 255.00 and thought if it goes down to 100 who cares? According to Prechter they were supposed to make a V bottom then shoot up. The reason I went ahead at 255.00 was because of the Y2K scare. Guess I made the right move. I wonder if any of the Prechterites here are still waiting for the collapse of the metals markets? good luck with that.

I am familiar with Alph Fields

Great speaker and one of the multiple people that convinced me to put fiat into real money.

History does not long entrust the care of freedom to the weak or the timid.
Dwight D. Eisenhower

I agree...

I agree...

Bump

for SchiffRadio.com

Make it a habit.

Bump for a great debate that

Bump for a great debate that I recommend to everyone here at the DP...

I would love to see Peter

I would love to see Peter Schiff debate Mish Shedlock.

Mish loves the Austrian School, but he is also a deflationists. Remember deflation just means contraction of money and credit, not falling prices. Also, inflation just means expansion on money and credit, not rising prices.

I am still in the Mish camp and it has paid off well. They have lots of similarities in investment advice even though both are arguing different points.

Prechter Advice

If you have been following Robert Prechter since he wrote Conquer the Crash, he has always advocated having a 10% gold position, and the rest in short term treasury bills. In addition he also recommended that the cash position could be diversified to a combination of currencies like the New Zealand Dollar, Swiss Francs, and Singapore Dollars, in order to maintain global purchasing power.

The Gold position is in case he is wrong about deflation. If you followed his advice you would have done reasonably well with low risk. Peter Schiff had a huge draw-down in the 2008 crash as foreign dividend paying stocks, and precious metals and other resource stocks took a big hit. He got a lot of criticism for that, but his positions did recover helped by the Government bailouts which helped reflate the economy. Without the bailouts Schiff's accounts would have probably not recovered as much or as quickly, and Prechter would have won the arguement. Those were scary times for investors following Peter's advice.

People following Prechter's advice would probably have suffered much less of a draw-down, as the currency positions and a likely smaller gold position would have took less of a draw-down.

Who will be right in the future? I don't know, I guess it is up to the Federal Reserve, but I suspect the Federal Reserve will be more interested in self-preservation than excessive money printing. It leaves investors in a dilemma.

lul you miss the point entirely

the whole point with schiff's strategy was that he predicted the fed and the treasury would bail the failed financial institutions out.. the fact that he predicted the collapse of the financial sector was just the premise of his strategies.. to somehow imply that fed's invention was like some kind of fluke that saved his investment when it was his strategy all along to invest IN ANTICIPATION of the inevitable federal bailout, is simply laughable.

on the other hand, keeping 8% of gold in a portfolio is almost a generic strategy of portfolio management among people slightly more cautious about inflations just from a year to year basis without putting a major financial crisis into consideration.. if that additional 2% is the only good point you can come up with about pretcha with his strategy with a once every 80 years financial event, you don't really have much to offer. try again.

sorry you miss the boat bro, but don't try to spin things. schiff had the general direction right, pretcha didn't, end of story.

just think of it this way.. if pretcha were just a little more humble and just went ahead be a little more unsure of himself.. better yet, just let him toss a coin. if he would just put half in gold and half a dollar, it was still better than his carefully planned strategy. when the more he was unsure of himself, the better off he could have been, that itself should be a simple enough analogy for his acolytes. enuff said. pretcha wouldn't have saved the saving of all these people i advised to get into silver and gold, and his shitty strategy wouldn't have had me making 100% the past 2 months.

there are a bunch of pretcha acolytes on dp that used to troll about deflation on a daily basis until several months ago. no idea where they are hiding out. ye i do take pretcha fanboys with their horrible advices somewhat personally. sorry if that offends anyone, but i mean, this affects the life saving of some people you give bad advice to.

the whole allure to Prechter

the whole allure to Prechter is buying the metals at discount bargain prices and watch the V bottom make them rich. My Grandfather read Prechter and pobably new more about him then anyone on the DP. I remeber talking to my Grandfather and wondering.. hmm something doesn't fit. This was 15 years ago when I had no clue about economics. My Grandfather passed away in 97 and I then had to educate myself.

The problem with Prechter is he does not see emerging nations coming into the fold. The rise of China and their demand. His main mistake is thinking that "cash" will be king. during the 30's depression, yes it was. But cash was backed by Gold. Today it is not. Ron Paul has this right. We are in or shortly headed into a INFLATIONARY depression. It will not be a deflationary depression like our grandparents saw.

What I don't understand is how Prechter can still keep a straight face. The proof is right there.

the 2008 crash in gold and

the 2008 crash in gold and silver was nothing more then manipulation. What Prechter misses is the dollar was backed by Gold in the 30's depression. They had deflation. the dollar is not back by gold today.. thus we are having an inflationary depression. Prechter is wrong. Who is right in the future? The debt is what drives all decisions. Its inflate or die.. Inflation will lead to death but at a later date. that is the road they have chose to travel. Prechter is wrong.
Look at others who also subscribe to elliot wave.. Read Alph Fields.

SteveMT's picture

Schiff had much better arguments.

This is not getting any better.

http://www.usdebtclock.org/

fireant's picture

I see it as a battle royale between freedom and control.

The "natural" economy wants to deflate in order to correct for all the excessive debt and spending. The central planners are desperate to inflate in order to promote growth which will continue to extend the debt (I don't see how we can grow with real estate in the condition it is). Right now the central planners are winning. I'm of the school though, that deflation will eventually win, but we will see massive inflation first. When deflation does hit, few people will have anything left to take advantage of lower prices, thus depression. The big question mark on the horizen is what type of a re-valued dollar or new currency we end up with.
Mattering not, those who invest in hard assets and commodities now, will have the capital to benefit from lower prices later. Holding dollars now in order to be in the catbirds seat for deflation could easily cause you to lose everything; that risk is just too high. So even if we get caught in sudden deflation at some point while holding metals, it's a far less risk than holding currencies during this inflationary phase, which seems entrenched for the forseeable future.

Undo what Wilson did

Interesting discussion

but it seems Peter has a better grasp of the issue.

Prepare & Share the Message of Freedom through Positive-Peaceful-Activism.

Prechter has cost a few

Prechter has cost a few people on the daily Paul lots of money.. If people would hjave bought their silver 3 years ago at 8.00 an ounce when I told them to they would be up huge right now. Prechter has no idea what is going on. Prechter looks at USA only and does not consider the rest of the world. Prechter also goes back to the depression of the 30's. What Prechter seems to forget is during the 30's the US dollar was backed by gold. Today it is not.

If you are going to follow someone who is an elliot wave theoris, look into Alph Fields. Alph is saying that gold will reach the 5k to 10k area. Also I would look into Martin Armstrong and Jim Sinclair.

Sinclair is kinda perplexing to me. He is a huge gold bug. But I don't understand why he does not see the potential in silver.

Sinclair's position on Silver

It is a game... a highly lucrative game, but a game nonetheless. It will not be re-monetized, in his opinion.

It is not a story predicated on the structure of the monetary system and therefore not really a focus for the site. It is a story of market manipulation and demand/supply issues, so reading between the lines you should see his position.

He doesn't talk about farming and water either, but those should be in any holistic discussion.

Ta,

Every decent man is ashamed of the government he lives under. -- H.L. Mencken

Blog: The Present in Plain Text
Listen to The Myo-Tonics on YouTube

He has said as with gold so

He has said as with gold so will be with silver but he misses the manipulation of silver to a far worse degree than gold. But this is what you see.. He is a gold bug and will stick with gold. Yes he will do good but not as good as silver holders. It will be funny to see the expression on hi face as silver trades 1 to 1 with gold.

i thot pretcha was bearish on gold?

so he's flip flopped once and you buy his new position?

As recently as a year ago he

As recently as a year ago he still beat the drum that gold would be $300/oz. He and Shedlock both can't get past the idea that government won't do what they are currently doing, radically debasing the dollar.

Schiff has less faith in the political system and Sinclair knows that there is no practical means of escaping this situation without debasement.

Hold your water and buy dips.

Ta,

Every decent man is ashamed of the government he lives under. -- H.L. Mencken

Blog: The Present in Plain Text
Listen to The Myo-Tonics on YouTube

Actually, I'm not buying any

Actually, I'm not buying any position. I am asking for more opinions.

I know very little about Pretcher's previous position, other than he has been in the deflation camp and predicting a collapse of the stock market. From this interview (did you listen to it?) he said he thinks 1400$/ozGold is not a good buying opportunity and that gold AND the DOW might meet at about 1000 or less. Then at the end of the interview he said his advice to people was to own "money" which he said includes physical dollars, francs, and gold.

Couldn't it be consistent to be bearish on gold in terms of dollars and bullish on gold in terms of purchasing power once everything collapses? I'm not saying that I'm taking that position...just that it could be consistent position and consistent with what you claim his position was/is.

On the bigger picture, the main question that this interview made obvious is this: once everything collapses will the FED be willing AND able to even try to monetize all the debt?

The answers might very well be "yes" (willing) and "yes" (able)...but they might not...either way, it's definitely a critical point that the inflation camp should not take for granted.

I'd love to hear more opinions.

i'll listen to it on weekend

since i trade some myself.. i don't have much capacity for second opinions during week days let alone from someone like pretcha

but gold and dollar can't be a consistent position.. it might be safe if you think us government has a chance to withdraw troops from around the world + cut social security to save money, and let all the wall street banks collapse. in that case it is better to go all cash. if gold were to rise in real value but lose value against dollar, that means dollar is gaining value quicker than gold.. that's impossible when you owe 14 trillion and have to print dollar like paper to pay back debt.

and i wonder where the pretcha fanboys are now.. they were here saying the sky would fall from deflation just 6 months ago. i remember debating them. hey paul revere, could use some input here.

SteveMT's picture

Bump: Thanks salberty

Listening now.