Peter Schiff - The Fed Unspun: The Other Side of the Story

"Ben Bernake fancies himself as a student of the Great Depression," says renowned investment broker, global strategist, author, and Austrian economist Peter Schiff, "but... if he were my student he would have gotten an F."

During a lecture entitled "The Fed Unspun: The Other Side of the Story", Schiff responded to Bernake’s recent four-part college lecture series, rebutting many of the Federal Reserve Chairman's claims about the cause of the housing crisis, the role of the Federal Reserve, the value of the gold standard, and more.

Cosponsored by the FreedomWorks Foundation and hosted at Reason Foundation’s DC office on March 29, 2012, the lecture was followed by a lively Q&A with the assembled audience, including students who attended Bernanke’s George Washington University lectures.

Shot by Meredith Bragg and Jim Epstein. Edited by Swain. Additional help from Anthony Fisher.

Approximately 1 hour and 26 minutes long.

Go to Reason.tv for downloadable versions of this video and subscribe to Reason.tv's YouTube channel to receive automatic notification when new material goes live.

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  • ||

    Videos this long should be posted in the evening.

  • Old Mexican||

    Thank you, Joshua!

  • Fist of Etiquette||

    One hour and twenty-six minutes? What am I, Joel Siegel? Someone broad stroke this for me.

  • ||

    I think you have to pay someone if you want to get stroked, dude. Ask Hugh; I hear he's got good rates.

  • ||

    Capitalism = good
    The Fed = bad
    Schiff = genius
    Bernanke = idiot

  • ||

    First one's free.

  • shrike||

    That is funny. Schiff is mocked as a clown on Wall St. He tried to salvage his reputation by comparing himself to Buffett later. Ironic that today the Fed laid out how they will unwind and gold is diving.

  • ||

    It's all about the gold.

  • shrike||

    Libertarians have a special gold fetish and they are right about every 30 years.

    When this bubble pops it will be extra painful in a geo-way since the Chinese bought 450 tons in 2011. Of course they hate their own currency too (like Schiff does).

  • Old Mexican||

    Re: shrike,

    Libertarians have a special gold fetish and they are right about every 30 years.


    Keynesians have an aggregate fetish and are stupid all the time, let alone every 30 years.

    When this bubble pops[...]


    Ha ha ha!

  • GAS||

    Will you admit you're wrong when interest rates rise, the value of the dollar goes in the tank, and gold hits $2500 an ounce? Of course you won't...

  • shrike||

    Yes.

    If the 10-yr hits 5%, and the USD falls to 50 and gold hits $2500 I would admit my (supposed) errors.

  • Tman||

    If he's a clown then we need more clowns.

    His prediction of the market crash was pretty smart, despite the fact that many on Wall Street said it wouldn't happen.

    His investment record seems pretty solid as well.

    SEND IN THE CLOWNS!!!

  • shrike||

    He predicted the asset/housing crash of 2008 for sure.

    Problem is, unlike John Paulson and many others he didn't buy CDS or short stocks like Lehman or WaMu.

    Basically he just yapped about gold like he always has.

  • ||

    Yeah, but we shouldn't really be citing Paulson. I think it's conclusive at this point that he was a broken clock right at just the right time. His losses on Sino-Forest were super dumb, and he's underperformed massively in this recovery.

  • shrike||

    I didn't know who John Paulson was before 2008.

    But he nailed the one-time-storm and Schiff blew it. And Bernanke picked up the dead bodies.

  • ||

    Basically he just yapped about gold like he always has.

    gold did better since 2008 then shorting Lehman WaMu and buying CDS did.

  • shrike||

    So he was correct in 2008 but his fund got hammered. Down 40-70% by some accounts.

    Not impressed.

    And if he is still short the USD he is a bigger fool than we realize.

  • BakedPenguin||

    Base! How low can you go?

  • shrike||

    So what? The monetary base is up? Big deal. Pulling that plug is child's play.

  • silent v||

    It is funny how the guys who predicted the meltdown (Schiff, Paul) are mocked as economic simpletons, while the guys who were caught completely off-guard are considered geniuses

  • shrike||

    Because they predict economic doom every day they wake up and have for the last 30 years.

    Why give a .050 hitter credit for one extra base hit?

  • R C Dean||

    Ironic that today the Fed laid out how they will unwind

    Pure fantasy.

    The Fed unwinds by selling assets. When it does so, interest will spike. When interest spikes, the deficit spikes and the federal government's finances are toast.

    Interest spiking also crashes the value of all that low-interest debt being used to capitalize banks, insurance companies and, wait for it, pubsec pensions. It will cause another credit lockup, and the pubsec finance contagion will spread to states and municipalities.

    But, you say, they've unwound before!

    Yeah, but not with banks loaded with toxic assets, not with a pubsec finances in the shitter, and not with the economy bottom-bouncing.

  • shrike||

    No.

    The Fed's assets are a blip in the world's asset pool.

    The Fed's balance sheet at $2.9 trillion is smaller than the assets Larry Fink of BlackRock (Obama supporter) manages.

  • R C Dean||

    If the Fed's assets are irrelevant, then why does having it add to its balance sheet via QE make such a difference?

    If the Fed's assets are irrelevant, then why does interest spike when it contracts its balance sheet? When Volcker contracted the balance sheet back in the day, it spiked interest and set off a recession.

    The Fed, via its purchase of assets, is keeping interest rates low (see, e.g., "Operation Twist" to suppress the long end of the yield curve). Why, then, would the Fed, via a sale of assets, not drive up the interest rate?

    The Fed's balance sheet at $2.9 trillion is smaller than the assets Larry Fink of BlackRock (Obama supporter) manages.

    One difference is that private entities do not print their own money to buy assets, and do not take money out of circulation when they sell assets.

  • shrike||

    Did Volcker contract the Fed b/s or did he simply raise the Fed Funds rate?

    I was high on drugs that decade so I seriously don't remember. But the last bout of QE was in the early 60's according to my econ prof.

  • Concerned Citizen||

    You know the Fed is a private business, don't you? And that per the Constitution, only gold and silver coin are legal tender in payment of debt? Why do statists defend the private Fed, and assail gold? What is the dollar worth today, compared to the dollar in 1912?

  • shrike||

    No. You're not worth rebutting. The Fed is a government entity.

  • Concerned Citizen||

    Except that it isn't. I had one of their employees on the phone once and he admitted.

  • Concerned Citizen||

    So why does the Fed chairman testify before Congress, like a private citizen? Can't Congress just audit the Fed if it's a gov't entity? Bernanke isn't on the Federal payroll. It is you who is not worth rebutting.

  • Sam Grove||

    Who appoints the Fed chairman?

  • R C Dean||

    Did Volcker contract the Fed b/s or did he simply raise the Fed Funds rate?

    Not sure, now that I look.

    Of course, for the Fed to contract its balance sheet, it has to (a) first stop buying in the debt market, which will decrease demand and raise rates, before (b) it sells into the debt market, which will increase supply and raise rates.

    To argue that contraction of the balance sheet will have no effect, you have to first argue that expansion of the balance sheet has no effect. Having the Fed clear Treasury auctions (to the tune of buying around 60% of Treasuries issued over the past year) definitely depresses interest rates.

    I would think that the Fed has to use both of its tools (the balance sheet, and the fed funds rate) to unwind what it has done with both of its tools (the balance sheet and the fed funds rate).

    Regardless, unwinding at this point cannot occur without driving up interest rates, with dire consequences that the Fed will not tolerate.

    Ain't gonna happen.

  • shrike||

    I disagree. You see the Fed as a monster. Financial data on bonds see it as a kitten.

  • np||

    lol, you wish it were "diving". Every time someone thinks that, it soon goes back up, as more people use every dip as an opportunity to buy more. In fact the crisis in 2008 forced central banks around the world to sell gold. Only the US thinks it's all about the dollar. The rest of the world wants to get off it. Asia, even Europe. The Dutch don't even trust the US and are repatriating their gold.

    But even without an official QE3, the Fed is still effectively creating money with Operation Twist 1,2,etc or whatever they want to call it, i.e. credit expansion, monetizing debt, I mean who cares if they buy all the US bonds or treasuries? The dollar is still tanking against the yen, the franc, and obviously gold. Who wouldn't short the dollar in the long term?

  • shrike||

    Ha! I admit that every time this year (4-5 maybe) gold has tanked $50 it has recovered later.

    That is classic bull/bear price movement. The sweet spot for gold shorts will be $1400 -> $1100.

    And the Fed has not sold an ounce of gold in decades.

  • np||

    By around the world I meant like how 15 central banks in the EU sold 345+ tons of it in 2008 for example

  • R C Dean||

    Of course, central banks are buying gold these days.

  • shrike||

    Not the Big Guy on the block. And not the ECB. And not China.

    So who is?

  • ||

    You can judge the merits of a persons arguments based on how he performs in the stock market?

    Even if the Fed can unwind it does nothing to resolve the unfathomable amount of debt that have been accumulated by the US government.

    Gold is losing value in the market, but to state it is diving is overstating things. The market is so distorted the only valuable information you can derive from it has be done in hindsight.

  • shrike||

    When said person runs a fund I judge them by performance - not rhetoric.

  • Fist of Etiquette||

    What am I, Ron Paul's accountant? Brooooooad strokes.

  • Heroic Mulatto||

  • Alan Vanneman||

    According to Wikipedia, Schiff has a bachelors from Berkeley in finance and accounting. It's a bit of a stretch to call him an "Austrian economist," since he's neither. If Schiff had taught a class, which he hasn't, and Bernanke were in it, maybe Pete would know how to spell Ben's last name correctly.

  • np||

    Well, Keynes didn't have a economics degree and neither did Mises (law) nor Hayek (law and political science), despite winning a Nobel prize in economics. Likewise, Austrian economics progenitor Carl Menger studied law. In fact, classical economists like Adam Smith and David Ricardo also did not have any economics degrees.

  • RBS||

    You have no idea what it means to be an "Austrian economist" do you?

  • R C Dean||

    So, according to Alan's definition, Hitler (yes, I went there) was more of an Austrian economist than Schiff could ever be. At least Hitler was Austrian, after all.

  • Ex Nihilo||

    This is an "Austrian economist (lawyer)."

    Eugen von Ritter Böhm-Bawerk

  • Heroic Mulatto||

    Me-ouch! Put those claws away, Catty Kathy!

  • Alan Vannemann||

    ALAN VANNEMAN

  • ||

    It's a bit of a stretch to call him an "Austrian economist," since he's neither.

    What the fuck am I reading?

  • Old Mexican||

    Re: Alan Vanneman,

    According to Wikipedia, Schiff has a bachelors from Berkeley in finance and accounting. It's a bit of a stretch to call him an "Austrian economist," since he's neither.


    It's a bit of a stretch to call Isaac Newton a 'scientist' because he never received a bachelor degree in science. It is a bit of a stretch to call Plato a philosopher because he did not receive a degree in Philosophy. And it is a stretch to call Bastiat an economist because he never went to Harvard.

    But we can call the president a "Constitutional Scholar" even when he has never published a single piece of scholary work on the Constitution in his life. Right, Alan?

  • Sam Grove||

    What I'd like to know is how a community activist/constitutional scholar gets to be worth millions.

  • anon||

    tl;dw

  • Ska||

    Always wipe, no matter how long.

  • ||

    unless it is the coveted two flush no wipe power dump

  • anon||

    Those are the best dumps; you go to wipe, nothing on the paper, so you wipe again in disbelief.

  • Harvard||

    In the groove, with Scotty Tissue.

  • rho||

    Economists who aren't filthy rich by being consistently right talk about the economy rather than play supermodel Jenga on their megayacht. Why do we listen to economists of any stripe?

    Let's call them Money Philosophers and buy them berets so we can more efficiently ignore them.

  • ||

    The first hat goes to Bernanke

  • np||

    It depends because there are multiple ways of "making money". You've got the Keynesian loving banksters, mainstream finance/wall-street players; and you've got other investors who Austrians or lean that way who are also rich (investing in commodities and hard assets, certain companies, even real estate, but with production value like farmland). There's a palpable dichotomy going with those two sides. For example, JP Morgan/Chase is one of the handful of *huge* institutional shorters in precious metals, always attempting to manipulate prices.

    While Peter Schiff, Jim Rogers and Marc Faber get a small amount of air time, you don't hear much from them or other players in the mainstream though. I can list off a few but for example, Mexican multi-billionare Hugo Salinas Price
    http://www.kingworldnews.com/k.....Price.html
    - covers hard money and fiat money, meeting with other presidents, the drug war, Ron Paul warding off vampire Ben Bernanke with his silver coin

  • Randian||

    shrike, the "fetish" for gold is not one that states that gold is somehow the "best" asset, because that term is obviously meaningless. The point that libertarians other small-government types are making about gold is a political one: the Congress should not have the power to manipulate currency, because that is too much power. It isn't a "gold fetish" it's a "limiting power fetish". You can't print more gold.

  • Old Mexican||

    Re: Randian,

    shrike, the "fetish" for gold is not one that states that gold is somehow the "best" asset, because that term is obviously meaningless.


    shrike is simply rehashing Marxian claptrap. He understand little of economics or even the concept of money, which makes it easy for him to misunderstand the role that gold and other precious metals have played in the economic history.

    Just to remind the economics ignoramus - that is, shrike - money is whatever people decide it is, not just a bunch of bureaucrats or bankers. Right now, you have Tide liquid detergent being used as currency throughout some black markets. The market (that is, the spontaneous system generated through people's purposeful actions) is much more powerful than whatever Bernanke and his gullible followers - like shrike - can even begin understand.

  • anon||

    Right now, you have Tide liquid detergent being used as currency throughout some black markets.

    RACIST! /sic

  • Concerned Citizen||

    Article 1, Section 10, Shreik. Suck it.

  • ||

    Wait...

    We did not use the CPI to measure inflation back in the 60s and 70s when we saw 13% inflation...

    And if we used the same methodology then as we do today to measure inflation it would show NO inflation in the 60s and 70s?!?!?

    WTF?!!?!?!

  • feitian||

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