Peter Schiff trolls Sargent and Sims

Some people on Twitter sent me this video of Peter Schiff, self-described "Austrian" and one of the world's most powerful EconoTrolls, ridiculing the two 2011 Economics Nobel winners, Tom Sargent and Chris Sims:

Schiff spends the first 9 minutes of the 11-minute video lambasting Sargent and Sims for (supposedly) not being able to answer the "poignant question" (sic) of what economic policy steps America should be taking. He repeatedly claims that Sargent and Sims can't answer this question because they don't "actually [understand] any economics". He contrasts this with himself, saying "I have real solutions based on a real knowledge of economics. I may not have a Nobel prize, but I got some street smarts."

Except Schiff's entire rant is pretty clearly just a hatchet job. Sargent and Sims didn't really fail to answer the question! Schiff just edited out the parts where they gave their answers!

Around the 9:30 mark, Schiff admits that Sims actually did give policy recommendations, and that these recommendations were very mainstream - monetary easing, short-term deficits, and long-term fiscal consolidation!

As for Sargent, Schiff doesn't cut him a break at all, but Sargent also answered the question. His full answer can be seen here. He basically says that the federal government needs to cut spending. (Update: As CA points out in the comments, Sargent might just be saying that we need to clarify which programs we're going to cut, since spending cuts are inevitable.)

So here's the question: Why does Schiff perform this unfair hatchet job on the Nobel Prize winners?

Of course I don't know the answer for certain. But it seems fairly clear that Schiff is trying to pump up his own credentials. He continually repeats that he knows more about economics than the Nobel Prize winners. And the fact that Sargent's answer dovetails with Schiff's well-known policy preferences means that Schiff either didn't understand Sargent (entirely possible), or else deliberately ignored the fact that Sargent agrees with him. That suggests self-glorification, at the expense of famous people, was Schiff's main objective.

Why would Schiff want to do this? It could be simply for fun! Being grandiose and self-congratulatory is fun (for some more than others). Or maybe it's a part of Schiff's business. As the head of a money management firm (Euro Pacific Capital), and as a seller of newsletters and writer of books about the coming collapse of the American economy, Schiff could always use some macro cred. Convincing investors that Schiff's everyman "street smarts" convey a superior understanding of the macroeconomy, while the bumbling know-nothing ivory-tower academics play with their irrelevant mathematical models, might make those investors more likely to stick with Schiff even as his repeated inflation predictions fail to pan out.

A sort of anti-intellectual folksy charm seems to be exactly what Schiff is going for. Notice how at around 9:06 he mispronounces Bernanke's name as "Bernacky". He then repeats this mispronunciation several more times (a quick search through older Schiff videos confirms that he often, though not always, mispronounces it this way). Now at first it might seem insane to hand one's wealth over to a macro investor who doesn't even know how to say the Fed Chairman's name. But who knows? Maybe there are deeply conservative people out there for whom handing a small sliver of their life's savings to Schiff is worth it purely for the sake of political affinity, as a sort of protest vote against Obama and the socialist money-printers. Or maybe Schiff just wants to signal his utter contempt for all things Fed. Or maybe after getting burned by repeated widowmaker trades, investors who buy into the "Austrian" schtick can console themselves that "Bernacky" just cheated, and went against the fundamentals of God and Market, but that that high-and-mighty bearded technocrat will get his comeuppance in the end! 

OK, I admit I really have no idea what's going on in this Austrian/Fox Business/right-wing-radio/macro-derp-herping world. At this point I'm just taking random swings for humor value. SORRY. Sorry.

But anyway, it occurs to me that the life of the Austrian investment guru is a tough one. Not only do you have to convince people that you know better economics than Tom Sargent and Chris Sims, but you have to fight rear-guard actions against others of your own kind, to prove you're The One True Austrian Guru. In 2009, a guy named Mish Shedlock, who runs his own money management business, called Schiff out on some failed exchange rate predictions and on the poor performance of one of Schiff's funds during and after the crisis. This is a bit funny, since Shedlock himself is a self-professed subscriber to "Austrian" ideas; his fund's name even sounds like Schiff's ("Sitka Pacific Capital Management" vs. "Euro Pacific Capital"). But his all-out attack on Schiff precipitated one of the great EconoTroll Battles of all time. 

Schiff quickly whirled to deal with the attack from behind. He gave Shedlock a brutal taste of his own medicine, pointing out Shedlock's own poor performance and mocking Shedlock's small amount of Assets Under Management. In response, Shedlock went for the jugular, calling out Schiff on his hyperinflation predictions and challenging Schiff to a debate. Schiff very wisely avoided debating someone with far less fame than himself, and stuck to dissing Shedlock harshly on his radio show. The highly entertaining three-year feud shows no signs of abating.

Anyway, what's the upshot of all my Schiff-trolling? The upshot is: If you see some guy making fun of top academic economists, fine. Maybe he has a good point! But if the alternative he's offering consists of a long string of failed macro predictions, loosely justified by hand-waving references to "the Austrian School" and seasoned with right-wing politics and folksy charm, beware. Chances are he's just pulling your leg. And if the top academic economists are reluctant to wade into political war zones, and unwilling to overstate the certainty afforded by their theories, well, that's probably to their credit rather than a reason to ridicule them.