“Fortunately,” says Peter Schiff, “I think we’re going to be presented with a real economic crisis.”
The fretful Tea Party activists sitting in front of me grimace, then nod. A couple of them even tweet. It’s Saturday morning at Americans for Prosperity’s annual, D.C.-based Defending the American Dream Summit, the largest and most open event that David Koch’s political organization holds. The overall frenzy is tamped down from the commotion at the 2011 event. That year’s conference was set upon by Occupy protesters, who blocked doors and choked traffic and (accidentally, probably) sent a grandmother hurtling down a small flight of stairs.
The Occupiers have packed up the tents. This year’s panic will be provided by investment broker, radio host, author, and former U.S. Senate candidate Peter Schiff. He appears on two panels—one ostensibly about regulation, one about health care—and in his calm, measured tone, he pivots both subjects back to the coming economic crash.
“Two-thousand and eight was just an overture,” he tells the crowd. “The opera is coming. The real financial crisis is coming in 2013, 2014. And so, we’ll get a real choice, a fork in the road. One way is going to lead toward complete authoritarianism, complete totalitarian government, and the other way is going to lead back to freedom.”
This crowd takes Schiff seriously, for good reason. In February 2007, when unemployment was low and there was very little financial eschatology in the conversation, Schiff published Crash Proof: How To Profit From the Coming Economic Collapse. He blamed Alan Greenspan’s policies for creating “an inflationary housing bubble to replace the stock market bubble” and worried that the government had inflated Freddie Mac and Fannie Mae far beyond their natural size. His recommendation: Buy commodities, buy gold, buy stock in mining companies. “Being patriotic does not mean going down with the sinking ship,” he wrote. “It means helping in the rescue effort, and you can’t do that if you’re drowning yourself.”
Very few people took the book seriously until September 2008, when everybody took it seriously. Schiff’s theory of collapse was a godsend to economic conservatives, who could explain why government meddling, and not business, caused the crash. The theory was proven by anyone who invested the Schiff way—an ounce of gold, worth $685 when Crash Proof came out, is now worth around $1,600. On Saturday, at the regulation panel, one Tea Partier stands up and asks Schiff the kind of question that validates everything he says. “Why do we have any regulations at all,” she says, “since they just distort the market?”
The panel ends, and I’m supposed to talk to Schiff, but it’s clear that the swarming crowd isn’t going to let me. For 45 minutes he declines another bid for U.S. Senate—“not this year”—and explains how his Euro Pacific Capital is hauling in profits.
“We have a lot of money in Singapore, a lot of money in Hong Kong,” he says. “There are areas of the world that are prospering, that have less government, fewer regulations, and more freedom than we have here. And we can invest in those countries.” They’re safer bets than the United States. “We’re either going to default or inflate. Fortunately, the same investment strategy will work under both.”
Schiff pushes back our interview until after the health care panel. He uses it to make the rare case against the Affordable Care Act’s popular requirement that health insurance companies offer plans to people with pre-existing conditions. “Under Obamacare, they have to sell me the same policy after I get sick that they would have sold me before I got sick,” he says. “That’s like being able to buy fire insurance after your house burns down.”
That’s a wrap, and Schiff offers to give the interview as he packs up his suitcase and checks out of the hotel. We pack into an elevator with four tourists who lack the conspicuous white-and-green conference badges. Schiff susses out the meaning of the Fed’s decision not to print more money and shovel it into the economy.
“When Ben Bernanke says we’re only going to give the economy more stimulus if it needs it,” says Schiff, “it’s like telling a heroin addict, ‘We’ll only give you more heroin if you need it.’ The economy is going to need it, because without it, it’s going to collapse. But it’s not right to give a heroin addict more heroin just because it’ll keep him high. It’s better to send him to rehab. That’s what we need to do, instead of injecting more monetary heroin into the system.”
Four very confused tourists exit onto the fourth floor; we continue to Schiff’s room on the sixth. His point, which he can make with any number of metaphors, is that it’d be best if policymakers let banks fail, so we could grit our teeth for a while and start over in a stable system. This has been Ron Paul’s argument, too, and it’s implicit in the populist arguments against the Dodd-Frank consumer protection act or other financial sector regulation. And you don’t build majority support for Americans for Prosperity’s goals without some gut-appeal populism. Tell people they should be worried about the Consumer Finance Protection Bureau, and you stoke some confusion. Tell them that it’s funded and protected by the profits of the secretive Federal Reserve, and you get apoplexy. The most successful legislation of Paul’s recent career, after all, was his bill to audit the Fed.
But when these ideas are popular, they get co-opted. In 2010, Schiff ran for the seat vacated by the scandal-plagued co-author of financial reform, Sen. Chris Dodd. “I thought I had a great story,” says Schiff. “There was plenty of video of me predicting the crisis.” But after spending $4 million on the race—$637,000 of it from his checkbook—Schiff got only 23 percent of the Republican primary vote, losing to former World Wrestling Entertainment executive Linda McMahon, who’d spent $50 million. This year Schiff watched “the only politician who was right about the crisis,” Rep. Ron Paul, lose to Mitt Romney in the GOP presidential primary.
“[Romney’s] economic plan is more about re-arranging the deck chairs on the Titanic,” says Schiff with a shrug, packing away his pinstriped suit to change into some plane-ready jeans. “Romney, I don’t believe, understands the severity of the problem. Just like in 2008. He didn’t understand. Romney was campaigning on the eve of the financial crisis and he had no idea what was going on.”
Schiff clicks on the TV to find the hotel’s automated check-out system. AFP has already paid the bill for the room. This is the second Koch-affiliated conference Schiff has spoken at, after a closed-press 2010 conference in Colorado, where Glenn Beck was the main speaker. “That was the 1 percent, or the 1 percent of the 1 percent,” he says. “I met billionaires at that conference. This crowd is the 99 percent. You hear a lot of the same things, though—they’re all good people.”
We head out of the room so Schiff can catch some of the conference’s closing ceremony, a speech by radio host/lawyer/author Mark Levin. Democrats, I tell Schiff, are convinced that they can turn voters against Mitt Romney by campaigning against his investments and his hiring practices, habits that Schiff considers laudable, what he’d recommend to anybody.
Democrats “want to play on people’s envy and greed,” he says. “Here’s a rich guy—he’s got money in Switzerland. Oooooh! He doesn’t have some patriotic obligation to send money to Washington, so they can waste it. I applaud people for trying to limit their tax bills. Is [Romney] betting against the dollar? Well, it’s a smart bet. If I were him I’d say, ‘Of course I’m betting against the dollar. I want to change the policy, so I don’t have to bet against it.’ ”