After failed bid for U.S. Senate, 'Dr. Doom' has more gloomy forecasts
It is a telling sign of the nation's economic climate that a man nicknamed "Dr. Doom" could use that moniker as a qualification for public office. But Peter Schiff's reputation for making dire economic predictions on cable news shows well before catastrophe struck burnished his credentials in the minds of many, as he ran earlier this year for the Connecticut Republican Party's nomination for U.S. Senate.
Schiff won 23 percent of the vote in last month's GOP primary, finishing third behind former WWE CEO Linda McMahon and former Congressman Rob Simmons. Although he will not be taking his ominous financial forecasts to Washington, Schiff, 47, remains a key player in the market for insights about the market. The Weston resident is president of Euro Pacific Capital, a brokerage firm headquartered in Westport, and he has also written several books, including his latest release, "How an Economy Grows and Why It Crashes."
Ironically for someone called Dr. Doom, Schiff does not work in a dark, underground lair. Instead, he operates out of a spacious corner office with a modern décor, with expansive views of downtown Westport. He sat down there with the Westport News last week to discuss his campaign, the causes of U.S. economic troubles, and the next bubble that investors should avoid.
How do you think your campaign for U.S. Senate went?
It was a pretty frustrating experience. There were some positive aspects. I met some really good people. I got to see a lot more of the state. But it was very frustrating with the Republican Party -- the convention process was very frustrating. It seemed to me that I was clearly the best candidate running. I couldn't seem to convince the Republican Party establishment of that fact.
It was also frustrating that I didn't get the national media attention that I thought I would have gotten. There are seven words that you can't say on radio or TV, and it seemed like when I was running for office there were eight. And one of those was "Peter Schiff."
If I had the same recognition as Linda [McMahon], and everything else was equal, I probably would have beaten her. I think if all things were fair -- if we had the same money and the same name recognition-- I would have won. She had the money and bought the name recognition, and that ultimately determined the outcome.
Does it bother you that Linda McMahon was able to influence the outcome of the primary election by spending tens of millions of dollars?
I'd rather have a wealthy businessperson buy the seat than have some career politician sell the seat, which is what they do. They sell it to their special-interest groups. So money is influencing the race whether it's Linda McMahon spending her own money or some career politician with special-interest money.
I don't like the campaign finance rules. I think they should be scrapped. I do think that people should be able to give unlimited amounts of money to candidates if they want to. Let's say a wealthy person wants to run. They can put in as much money as they want. Well, what if I had 10 wealthy friends or clients who were each willing to give me a million dollars a piece? They can't do that. It's illegal. But why? If one wealthy person can finance their own campaign, why can't I go to wealthy people and say, "I'll kick in a million, and you'll each kick in a million." And [then] I don't have to campaign for people to send me $100 or $200 like I did.
Now, of course, you can go the old-fashioned way, which is the Dick Blumenthal way -- get money from special-interest groups. But no special-interest group is going to give me any money, because they're not going to get anything from me.
What do you think of Linda McMahon?
I've met her, and on the surface, I like her. She says a lot of the right things. My problem is that there are other Republicans that say the right things. The question is do they do the right things? I'm hoping that if she wins, that I'll be impressed and proud of what she does, that she will not go RINO [Republican in name only] on me, or do a Scott Brown and just be a part of the problem, and not the solution.
I'm just wondering, can she go in there [to Congress] as a freshman senator and convince the Republican leadership to follow her lead and listen to her and not [chairman of the Federal Reserve] Ben Bernanke?
I hope she wins. The alternative is what? Dick Blumenthal -- there's no chance that he's going to do anything right.
What does she need to do to win in November's general election?
I think she needs to keep the focus on the economy and on Washington. She's got to paint Dick Blumenthal as the incumbent and she as the challenger. I think it's going to be very much a "throw the bums out" kind of election. She needs to let the voters know that Dick Blumenthal is one of the bums that needs to be thrown out.
What do you think were the main causes of the financial, and in particular, the subprime mortgage crisis?
It was a failure of government. The reason I was able to predict it was because I was able to see how the government distorted and created the problem. I could see the result of government regulation. I knew that the government was guaranteeing the [subprime] mortgages. I knew without the government guarantees, the mortgages would never have been created.
I knew the government was keeping interest rates too low, so I knew that was causing people to behave how they never would in a free market. The government distorted the conditions that led to speculation that led to the risk-taking that led to the greed.
The [free] market never would have allowed this to happen. If people knew that if a borrower defaulted they were going to lose [money], they would have been much more cautious.
What does the next Congress need to do to get this country's economy back on track?
They need to do the opposite of what's been done under the Obama and Bush administrations. They need to dramatically reduce the size of government, the burden that government places on the economy through taxes and regulation.
The government needs to cut spending everywhere, cut agencies and departments. It needs to cut the federal workforce dramatically. It needs to reduce the pay of the people it doesn't lay off. We need massive reforms of the entitlements -- Social Security, Medicare, unemployment. The less government you have, the more prosperous you're going to be.
We need to stop printing money, and the Fed[eral Reserve] has to raise interest rates. We can't have rates at zero; it is damaging the economy.
You are famous for your ominous predictions about the economy and the market. What do you think will be the next financial crisis?
You have people around the world -- individuals, central banks, financial institutions -- they all own long-term bonds, and they're overpriced. The yields are too low. Eventually, the people that own these bonds are going to want to get rid of them. Then, the price is going to plunge, and the interest rates are going to soar.
People are going to realize, "Hey, I'm sitting on a bond that doesn't mature for 30 years, and it's only paying four percent [interest]. I've got to get rid of this thing."
What are your plans for the future? Do you plan to run for office again?
I don't know. I might, I just don't have any specific plans to do so. I'd say I'm not leaning in that direction [of running again]. But if I do it again, I'm not going to do it the way I did it last time. I'm not going to do it unless I have real support in the [Republican] Party here in Connecticut and real financial backing. If that were to come together, then maybe I would run.
Ron Paul might run for president in 2012. I might decide that I'd rather help him run for president than go after a Senate seat myself.