After all, the 44 year-old president of Euro Pacific Capital was mocked on networks like CNBC and Fox for predicting “wild” things like a real estate bust, a credit crunch, and a deep recession. Two years later, and Schiff’s original prophecies have come true.

That validation has been earning Schiff some much-deserved credibility in the financial world, where until now he’s been dismissed as overly pessimistic.

But does Schiff really deserve the acclaim he’s recently found?

While Schiff has proved himself as an economist, his ability to parlay those predictions into profits for his clients was questionable for 2008. For the last few years, he’s been betting big on overseas investments and precious metals – two areas that got hit as hard or harder than the S&P last year.

According to Morningstar, the average international equity fund performed 7% worse than the average U.S. stock fund in the last year.

Just look at the iShares MSCI Belgium (EWK), the worst performing ETF last year according to SmartMoney.com, or the iShares FTSE/Xinhua China 25 ETF (FXI), which lost 49% in 2008.

Another of Schiff’s investment strategies has been to exit the U.S. dollar in favor of more fundamentally sound currencies. This too has proved untimely since anxious treasury investors have driven up the dollar in the last year.

Just because Schiff’s favored investments didn’t do well doesn’t mean that others’ investments didn’t. Just look at former hedge fund manager Andrew Lahde, whose real estate fund made 866% last year by betting that defaults would rise. Schiff was an early investor in the fund, but even that play couldn’t shake the losses on his other picks.

Some of the market’s other doomsayers, like Nicholas Nassim Taleb, banked gains for the year, so why couldn’t Schiff?

Likewise, a lot of individual investors did well in 2008 by betting against the market. But if you’re still trying to decide where to put your money in 2009, you’re not alone. While the market is a lot less volatile than it was six months ago, it’s still wild enough to give pause to even the most decisive investors right now.

Now, I don’t think Schiff should be written off – he took a risky stance against CNBC’s perpetual bulls, and it paid off. He’s also helped to bring attention to some of our country’s very real financial problems. That’s something he should be congratulated for.

We’ll see where his investments go in the future, but it doesn’t look like his opinions are wavering for the time being. “…My problem has always been that I see things too clearly and too far in advance,” he said in the Fortune article, “Other people don’t understand what I do, so the markets might not validate what I’m saying right away. But they will eventually.”

Source: How to Profit Better Than “Dr. Doom”

In fact, Schiff, a well-known dollar bear, says the result of the government bailout packages and an Obama administration will be the total destruction of the dollar.

Watch it below.

Peter is the president of Euro Pacific Capital, a brokerage firm based in Darien, Connecticut. He’s also follows the Austrian School of Economics.

Take a look at this clip of Peter on CNBC’s Kudlow & Company from August, 28, 2006.

This was thanks, believe it or not, to last Tuesday’s Standard & Poor’s/Case-Shiller report. Despite showing that home prices dropped a record 15.4% during the second quarter, it revealed that the rate of single-family home price declines slowed from May to June.

“Once again, real estate market watchers have pounced on a shred of seemingly positive news to proclaim that the long sought ‘bottom’ is in sight,” says Peter Schiff. “The routine is becoming extremely stale, but somehow the media never seems to tire of it.”

This from a guest essay by Schiff in today’s Money Morning…

When real estate prices were expected to rise in perpetuity, the price of a house had two components – one part representing shelter and the other investment.  The shelter component was the actual utility and desirability of the house and the investment component was the expected future appreciation.  My guess is that at the peak of the real estate mania, a $500,000 house might have consisted of $250,000 for the shelter component and $250,000 for the investment component.

In effect, the appreciation potential, and the ability of the homeowner to tap into it though refinancing and home equity loans, offset the real costs of home ownership, such as mortgage payments, taxes, insurance, and maintenance.  So the main reason a buyer would commit to a mortgage that would soak up 50% of his disposable income was that he expected to recover most of that outlay through future appreciation.  Absent the expectation of that windfall, buyers would not have been willing to pay such staggering prices for houses or commit to burdensome mortgage payments.

Lenders were caught up by the same delusion.  Since they, too, believed prices could only rise, lending standards were thrown out the window.  If the collateral (the house) were to always rise in value, what difference would it make if the buyer made the payments?  In effect, instead of relying on the borrower’s ability to pay to mitigate its risk, lenders merely relied on the house’s ability to appreciate.

However, now that real estate prices are falling, this has all changed: Lenders are beginning to rely solely on the borrower’s ability to pay.  As this trend continues, lending standards will tighten and mortgages will be brought back into line with the incomes of borrowers.

In addition, down payments will be larger to reflect the greater likelihood of losses should loans end up in foreclosure.  When prices were rising the foreclosure risk was negligible.  However, now that foreclosures are soaring and recovery rates are less than 50 cents on the dollar, those risks are enormous.

So, with falling real estate prices, mortgages are much less appealing to both borrowers and lenders.  The only solution is for home prices to fall far enough to where they are cheap enough for buyers to afford the mortgage payments (both interest and principal), without relying on appreciation, teaser rates, or negative amortization, and save enough for a down payment that would protect a lender in the event of default.

In addition, the collapse of the mortgage securitization market means houses must be cheap enough for our limited pool of domestic savings to supply the funding, as we will likely lose access to much of the foreign funding that fueled the bubble.

Of course, we need to be honest about the winners and losers of this credit crunch.  Just because mortgage money becomes scarce, and lending standards tighten, does not mean people will not be able to buy houses – it simply means they will pay a lot less for them and that fewer new houses will be built.

Therefore it is sellers, builders and those holding or insuring existing mortgages who lose, while buyers win big.  There’s a reason for that: Despite higher interest rates and larger down payments, they end up borrowing a lot less money.

In the end they will become true homeowners, rather than indentured servants.  If home ownership is truly the American dream that so many realtors profess, then the ongoing collapse in home prices will actually be a dream come true.

P.S. Peter D. Schiff, Euro Pacific Capital Inc.’s president and chief global strategist, is a regular contributor to Money Morning. He most recently wrote about the gloomy “financial reality” that’s facing U.S. consumers and the looming spike in gold prices.]

Throughout history, governments have always used crises to justify blatant power grabs. Often the crisis subsides, but the expanded government powers remain.In America this week, the tendency came into sharp focus. Congress signaled that it is preparing to perpetuate the Bush Administration’s domestic wiretapping program, and has even abandoned the pretense that warrantless surveillance be confined to terrorism.

Similarly, even though our financial crisis has yet to reach full flower, U.S. Treasury Secretary Henry Paulson announced plans to give the Federal Reserve new and explicit powers to oversee and regulate the financial services industry. And a sober look at his plan reveals that it is tantamount to giving the fox complete autonomy to guard the henhouse.

What few economic leaders have acknowledged is that the Federal Reserve itself is responsible for the real estate and credit bubbles, which are the source of our current troubles. By keeping interest rates too low for too long, the Fed ignited a speculative fever and engendered a disregard for risk management that pushed asset prices above rational levels.

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USGS Recently Admitted, “It’s the largest continuous oil accumulation the agency ever assessed.”

Today, just 470 miles from Helena, Montana, America’s greatest wealth boom is fast – and secretly – underway.

In short, thanks to a unique technological breakthrough, a group of scientists just unlocked the largest oil deposit in U.S. history…

503 billion barrels worth. And they can now extract it for just $16 a barrel.

With oil breaking $130, news of this momentous discovery is already boiling over – at breakneck speeds.

In fact, the three outfits leading the way each averaged 21% gains within the past 11 days. And they’re just getting started. To find out how each one could triple your money – this year.

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Should we blame the private sector for taking advantage of all the cheap credit, or the Fed for supplying it? If a kindergarten teacher passes out handfuls of Pixie Sticks, and then leaves her classroom unattended for several hours, should we blame the five year olds for the hysteria that ensues?

The reality is that we should be restricting, rather than expanding, the powers given to the Fed. Since Greenspan, Bernanke and company have already inflicted so much damage with the weapons already in their arsenal, why provide them with heavier artillery? Only in Washington do those who screw up get rewarded for doing so.

Since the Fed has demonstrated complete incompetence at setting interest rates, why not return that function to the market? Instead of allowing the Fed to inflict unbridled havoc on our economy, why not re-impose some discipline? Instead of looking for new ways to regulate Wall Street, why not find an old way to regulate the Fed? Actually there is a solution to all of this; it’s called the gold standard.

In his speech outlining these proposals, Paulson stated that during the past fifty years the performance of the U.S. economy has been second to none. I do not know what planet Paulson has been living on these past fifty years, but it is certainly not Earth.

If Paulson were referring to the prior fifty year period, from 1908-1958, his statement would have been correct. But from 1958 to 2008, the U.S. economy has blown a lead even greater than the one the Lakers enjoyed over the Celtics in game four of the just concluded NBA Finals. In fact, it may well qualify as the biggest economic choke in history.

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In 1958 the U.S. enjoyed a standard of living so unmatched that the rest of the world still lived in the Stone Age by comparison. Our per capita income was so far ahead of our nearest rival that it seemed impossible that any other nation would ever catch up.

Today not only is per capita income in the U.S. barely in the top ten, but we are being rapidly overtaken by countries that, up until a few years ago, were barely discernable in our rear-view mirrors. When it comes to economic performance during the past 150 years, the U.S. is the Big Brown (race horse) of economies. 1858-1908 was the Kentucky Derby, 1908-1958 was the Preakness, and 1958-2008 was the Belmont Stakes.

Not only did the U.S. surrender a substantial lead, but in many respects our current standard of living is lower than the one our grandparents enjoyed. Sure we have a few more gadgets, larger televisions and more prevalent air conditioning, but the quality of life has actually declined.

In the 1950’s, the average man earned enough money to fully support a wife and four kids, all while saving for retirement and paying off his mortgage. Today the average man can barely support himself. It takes two bread winners in most families to make ends meet, and that is assuming only two children. Even with both parents working, the typical mortgage on the family home will never be paid off and retirement is now a pipe dream.

Flush with high pay, low debt, and a strong currency, the Ugly American in the 1950’s could vacation in Europe like a king. Now he can barely afford the gas for a day trip to a Six Flags theme park.

If Paulson can be so completely clueless regarding the Fed’s role in the current debacle and in America’s economic stumbles over the past two generations, why would anyone place any faith in his proposed remedies?An unaccountable and unelected Fed, which nonetheless has lately proven to be as politically craven as any two-bit politician, does not hold the keys to our economic revival. With its increased willingness to rescue the big financial firms from their own excesses, perhaps Paulson sees an expanded Fed as the best way to ensure the continued prosperity of his former pals on Wall Street.

For a more in depth analysis of our financial problems and the inherent dangers they pose for the U.S. economy and U.S. dollar-denominated investments, read my new book “Crash Proof: How to Profit from the Coming Economic Collapse.” Click here to order a copy today.

Source: Dollar Bear: More Fed Means Less Money for You

This from Forbes.com:

The first $7 bln of economic stimulus payments went out by electronic deposit last week to 7.7 mln people, Treasury Secretary Henry Paulson said on Thursday. The average payment was $920.

Almost $50 bln will have been sent out by the end of this month and another $50 bln by early July to a total of about 130 mln households, he said after touring a plant printing stimulus checks in Kansas City.

For American tax payers wondering where their economic stimulus check is, there are plenty of websites out there that provide all the usual details about the economic stimulus package.

Those with a more inquiring mind may want to read this article on the stimulus checks by Peter Schiff in The Daily Reckoning.

Peter says the Bush ’stimulus’ package is really a handout to lenders. He also asks one hugely pertinent question that the mainstream press has passed over: If there are no tax increases on the table to fund the rebates, who ends up footing the bill?

MoneyWeek magazine’s Richard Benson says the economic stimulus package is flawed policy in the first place. Richard says, “The US government hopes to revive its ailing economy with tax rebates. But with the cost of living soaring and consumers deep in debt, this will have little effect.”

As thousands of Americans turn to the internet to find out where their stimulus check has got to, the mainstream press has started to crank out hundreds of “How to spend your stimulus check” filler articles. Like this piece form The Washington Post urging hard-pressed Americans to donate their rebate checks to charitable organizations supporting “our troops and their families.”

This is because most mainstream journalists are too lazy to report on what’s really going. Peter Schiff, writing in The Daily Reckoning, says the Bush ’stimulus’ package is really a handout to lenders. He also asks this: If there are no tax increases on the table to fund the rebates, who ends up footing the bill?

“The Bush legislation includes a provision that offers generous tax credits to individuals who buy homes out of foreclosure,” says Peter D. Schiff in Money Morning.

“While this is billed as a benefit to homebuyers, it is just another handout to lenders, since the prospective buyers qualifying for the tax breaks will simply pay more at auctions as the tax breaks subsidize higher bids. The real winners are the creditors who will now get more in foreclosure than they would have had buyers not been counting on having their bids subsidized by the government.

“Of course, for all the talk about taxpayer bailouts, none of the Senators bothered to mention that — for the moment — no tax increases actually are on the table. Instead, the bailouts are being financed by savers, pensioners, wage earners, investors and the elderly on fixed incomes, who all suffer staggering increases in their costs of living, as the Fed uses inflation to rob Main Street to pay off Wall Street.”