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Thread: Dave Ramsey vs. Peter Schiff on the US Economy

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    Default Dave Ramsey vs. Peter Schiff on the US Economy

    for all you "I'm Debt Freeeeee!!" listeners

    Dave Ramsey, Peter Schiff, and decline of U.S. Economy
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    Dave Ramsey and Peter Schiff are two men that I respect because they exist within a group of little known “truth tellers,” speaking out on the perils of personal debt and a troubled U.S. Economy. But there are two distinct differences in their perspectives concerning our U.S. Economy and monetary policy that I find puzzling. To hear a podcast of this article in windows media player click here.

    In a recent radio show (early January 2008) Dave Ramsey was asked about the state of the American Economy. He joked and said that the media had predicted “36 out of the last 2 recessions”, implying the media was anxiously reporting any negative news in regards to the state of our Economy. Ramsey then went on to mention that GDP and Net Worth figures were steadily rising - and pointed to these facts as proof that talk of recession is nothing more than ‘fear mongering’.

    Since Peter Schiff (whom accurately predicted the housing bubble meltdown) is currently predicting the outright collapse of the U.S. dollar and our Economy, I decided to purchase his latest book ‘Crash Proof - How to Profit from the Upcoming Economic Collapse’ to harvest Peter’s thoughts on this very subject - and he delivers.

    The Net Worth argument

    Peter wastes no time attacking the Net Worth argument (smacks it down in the preface) stating that booming optimism “relies heavily on the familiar but erroneous argument that declining savings rates are belied by high household net worth figures, which we know reflect inflated housing and paper asset values.”

    In other words, Americans have record low amounts of Savings (lowest since 1933) - but that’s supposed to be alright because they bought a house three years ago, which has doubled in ‘market value’, so the acquired equity represents Net Worth. As we are currently witnessing, Net Worth based on home equity is dropping sharply. Likewise, paper asset values such as stocks and investments will also drop, because they are based on a maintained global market ‘faith based’ value of the U.S. Dollar. The Dollar is on the way down, along with any markets based on its value. Since most American’s ‘paper assets’ are based on investments backed in U.S. dollars, the Net Worth attached to these paper assets are likely to crash and burn.

    How does Dave Ramsey not comprehend this?

    The Gross Domestic Product argument

    Moving on to the ‘GDP is growing - so the Economy is great’ argument. Peter invalidates this fantasy on page 2 of Chapter 1. The problem “is that most Americans, including most economists and investment advisers, have confused conspicuous consumption with legitimate wealth creation. Our impressive gross domestic product (GDP) growth, dominated as it is by consumption, is not a measure of how much wealth we have created but of how much we have destroyed.”

    Our inspiring GDP is based on borrowing and consumption (bad), not savings and production (good). It sounds wonderful to be able to say that life is good because people are spending money. But when you analyze just beneath the surface there is a horrifying catalyst: The Savings of American Citizens are gone, personal and national debt is at an all time high, and the money was used to purchase garbage.

    If this is how you measure success - count me out.

    Gold investments and the Gold Standard

    In regards to monetary policy Dave Ramsey is not a promoter of Gold. Although Dave doesn’t mention hard money or a Gold Standard, he does degrade the precious metal as a poor investment. In Dave’s latest book ‘The Total Money Makeover’ he had this to say about Gold: “The truth is that gold is a lousy investment with a long track record of mediocrity. The average rates of return tracked as far back as Napoleon are around 2 percent gain per year. In recent history, gold has a fifty-year track record of around 4.4 percent, about the same as inflation and just above savings accounts………..It is important to remember that gold is not used when economies fail. History shows that when an economy completely collapses, the first thing that appears is a black-market barter system…” (pg. 55).

    Although I don’t doubt that Ramsey’s facts are accurate, his assessment of Gold is backed by his above mentioned confidence in the U.S. Economy. If the value of our U.S. Dollar were to crash - Gold would remain a viable investment (protecting an individual’s wealth by maintaining value on the global market).

    This is where Peter and Dave’s philosophies differ.

    If Peter Schiff turns out to be correct about a Dollar meltdown - Dave’s investment strategies would fail (they’re based largely on Wall Street Economics). Peter’s attraction with Gold is reinforced by his admiration of the American Economy and Government when our currency was on a Gold Standard. The Gold Standard restricts the creation of credit and helps to keep Government Spending under control. Peter understands this and believes that the next dominating ‘reserve currency’ will be backed by the luscious Gold.

    Dave Ramsey is on the right track regarding most of what he says. He encourages all Americans to get 100% out of debt immediately. Ramsey accurately explains that obligations to debt prevent wealth building.

    However, after retreating from the debt trap I highly recommend adopting Peter Schiff’s investment strategies (based on foreign markets and precious metals). I know it’s difficult but let’s try and look beyond Wall Street, or as Peter would say “Nations are not served by citizens who refuse to face the truth. Blind optimism, shrouded typically in patriotism, abounds and is going to lead us to disaster.”



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  3. #2
    Moderatorus Emeritus Cowlesy's Avatar
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    Interesting stuff. I hadn't read this. Thanks for the post!
    "Your mother's dead, before long I'll be dead, and you...and your brother and your sister and all of her children, all of us dead, all of us..rotting in the ground. It's the family name that lives on. It's all that lives on. Not your personal glory, not your honor, but family." - Tywin Lannister


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    Member DirtMcGirt's Avatar
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    Nice find...

  5. #4

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    If you look at all 10 year rolling periods since even BEFORE the Great Depression, the market still experienced positive growth each and every 10 year period.


    Dave makes a point about this - If we ever get to a point where it's things are bad enough so that no one profits from the market ever.... money won't matter... gold won't matter... it's time to dig a trench and break out the Uzi.

    There is too much wealth in this country for total economic collapse. Will things get bad? Possibly. We will probably have a recession and possibly even a depression in part due to our governments illegal and irresponsible behavior. But for it to be so bad as described.... no one will be worried about money... we will be worried about survival.
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  6. #5

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    Great Post. I love Dave Ramsey first of all. He is pure genius most of the time. I do sometimes worry about his view of the bigger picture. His philosophy assumes that things will always eventually get better. I have continued to invest in mutual funds and hold breath, but it is kind of scary to think of what could happen if the dollar collapsed. Dave Ramsey devotees would fare better than most people in an economic meltdown, but I don't want to just survive. The long term prospects for the dollar scare me considering the bozos in Washington and the fact that one geo-political event or terrorists attack could create havoc around the world.

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  7. #6

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    Of course the first thing people will do is resort to barter. It's not like gold or any other type of money was the first to spring up in transactions. It always goes from barter to money to the destruction of money and back to barter. However, I think the idea here is that gold and silver are seen as the universal money and that once people in the black market start looking for a medium of exchange, gold and silver would be good candidates and highly accepted.

  8. #7

    Default Barter

    Barter is extremely inefficient. Economies without established currencies begin looking for one immediately because barter is so cumbersome. Cigarettes, ammo, canned goods, jewelry, and eventually coins of gold and particularly silver will become currency very quickly.

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    I haven't read much from this Ramsey guy, but this article actually makes him sound really smart. I happen to agree with the assessment on gold. In a gold-backed reserve system, it does act as a counter to credit expansion. However, in nearly all other cases gold is a terrible investment. It significantly underperforms the rest of the market (and even inflation).

    The goldbug argument is that although the returns now aren't so good, just wait for when the collapse happens. Well, first off, I see absolutely no collapse happening any time soon. And even if there were one on the brink, I still wouldn't use gold as my emergency stash. If the entire economy and monetary system fails, not a single person is going to want some shiny, useless metal.

  10. #9

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    Quote Originally Posted by Paulitician View Post
    Of course the first thing people will do is resort to barter. It's not like gold or any other type of money was the first to spring up in transactions. It always goes from barter to money to the destruction of money and back to barter. However, I think the idea here is that gold and silver are seen as the universal money and that once people in the black market start looking for a medium of exchange, gold and silver would be good candidates and highly accepted.
    Exactly. Gold and silver simply have value.

  11. #10

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    Quote Originally Posted by scooter View Post
    I haven't read much from this Ramsey guy, but this article actually makes him sound really smart. I happen to agree with the assessment on gold. In a gold-backed reserve system, it does act as a counter to credit expansion. However, in nearly all other cases gold is a terrible investment. It significantly underperforms the rest of the market (and even inflation).

    The goldbug argument is that although the returns now aren't so good, just wait for when the collapse happens. Well, first off, I see absolutely no collapse happening any time soon. And even if there were one on the brink, I still wouldn't use gold as my emergency stash. If the entire economy and monetary system fails, not a single person is going to want some shiny, useless metal.
    Well, the way I see it is gold is very solid and stable. It's not supposed to make you rich...it's supposed to preserve your purchasing power, and I think that's where Ramsey has it backwards. Whether you had gold from 100 years ago, or that gold today, it'll still get you, roughly, the same amount of stuff. Can't say that for a reserve note, can you?

  12. #11

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    Quote Originally Posted by scooter View Post
    I haven't read much from this Ramsey guy, but this article actually makes him sound really smart. I happen to agree with the assessment on gold. In a gold-backed reserve system, it does act as a counter to credit expansion. However, in nearly all other cases gold is a terrible investment. It significantly underperforms the rest of the market (and even inflation).

    The goldbug argument is that although the returns now aren't so good, just wait for when the collapse happens. Well, first off, I see absolutely no collapse happening any time soon. And even if there were one on the brink, I still wouldn't use gold as my emergency stash. If the entire economy and monetary system fails, not a single person is going to want some shiny, useless metal.
    Actually, I think the goldbug argument is that precious metals have no counterparty risk. You seriously don't think people wouldn't accept gold as money? I know most don't now here in the United States and probably other parts of the world, but that's because we haven't experienced using gold in transactions for 3/4 of a century. I'd definitely take the gold. It might be useless to you but not to many other people.

  13. #12

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    Quote Originally Posted by scooter View Post
    I haven't read much from this Ramsey guy, but this article actually makes him sound really smart. I happen to agree with the assessment on gold. In a gold-backed reserve system, it does act as a counter to credit expansion. However, in nearly all other cases gold is a terrible investment. It significantly underperforms the rest of the market (and even inflation).

    The goldbug argument is that although the returns now aren't so good, just wait for when the collapse happens. Well, first off, I see absolutely no collapse happening any time soon. And even if there were one on the brink, I still wouldn't use gold as my emergency stash. If the entire economy and monetary system fails, not a single person is going to want some shiny, useless metal.
    LMAO! Take a look at where gold was 5 or 6 years ago and where it's at today. Peter Schiff predictions have been spot on with the economy so far. Dave.......not so much. Peter Schiff has not only protected his clients, but has made them great dividends. Dave..........not so much.
    Last edited by NocturnalC; 05-29-2008 at 07:09 PM.

  14. #13
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    Dave Ramsey is very useful in his lessons of living debt free and having a savings. His plan was great during the 1990s when mutual funds were profitable. He unfortunately does not recognize that the equity market is not strong and that the commodity market is. He is right that gold was not profitable during the 80s and 90s, things have changed.

    Ramsey teaches good basics for the general population but is limited in his thoughts and formula. Remember, his lessons came from the fact that he went bankrupt. I have no doubt that Peter Schiff has superior knowledge and insight.
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  15. #14

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    Quote Originally Posted by Cleaner44 View Post
    Dave Ramsey is very useful in his lessons of living debt free and having a savings. His plan was great during the 1990s when mutual funds were profitable. He unfortunately does not recognize that the equity market is not strong and that the commodity market is. He is right that gold was not profitable during the 80s and 90s, things have changed.

    Ramsey teaches good basics for the general population but is limited in his thoughts and formula. Remember, his lessons came from the fact that he went bankrupt. I have no doubt that Peter Schiff has superior knowledge and insight.
    Agreed with those points.

    And it seems pretty obvious that the people that listen to Dave are mostly people in lots of debt. They are being told half the truth by Dave (get out of debt and save........well DUH!!! Here's your sign). People that listen to and invest with Peter's firm have their fundamentals straight and are reaping the rewards of the complete TRUTH.
    Last edited by NocturnalC; 05-29-2008 at 07:48 PM.

  16. #15

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    My wife and I have been following Dave Ramsey's plan for getting out of debt for about 3 years now. I HIGHLY recommend it. Our only debt left is our house, and it should be paid off in less than 2 years.

    However, Dave's investment strategy is based on historical performance on Wall St. and is way too narrowminded. He basically recommends putting virtually everything into mutual funds. If the multitudes of his followers follow that advice and those who pull the strings at the top pull something like they did in 1929 most of Dave's devotees will be wiped out. The powers that be have now given him a show on Fox. He could be playing right into the Elite's hand, although I don't think it's on purpose because I just don't think he understands the big picture. He talks a lot about debt and taxes and even occasionally rails against socialism but never mentions our fucked monetary system itself.

  17. #16

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    Quote Originally Posted by dirknb@hotmail.com View Post
    He talks a lot about debt and taxes and even occasionally rails against socialism but never mentions our fucked monetary system itself.
    Dave is about taking responsibilty for your own financial decisions, which I highly respect but...

    The one thing that bugs me about Dave is his rants about people not paying taxes. He says he can't stand taxes as much as the next guy, if not more, but rails people for not paying taxes. I understand his arguements but I guess he's just not much of a Henry David Thoreau fan?

  18. #17

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    Yes - Dave's investment advice leaves a lit to be desired. It's an ok plan, but if you follow it, you can earn a lot less than what you would've made if you had followed the advice of a competent fee-only adviser who divides things up into proper asset categories.

    Also BUYING GOLD IS NOT AN INVESTMENT!!! It's a speculation. For something to be an investment it must produce. Buying stock in a company is an investment because the company is (expected to) produce something. Buying a commodity is speculation. The distinction might seem minute, but it is actually very significant.
    Last edited by Matt Collins; 05-31-2008 at 02:53 PM.
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  19. #18

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    Quote Originally Posted by RSLudlum View Post
    Dave is about taking responsibilty for your own financial decisions, which I highly respect but...
    Yes - Dave's show is more about personal behavior as it relates to finance than anything else.

    If you want an investor radio show check out this guy:
    http://paulwinkler.net/
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    I wrote to Dave Ramsey once. The letter went something like this:

    Dear Dave,

    I am writing you for the benefit of a very suborn relative of mine who is in a financial hole. His name is Sam. Sam has extensive real estate holdings all over the world, each with an extensive staff. He insists on spending more with each passing year, to keep up with inflation, but is getting deeper and deeper into the red. Every year he borrows a significant amount of money to pay off the interest on his past loans and maintain his lifestyle but never pays off any of his loans. He has even raided his employees pension funds and left IOU's...

    yadda, yadda, yadda...

    Do you have any advice you could give my uncle? He won't listen to me.

    He never wrote back and I'm fairly certain he never covered it on his show It would have been awesome if he had!

    -t
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    Regulations do not regulate ... they protect the status quo.
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    The result is war, poverty, fear, chaos, and hopelessness for most people with abundance for a few elite.
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  22. #21

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    Harry Browne gives the best investment advice.
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  23. #22

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    What about the gold stocks Ron Paul bought that are up 1,000% in the last decade? Peter invests in those kinds of stocks.


  24. #23

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    I'm relatively certain that all of Paul's stocks are in gold MINES!

    -t
    Public education is not education ... it is schooling.
    Our military is not defense ... it is warmongering and empire building.
    Government police do not protect ... they control.
    Regulations do not regulate ... they protect the status quo.
    Government banks do not distribute money based on effort ... it is gifted to close friends ... and some of it trickles down.

    The result is war, poverty, fear, chaos, and hopelessness for most people with abundance for a few elite.
    -Travlyr

  25. #24

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    Dave may not be wrong in his gold return on investment figures but the failure in his argument is that it factors in several years of 0% return when we were on the Gold Standard up to 1971. So if in 2011 he was looking at a 50 year track record then he would have been factoring in 10 yrs. of 0% returns because the dollar was linked to gold.

  26. #25

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    The dollar index is just about to fall to 70 in the next 2 months and then lower still
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  27. #26

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    Dave Ramsey does not understand the bigger picture imo.

  28. #27

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    [Ramsey] joked and said that the media had predicted “36 out of the last 2 recessions”, implying the media was anxiously reporting any negative news in regards to the state of our Economy.
    He didn't notice that they certainly didn't predict the 2008 meltdown? The CNBC people were literally laughing out loud at Ron Paul's assertions, as was Ramsey I suspect, until they came to fruition.

    I do think Ramsey is right about living debt free, no doubt about it, but if we all live that way our economy will collapse. How does he reconcile that?
    .[QUOTE]"Every great new thought was opposed. Every great new invention was denounced. The first motor was considered foolish. The airplane was considered impossible. The power loom was considered vicious. Anesthesia was considered sinful. But the men of unborrowed vision went ahead. They fought, they suffered and they paid. But they won." - Ayn Rand, The Fountainhead[/QUOTE]
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  29. #28

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    The economy as it is currently structured would collapse - the economy as a whole would flourish, though (once the rot is cleared).

    :-)

    I say, bring it on!

    Quote Originally Posted by angelatc View Post
    He didn't notice that they certainly didn't predict the 2008 meltdown? The CNBC people were literally laughing out loud at Ron Paul's assertions, as was Ramsey I suspect, until they came to fruition.

    I do think Ramsey is right about living debt free, no doubt about it, but if we all live that way our economy will collapse. How does he reconcile that?
    "Like an army falling, one by one by one" - Linkin Park

  30. #29

    Question

    Quote Originally Posted by angelatc View Post
    I do think Ramsey is right about living debt free, no doubt about it, but if we all live that way our economy will collapse. How does he reconcile that?
    WTF?!

    So you're saying that if everyone behaves responsibly (not gunna happen) and lives without debt, or at least minimal debt other than one's house, that will cause the entire economy to collapse?
    Last edited by Matt Collins; 11-29-2012 at 05:57 PM.
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  31. #30

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    Dave's target audience is not rich people with money to invest. To his credit, he has found a niche in making money from poor people.

    His advice serves a purpose for helping people who suck with their money. Even his get out of debt advice is not optimum mathematically but they are good advice psychologically.

    He advises people to start with a safety net of $1,000. He refers to Murphey's law and how it always comes into play.
    This is sound advice because people with huge debt will likely borrow at a high percentage rate if they are low on funds and need money quick. Having a cushion at least keeps that from happening.

    Then he advises putting any extra money each month toward the smallest credit card bill. Mathematically you would put your extra money toward the credit card with the highest rate, but Dave's way of thinking is that once you pay off one credit card and start using the money you were paying toward that card and combine it with the extra money you were putting toward it, then you get a snowball affect and can start knocking cards out easier. It is all about motivation and gaining that satisfaction early on of being able to cut up your credit card and put one more headache away as you move on to the others.

    His advice is great for helping people with debt. From there it is all just easy stuff of saying to save up a few month's expenses, yada yada yada...anyone can give you advice on what to do with your extra money. The hardest part is actually getting to that point in the first place. If Dave could get everyone in the contry to that point, then we would all be better off.
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