Schiff on Epistemological Errors

Kling notes the epistemological errors in the prior bubble. In Peter Schiff's prescient Crash Proof written in 2006, he notes the following story from the New York Times:

The July 31, 2006, New York Times had an article accompanied by a picture that might have been captioned "The Life of Riley."

It showed a smiling, well-coiffed, 53-year-old former steel-worker and sometime math teacher, relaxing in his jeans on a chaise lounge. The article title was “Men Not Working, and Not Wanting Just Any Job.”

The article explained that the man's life of leisure was being financed by home equity extractions. But that was not the articles's angle. That part seemed to be okay with the Gray Lady. The point was that our fried could afford to be idle and planned to stay that way until something befitting his dignity came his way.

To me, it was a telling example of how the idea that home equity is a modern form of wealth is routinely accepted.

The cognitive failure that with hindsight seems absurd, was real. See his 2006 Mortgage Bankers Speech, proof positive he is the most prominent, and most specific, big name who called the crash. Highlighting he wasn't using hindsight, he erred in expecting the dollar to fall, and that the US would do relatively worse than other economies, one problem with forecasting complex systems like economies: you can be right on some big assumptions but still screw up the implications.