Analogy (from Greek αναλογία – analogia, "proportion"^[1][2]) is a cognitive process of transferring information or meaning from a particular subject (the analogue or source) to another particular subject (the target), and a linguistic expression corresponding to such a process. In a narrower sense, analogy is an inference or an argument from one particular to another particular, as opposed to deduction, induction, and abduction, where at least one of the premises or the conclusion is general. The word analogy can also refer to the relation between the source and the target themselves, which is often, though not necessarily, a similarity, as in the biological notion of analogy.

Niels Bohr's model of the atom made an analogy between the atom and the solar system.

Analogy plays a significant role in problem solving, decision making, perception, memory, creativity, emotion, explanation and communication. It lies behind basic tasks such as the identification of places, objects and people, for example, in face perception and facial recognition systems. It has been argued that analogy is "the core of cognition".^[3] Specific analogical language comprises exemplification, comparisons, metaphors, similes, allegories, and parables, but not metonymy. Phrases like and so on, and the like, as if, and the very word like also rely on an analogical understanding by the receiver of a message including them. Analogy is important not only in ordinary language and common sense (where proverbs and idioms give many examples of its application) but also in science, philosophy and the humanities. The concepts of association, comparison, correspondence, mathematical and morphological homology, homomorphism, iconicity, isomorphism, metaphor, resemblance, and similarity are closely related to analogy. In cognitive linguistics, the notion of conceptual metaphor may be equivalent to that of analogy.

Analogy has been studied and discussed since classical antiquity by philosophers, scientists and lawyers. The last few decades have shown a renewed interest in analogy, most notably in cognitive science.

Usage of the terms "source" and "target"[link]

With respect to the terms source and target there are two distinct traditions of usage:

• The logical and cultures and economics tradition speaks of an arrow, homomorphism, mapping, or morphism from what is typically the more complex domain or source to what is typically the less complex codomain or target, using all of these words in the sense of mathematical category theory.

• The tradition that appears^{[original research?]} more common in cognitive psychology, in literary theory, and in specializations within philosophy outside of logic, speaks of a mapping from what is typically the more familiar area of experience, the source, to what is typically the more problematic area of experience, the target.

Models and theories[link]

Identity of relation[link]

This section may contain original research. Please improve it by verifying the claims made and adding references. Statements consisting only of original research may be removed. More details may be available on the talk page. (July 2009)

In ancient Greek the word αναλογια (analogia) originally meant proportionality, in the mathematical sense, and it was indeed sometimes translated to Latin as proportio. From there analogy was understood as identity of relation between any two ordered pairs, whether of mathematical nature or not. Kant's Critique of Judgment held to this notion. Kant argued that there can be exactly the same relation between two completely different objects. The same notion of analogy was used in the US-based SAT tests, that included "analogy questions" in the form "A is to B as C is to what?" For example, "Hand is to palm as foot is to ____?" These questions were usually given in the Aristotelian format:

HAND : PALM : : FOOT : ____

While most competent English speakers will immediately give the right answer to the analogy question (sole), it is more difficult to identify and describe the exact relation that holds both between hand and palm, and between foot and sole^{[citation needed][original research?]}. This relation is not apparent in some lexical definitions of palm and sole, where the former is defined as the inner surface of the hand, and the latter as the underside of the foot. Analogy and abstraction are different cognitive processes, and analogy is often an easier one.

Recently a computer algorithm has achieved human-level performance on multiple-choice analogy questions from the SAT test.^[4] The algorithm measures the similarity of relations between pairs of words (e.g., the similarity between the pairs HAND:PALM and FOOT:SOLE) by statistical analysis of a large collection of text. It answers SAT questions by selecting the choice with the highest relational similarity.

Shared abstraction[link]

In several cultures, the sun is the source of an analogy to God.

Greek philosophers such as Plato and Aristotle actually used a wider notion of analogy. They saw analogy as a shared abstraction.^[5] Analogous objects did not share necessarily a relation, but also an idea, a pattern, a regularity, an attribute, an effect or a function. These authors also accepted that comparisons, metaphors and "images" (allegories) could be used as arguments, and sometimes they called them analogies. Analogies should also make those abstractions easier to understand and give confidence to the ones using them.

The Middle Ages saw an increased use and theorization of analogy. Roman lawyers had already used analogical reasoning and the Greek word analogia. Medieval lawyers distinguished analogia legis and analogia iuris (see below). In Islamic logic, analogical reasoning was used for the process of Qiyas in Islamic sharia law and fiqh jurisprudence. In Christian theology, analogical arguments were accepted in order to explain the attributes of God. Aquinas made a distinction between equivocal, univocal and analogical terms, the latter being those like healthy that have different but related meanings. Not only a person can be "healthy", but also the food that is good for health (see the contemporary distinction between polysemy and homonymy). Thomas Cajetan wrote an influential treatise on analogy. In all of these cases, the wide Platonic and Aristotelian notion of analogy was preserved. James Francis Ross in Portraying Analogy (1982), the first substantive examination of the topic since Cajetan's De Nominum Analogia, demonstrated that analogy is a systematic and universal feature of natural languages, with identifiable and law-like characteristics which explain how the meanings of words in a sentence are interdependent.

Special case of induction[link]

On the contrary, Ibn Taymiyya,^[6][7][8] Francis Bacon and later John Stuart Mill argued that analogy is simply a special case of induction.^[5] In their view analogy is an inductive inference from common known attributes to another probable common attribute, which is known only about the source of the analogy, in the following form:

Premises

a is C, D, E, F, G

b is C, D, E, F

Conclusion

b is probably G.

Alternative conclusion

every C, D, E, F is probably G.

This view does not accept analogy as an autonomous mode of thought or inference, reducing it to induction. However, autonomous analogical arguments are still useful in science, philosophy and the humanities (see below), which makes this reduction philosophically uninteresting. Moreover, induction tries to achieve general conclusions, while analogy looks for particular ones.

Hidden deduction[link]

The opposite move could also be tried, reducing analogy to deduction. It is argued that every analogical argument is partially superfluous and can be rendered as a deduction stating as a premise a (previously hidden) universal proposition which applied both to the source and the target. In this view, instead of an argument with the form:

Premises

a is analogous to b.

b is F.

Conclusion

a is plausibly F.

We should have:

Hidden universal premise

all Gs are plausibly Fs.

Hidden singular premise

a is G.

Conclusion

a is plausibly F.

This would mean that premises referring the source and the analogical relation are themselves superfluous. However, it is not always possible to find a plausibly true universal premise to replace the analogical premises.^[9] And analogy is not only an argument, but also a distinct cognitive process.

Shared structure[link]

According to Shelley (2003), the study of the coelacanth drew heavily on analogies from other fish.

Contemporary cognitive scientists use a wide notion of analogy, extensionally close to that of Plato and Aristotle, but framed by Gentner's (1983) structure mapping theory.^[10] The same idea of mapping between source and target is used by conceptual metaphor and conceptual blending theorists. Structure mapping theory concerns both psychology and computer science. According to this view, analogy depends on the mapping or alignment of the elements of source and target. The mapping takes place not only between objects, but also between relations of objects and between relations of relations. The whole mapping yields the assignment of a predicate or a relation to the target. Structure mapping theory has been applied and has found considerable confirmation in psychology. It has had reasonable success in computer science and artificial intelligence (see below). Some studies extended the approach to specific subjects, such as metaphor and similarity.^[11]

Keith Holyoak and Paul Thagard (1997) developed their multiconstraint theory within structure mapping theory. They defend that the "coherence" of an analogy depends on structural consistency, semantic similarity and purpose. Structural consistency is maximal when the analogy is an isomorphism, although lower levels are admitted. Similarity demands that the mapping connects similar elements and relations of source and target, at any level of abstraction. It is maximal when there are identical relations and when connected elements have many identical attributes. An analogy achieves its purpose insofar as it helps solve the problem at hand. The multiconstraint theory faces some difficulties when there are multiple sources, but these can be overcome.^[5] Hummel and Holyoak (2005) recast the multiconstraint theory within a neural network architecture. A problem for the multiconstraint theory arises from its concept of similarity, which, in this respect, is not obviously different from analogy itself. Computer applications demand that there are some identical attributes or relations at some level of abstraction. The model was extended (Doumas, Hummel, & Sandhofer, 2008) to learn relations from unstructured examples (providing the only current account of how symbolic representations can be learned from examples).

Mark T. Keane and Brayshaw (1988) developed their Incremental Analogy Machine (IAM) to include working memory constraints as well as structural, semantic and pragmatic constraints, so that a subset of the base analog is selected and mapping from base to target occurs in a serial manner.^[12][13] Empirical evidence shows that human analogical mapping performance is influenced by information presentation order.^[14]

High-level perception[link]

Douglas Hofstadter and his team^[15] challenged the shared structure theory and mostly its applications in computer science. They argue that there is no line between perception, including high-level perception, and analogical thought. In fact, analogy occurs not only after, but also before and at the same time as high-level perception. In high-level perception, humans make representations by selecting relevant information from low-level stimuli. Perception is necessary for analogy, but analogy is also necessary for high-level perception. Chalmers et al. conclude that analogy is high-level perception. Forbus et al. (1998) claim that this is only a metaphor. It has been argued (Morrison and Dietrich 1995) that Hofstadter's and Gentner's groups do not defend opposite views, but are instead dealing with different aspects of analogy.

Analogy and Complexity[link]

Antoine Cornuéjols^[16] has presented analogy as a principle of economy and computational complexity.

Reasoning by analogy is a process of, from a given pair (x,f(x)), extrapolating the function f. In the standard modeling, analogical reasoning involves two "objects": the source and the target. The target is supposed to be incomplete and in need for a complete description using the source. The target has an existing part S_t and a missing part R_t. We assume that we can isolate a situation of the source S_s, which corresponds to a situation of target S_t, and the result of the source R_s, which correspond to the result of the target R_t. With B_s, the relation between S_s and R_s, we want B_t, the relation between S_t and R_t.

If the source and target are completely known:

Using Kolmogorov complexity K(x), defined as the size of the smallest description of x and Solomonoff's approach to induction, Rissanen (89),^[17] Wallace & Boulton (68) proposed the principle of Minimum description length. This principle leads to minimize the complexity K(target| Source) of producing the target from the source.

This is unattractive in Artificial Intelligence, as it requires a computation over abstract Turing machines. Suppose that M_s and M_t are local theories of the source and the target, available to the observer. The best analogy between a source case a and target case is the analogy that minimizes:

K(M_s) + K(S_s|M_s) + K(B_s|M_s) + K(M_t|M_s) + K(S_t|M_t) + K(B_t|M_t) (1).

If the target is completely unknown:

All models and descriptions M_s, M_t, B_s, S_s, and S_t leading to the minimization of:

K(M_s) + K(S_s|M_s) + K(B_s|M_s) + K(M_t|M_s) + K(S_t|M_t) (2)

are also those who allow to obtain the relationship B_t, and thus the most satisfactory R_t for formula (1).

The analogical hypothesis, which solves an analogy between a source case and a target case, has two parts:

• Analogy, like induction, is a principle of economy. The best analogy between two cases is the one which minimizes the amount of information necessary for the derivation of the source from the target (1). Its most fundamental measure is the computational complexity theory.
• When solving or completing a target case with a source case, the parameters which minimize (2) are postulated to minimize (1), and thus, produce the best response.

However, a cognitive agent may simply reduce the amount of information necessary for the interpretation of the source and the target, without taking into account the cost of data replication. So, it may prefer to the minimization of (2) the minimization of the following simplified formula:

K(M_s) + K(B_s|M_s) + K(M_t|M_s) (3).

Applications and types[link]

In language[link]

Logic[link]

Logicians analyze how analogical reasoning is used in arguments from analogy.

Rhetoric[link]

• An analogy can be a spoken or textual comparison between two words (or sets of words) to highlight some form of semantic similarity between them. Such analogies can be used to strengthen political and philosophical arguments, even when the semantic similarity is weak or non-existent (if crafted carefully for the audience). Analogies are sometimes used to persuade those that cannot detect the flawed or non-existent arguments.

Linguistics[link]

• An analogy can be the linguistic process that reduces word forms perceived as irregular by remaking them in the shape of more common forms that are governed by rules. For example, the English verb help once had the preterite holp and the past participle holpen. These obsolete forms have been discarded and replaced by helped by the power of analogy (or by widened application of the productive Verb-ed rule.) This is called leveling. However, irregular forms can sometimes be created by analogy; one example is the American English past tense form of dive: dove, formed on analogy with words such as drive: drove.
• Neologisms can also be formed by analogy with existing words. A good example is software, formed by analogy with hardware; other analogous neologisms such as firmware and vaporware have followed. Another example is the humorous term underwhelm, formed by analogy with overwhelm.
• Analogy is often presented as an alternative mechanism to generative rules for explaining productive formation of structures such as words. Others argue that in fact they are the same mechanism, that rules are analogies that have become entrenched as standard parts of the linguistic system, whereas clearer cases of analogy have simply not (yet) done so (e.g. Langacker 1987.445–447). This view has obvious resonances with the current views of analogy in cognitive science which are discussed above.

In science[link]

Analogues are often used in theoretical and applied sciences in the form of models or simulations which can be considered as strong analogies. Other much weaker analogies assist in understanding and describing functional behaviours of similar systems. For instance, an analogy commonly used in electronics textbooks compares electrical circuits to hydraulics. Another example is the analog ear based on electrical, electronic or mechanical devices.

Mathematics[link]

Some types of analogies can have a precise mathematical formulation through the concept of isomorphism. In detail, this means that given two mathematical structures of the same type, an analogy between them can be thought of as a bijection between them which preserves some or all of the relevant structure. For example, Failed to parse (Missing texvc executable; please see math/README to configure.): \Bbb{R}^2

and Failed to parse (Missing texvc executable; please see math/README to configure.):  \Bbb{C} 
are isomorphic as vector spaces, but the complex numbers, Failed to parse (Missing texvc executable; please see math/README to configure.):  \Bbb{C} 

, have more structure than Failed to parse (Missing texvc executable; please see math/README to configure.): \Bbb{R}^2

does: Failed to parse (Missing texvc executable; please see math/README to configure.):  \Bbb{C} 
is a field as well as a vector space.

Category theory takes the idea of mathematical analogy much further with the concept of functors. Given two categories C and D, a functor F from C to D can be thought of as an analogy between C and D, because F has to map objects of C to objects of D and arrows of C to arrows of D in such a way that the compositional structure of the two categories is preserved. This is similar to the structure mapping theory of analogy of Dedre Gentner, in that it formalizes the idea of analogy as a function which satisfies certain conditions.

Artificial intelligence[link]

Steven Phillips1 and William H. Wilson ^[18][19] uses category theory to mathematically demonstrate how the analogical reasoning in the human mind, that is free of the spurious inferences that plague conventional artificial intelligence models, (called systematicity), could arise naturally from the use of relationships between the internal arrows that keep the internal structures of the categories rather than the mere relationships between the objects. (called "representational states"). Thus, the mind may use analogies between domains whose internal structures fit according with a natural transformation and reject those that don´t.

see also Structure mapping engine.

See also case-based reasoning.

Anatomy[link]

In anatomy, two anatomical structures are considered to be analogous when they serve similar functions but are not evolutionarily related, such as the legs of vertebrates and the legs of insects. Analogous structures are the result of convergent evolution and should be contrasted with homologous structures.

Engineering[link]

Often a physical prototype is built to model and represent some other physical object. For example, wind tunnels are used to test scale models of wings and aircraft, which act as an analog to full-size wings and aircraft.

For example, the MONIAC (an analog computer) used the flow of water in its pipes as an analog to the flow of money in an economy.

Cybernetics[link]

Where there is dependence and hence interaction between a pair or more of biological or physical participants communication occurs and the stresses produced describe internal models inside the participants. Pask in his Conversation Theory asserts there exists an analogy exhibiting both similarities and differences between any pair of the participants' internal models or concepts.

In normative matters[link]

Morality[link]

Analogical reasoning plays a very important part in morality. This may be in part because morality is supposed to be impartial and fair. If it is wrong to do something in a situation A, and situation B is analogous to A in all relevant features, then it is also wrong to perform that action in situation B. Moral particularism accepts analogical moral reasoning, rejecting both deduction and induction, since only the former can do without moral principles.

Law[link]

In law, analogy is used to resolve issues on which there is no previous authority. A distinction has to be made between analogous reasoning from written law and analogy to precedent case law.

Analogies from codes and statutes[link]

In civil law systems, where the preeminent source of law is legal codes and statutes, a lacuna (a gap) arises when a specific issue is not explicitly dealt with in written law. Judges will try to identify a provision whose purpose applies to the case at hand. That process can reach a high degree of sophistication, as judges sometimes not only look at a specific provision to fill lacunae (gaps), but at several provisions (from which an underlying purpose can be inferred) or at general principles of the law to identify the legislator's value judgement from which the analogy is drawn. Besides the not very frequent filling of lacunae, analogy is very commonly used between different provisions in order to achieve substantial coherence. Analogy from previous judicial decisions is also common, although these decisions are not binding authorities.

Analogies from precedent case law[link]

By contrast, in common law systems, where precedent cases are the primary source of law, analogies to codes and statutes are rare (since those are not seen as a coherent system, but as incursions into the common law). Analogies are thus usually drawn from precedent cases: The judge finds that the facts of another case are similar to the one at hand to an extent that the analogous application of the rule established in the previous case is justified.

In teaching strategies[link]

Teaching the process of thinking by analogy is one of the main themes of The Private Eye Project.

See also[link]

Thinking portal

• List of thinking-related topics
• Conceptual metaphor
• Conceptual blending
• Argument from analogy
• False analogy
• Portal: thinking
• Metaphor
• Simile
• Hypocatastasis
• Allegory
• Argumentum e contrario
• Parable

Notes[link]

References[link]

• Cajetan, Tommaso De Vio, (1498), De Nominum Analogia, P.N. Zammit (ed.), 1934, The Analogy of Names, Koren, Henry J. and Bushinski, Edward A (trans.), 1953, Pittsburgh: Duquesne University Press.
• Chalmers, D.J. et al. (1991). Chalmers, D.J., French, R.M., Hofstadter, D., High-Level Perception, Representation, and Analogy.
• Coelho, Ivo (2010). "Analogy." ACPI Encyclopedia of Philosophy. Ed. Johnson J. Puthenpurackal. Bangalore: ATC. 1:64-68.
• Cornuéjols, A. (1996). Analogie, principe d’économie et complexité algorithmique. In Actes des 11èmes Journées Françaises de l’Apprentissage. Sète.
• Doumas, L. A. A., Hummel, J.E., and Sandhofer, C. (2008). A Theory of the Discovery and Predication of Relational Concepts. Psychological Review, 115, 1-43.
• Gentner, D. (1983). Structure-mapping: A theoretical framework for analogy. Cognitive Science, 7, 155–170. (Reprinted in A. Collins & E. E. Smith (Eds.), Readings in cognitive science: A perspective from psychology and artificial intelligence. Palo Alto, CA: Kaufmann).
• Forbus, K. et al. (1998). Analogy just looks like high-level perception.
• Gentner, D., Holyoak, K.J., Kokinov, B. (Eds.) (2001). The Analogical Mind: Perspectives from Cognitive Science. Cambridge, MA, MIT Press, ISBN 0-262-57139-0
• Hofstadter, D. (2001). Analogy as the Core of Cognition, in Dedre Gentner, Keith Holyoak, and Boicho Kokinov (eds.) The Analogical Mind: Perspectives from Cognitive Science, Cambridge, MA: The MIT Press/Bradford Book, 2001, pp. 499–538.
• Holland, J.H., Holyoak, K.J., Nisbett, R.E., and Thagard, P. (1986). Induction: Processes of Inference, Learning, and Discovery. Cambridge, MA, MIT Press, ISBN 0-262-58096-9.
• Holyoak, K.J., and Thagard, P. (1995). Mental Leaps: Analogy in Creative Thought. Cambridge, MA, MIT Press, ISBN 0-262-58144-2.
• Holyoak, K.J., and Thagard, P. (1997). The Analogical Mind.
• Hummel, J.E., and Holyoak, K.J. (2005). Relational Reasoning in a Neurally Plausible Cognitive Architecture
• Itkonen, E. (2005). Analogy as Structure and Process. Amsterdam/Philadelphia: John Benjamins Publishing Company.
• Juthe, A. (2005). "Argument by Analogy", in Argumentation (2005) 19: 1–27.
• Keane, M.T. Ledgeway; Duff, S (1994). "Constraints on analogical mapping: a comparison of three models". Cognitive Science 18: 287–334. 
• Keane, M.T. (1997). "What makes an analogy difficult? The effects of order and causal structure in analogical mapping". Journal of Experimental Psychology: Learning, Memory and Cognition 123: 946–967. 
• Kokinov, B. (1994). "A hybrid model of reasoning by analogy."
• Kokinov, B. and Petrov, A. (2001). "Integration of Memory and Reasoning in Analogy-Making."
• Lamond, G. (2006). Precedent and Analogy in Legal Reasoning, in Stanford Encyclopedia of Philosophy.
• Langacker, Ronald W. (1987). Foundations of Cognitive grammar. Vol. I, Theoretical prerequisites. Stanford: Stanford University Press.
• Little, J. (2000). Analogy in Science: Where Do We Go From Here? Rhetoric Society Quarterly, 30, 69–92.
• Little, J. (2008). The Role of Analogy in George Gamow's Derivation of Drop Energy. Technical Communication Quarterly, 17, 1–19.
• Morrison, C., and Dietrich, E. (1995). Structure-Mapping vs. High-level Perception.
• Ross, J.F., (1982), Portraying Analogy. Cambridge: Cambridge University Press.
• Ross, J.F. (October 1970). "Analogy and The Resolution of Some Cognitivity Problems". The Journal of Philosophy 67 (20): 725–746. DOI:10.2307/2024008. JSTOR 2024008. 
• Ross, J.F. (September 1961). "Analogy as a Rule of Meaning for Religious Language". International Philosophical Quarterly 1 (3): 468–502. 
• Ross, J.F., (1958), A Critical Analysis of the Theory of Analogy of St Thomas Aquinas, (Ann Arbor, MI: University Microfilms Inc).
• Shelley, C. (2003). Multiple analogies in Science and Philosophy. Amsterdam/Philadelphia: John Benjamins Publishing Company.
• Turney, P.D., and Littman, M.L. (2005). Corpus-based learning of analogies and semantic relations. Machine Learning, 60 (1–3), 251–278.
• Turney, P.D. (2006). Similarity of semantic relations. Computational Linguistics, 32 (3), 379–416.
• Cornuéjols, A. (1996). Analogy, principle of economy and computational complexity.

External links[link]

Look up analogy in Wiktionary, the free dictionary.

• Dictionary of the History of Ideas: Analogy in Early Greek Thought.
• Dictionary of the History of Ideas: Analogy in Patristic and Medieval Thought.
• Stanford Encyclopedia of Philosophy: Medieval Theories of Analogy.
• Dedre Gentner's publications page, most of them on analogy and available for download.
• Shawn Glynn’s publications page, all on teaching with analogies and some available for download.
• Keith Holyoak's publications page, many on analogy and available for download.
• Boicho Kokinov's publications page, most of them on analogy and available for download.
• The Private Eye Project's publications page, all on teaching with analogies (and thinking by analogy) and some available for download.
• jMapper – Java Library for Analogy/Metaphor Generation
• Analogy games: Analogy used as the basis for a cultural game

Peter Schiff

Austrian School
Born	(1963-03-23) March 23, 1963 (age 49)
Nationality	United States
Field	Financial Economics
Alma mater	U.C. Berkeley (B.B.A.), 1987[1]
Opposed	John Maynard Keynes,[2] Alan Greenspan,[3][4][5] Ben Bernanke,[6][7][8] Paul Krugman,[9] Christopher Dodd,[10] Barack Obama,[11]
Influences	Irwin Schiff, Ludwig von Mises, F.A. Hayek, Murray Rothbard

Peter David Schiff (pronounced /ˈʃɪf/; born March 23, 1963) is an American businessman, investment broker, author and financial commentator. Schiff is CEO and chief global strategist^[1] of Euro Pacific Capital Inc., a broker-dealer based in Westport, Connecticut^[12] and CEO of Euro Pacific Precious Metals, LLC, a gold and silver dealer based in New York City.^[13]

Schiff frequently appears as a guest on financial television and is often quoted in major financial publications. He is host of The Peter Schiff Show, a radio show broadcast on terrestrial and internet radio. He is a frequent guest on internet radio^[14][15][16] as well as the host of the former podcast Wall Street Unspun.^[14][17] In 2010 Schiff ran as a candidate in the Republican primary for the United States Senate seat from Connecticut.^[18]

Schiff is known for his bearish views on the dollar and dollar denominated assets, while bullish on investment in tangible assets as well as foreign stocks and currencies.

Early life and education[link]

Peter Schiff was born and raised in New Haven, Connecticut. His father, Irwin Schiff, is a prominent figure in the U.S. tax protester movement, currently serving a 13-year sentence for tax evasion.^[19] Peter Schiff attended Beverly Hills High School in California,^[20] and graduated from the University of California, Berkeley in 1987 with a Bachelor's degree in finance and accounting.^[1]

Financial career[link]

Schiff began his career as a financial consultant at a Shearson Lehman Brothers brokerage.^[1] In 1996 Schiff and a partner acquired a small brokerage firm that had been founded in 1980, reincorporated it in California and renamed it Euro Pacific Capital.^[21][22] The company today has more than 15,000 clients^{[citation needed]} and six offices nationwide, with its headquarters in Westport, Connecticut.^[12][21][23]

According to a 2005 article in The Advocate of Stamford, Connecticut Schiff relocated the firm to Darien, Connecticut to find brokers "who think like him". The New York Metropolitan Area, Schiff says, has the biggest concentration of brokers in the country, making it easier to recruit employees.^[24] The company has offices in Newport Beach, California as well as in Scottsdale, Arizona, Palm Beach, Florida, Los Angeles and New York City. Euro Pacific Capital also holds the exclusive rights to broker some Perth Mint gold products in the United States.^[25]

Economic forecasts[link]

Peter Schiff voices strong support for the Austrian School of economic thought, first introduced to him by his father.^{[26][27][28][29]}

2002–2008[link]

In his 2007 book Crash Proof, Schiff wrote that United States economic policies were fundamentally unsound, and predicted that the United States dollar would lose much of its value.^[3] Schiff believed that the imbalance between the amount of goods the U.S. consumed and what it produced would eventually lead to problems for the U.S. economy.^[30][31] As a remedy Schiff favored increased personal savings and production which he said would stimulate economic growth.^[32] Schiff cited the U.S.'s low personal savings rate as one of the causes of its transformation from the world's largest creditor nation in the 1970s to the largest debtor nation in the year 2000.^[33] Schiff attributed the low savings rate to higher inflation and the artificially low interest rates set by the Federal Reserve.^[34]

In a May 2002 interview with Southland Today, Schiff predicted that the economic downturn triggered by the bursting of the dot-com stock market bubble, an event that he had also forecast well in advance, would lead to a bear market likely to last "another 5 to 10 years."^[35][36] Later that year, following a 30% decline in the Dow Jones, Schiff reversed his call, and became bullish on U.S. stocks in nominal terms. However, he remained bearish in gold terms. In November 2002, as Schiff predicted, US stock indexes began a nominal bull market uptrend that held steady for five years,^[37] until reversing course in 2008, when they began a decline to less than half of their peak 2008 values,^[38] followed in 2009 by the Dow climbing 61% from its low point over the following year.^[39] However, priced in gold, U.S. stocks remained in a bear market the entire time. In May of 2002, the date of the Southland Today interview,^[40] the Dow Jones was worth over 34 ounces of gold. By 2011 the Dow fell below 6 ounces of gold, a nine-year decline of over 80%, in line with Schiff’s 2002 forecast.^[41]

In an August 2006 interview he said: "The United States economy is like the Titanic and I am here with the lifeboat trying to get people to leave the ship... I see a real financial crisis coming for the United States."^[42] On December 31, 2006 in debate on Fox News, Schiff forecast that "what's going to happen in 2007" is that "real estate prices are going to come crashing back down to Earth".^[42]

As part of these exchanges on Fox News and his repeated appearances on financial news network CNBC, Schiff had mentioned factors such as speculators and "the absence of lending standards" which are now seen by many^[43][44] to indeed be contributing factors to the housing crisis which began in 2007. On December 13, 2007 in a Bloomberg interview on the show Open Exchange, Schiff further added that he felt that the crisis would extend to the credit card lending industry.^[45] Following this observation, it was soon reported on December 23, 2007 by the Associated Press that "The value of credit card accounts at least 30 days late jumped 26 percent to $17.3 billion in October from a year earlier at 17 large credit card trusts examined by the AP... At the same time, defaults -- when lenders essentially give up hope of ever being repaid and write off the debt -- rose 18 percent to almost $961 million in October, according to filings made by the trusts with the Securities and Exchange Commission."^[46]

Since 2007, Schiff has stated many times that if the government doesn't change course there will be hyperinflation in the US.^[3] Schiff is one of a minority of economists credited with accurately predicting the financial crisis of 2007–2010 while "nearly all [macroeconomists] failed to foresee the recession despite plenty of warning signs".^[47][48] In his book Crash Proof, he described several aspects of the U.S. economy that would lead to a recession.^[3]

A YouTube video entitled "Peter Schiff was right" became popular in late 2008 and 2009.^[49][50] The video consists of a compilation of clips of his many appearances on various financial news programs from networks including CNBC, Fox News, MSNBC and Bloomberg, most of which took place from 2005 to 2007. In the video segments Schiff explains the fundamental problems he saw with the United States economy at that time. Schiff's warnings of a coming economic collapse earned him the moniker "Dr. Doom."^[22][51][52]

2009–present[link]

Despite predictions regarding the housing bubble and automotive industry difficulties coming to fruition, as early as 2009 Schiff was receiving criticism due to the performance of some of his client's accounts in 2008, as well as controversies over the predictions themselves. In January 2009, economic blogger and investment adviser Michael Shedlock reported, "I have talked with many who claim they have invested with Schiff and are down anywhere from 40% to 70% in 2008."^[53] Later that week an article appeared in the Wall Street Journal reporting that Schiff's broker-dealer firm, Euro Pacific Capital Inc., "advised its clients to bet that the dollar would weaken significantly and that foreign stocks would outpace their U.S. peers" and that instead, the dollar advanced against most currencies, "magnifying the losses from foreign stocks Mr. Schiff steered his investors into."^[54]

The Director of Communications at Schiff's investment firm responded to the original Shedlock piece by saying, "While it is true, that our accounts have suffered badly in 2008, a fact that we have never disputed or ran from, [Shedlock's] estimates for the size of our typical client losses are exaggerated and unfair."^[55][56] Schiff personally responded to Shedlock's criticism by saying, "to examine the effectiveness of my investment strategy immediately following a major correction by looking only at those accounts who adopted the strategy at the previous peak is unfair and distortive" and called Shedlock's blog entry "nothing more than an overt advertisement (and a highly deceptive one at that) to use my popularity to advance his career," adding that losses were felt mostly by recent clients and not by others.^[57]

Schiff responded similarly to criticisms made by Wade Slome of Sidoxia Capital Management, LLC. in a September 2009 blog entry entitled, "The Emperor Schiff Has No Clothes."^[36] Schiff stated not only were the losses suffered by his clients in 2008 highly exaggerated, but also that most of those losses have already been recouped, stating that many who were down then are now up, and most long-term clients were never down at all, but merely temporarily lost some of the profits they had earned over the years.^[36]

The January 2009 Wall Street Journal article discussed the value of Schiff's predictions, and stated how deficiencies "made mincemeat of investors who took his advice in 2008."^[54] In an interview the following week Schiff likened himself to billionaire investor Warren Buffett, saying they were both "buy and hold" long-term investors. Contrasting his negative press he compared claims about accounts managed under Schiff's firm to the stock market value of Buffett's company, saying: "His approach is you buy stocks and you never sell them—you hope to never sell them—and Berkshire Hathaway is down 40% in the last thirteen months; I don't see the Wall Street Journal saying 'Warren Buffett made mincemeat out of his clients.'"^[58] The Wall Street Journal also published a letter written by Schiff in response to his critics saying: "My central investing premise, a weakening dollar and safety in gold, commodities and foreign stocks, didn't materialize in 2008. But all the ingredients were (and remain) present for those movements to occur. Over the past year, market reactions that I didn't foresee—massive global deleveraging, a knee-jerk 'flight to quality' into U.S. Treasuries and a sharp counter trend rally in the U.S. dollar—have kept the scenario from playing out."^[59]

In a November 2009 videoblog, Schiff said that five stocks he picked for Fortune Magazine in January 2009 had gained a total of 360%.^[60][61]

In a March 2009 speech Schiff said that it would be impossible for the U.S. debt to China to be repaid unless the U.S. dollar's value is substantially diluted through inflation. In September 2009 Schiff said that "I would not be surprised to see [gold] at $5,000 over the next several years" and that the 2009 stock market rally was a "bear market rally".^[62]

According to economist Paul Krugman, Schiff's Austrian approach to economics led him to incorrectly predict hyperinflation in the United States.^[63]

Political career[link]

Schiff was an economic adviser to Ron Paul's 2008 presidential campaign. In support of Paul's economic revitalization plan, he said: "We need a plan that stimulates savings and production, not more of the reckless borrowing and consumption that got us into this mess in the first place. Ron Paul's plan is the only one that amounts to a step in the right direction. If you want meaningful change—for the better that is—Ron Paul is the only candidate capable of delivering it."^[64]

In 2008, Schiff also endorsed Murray Sabrin for the U.S. Senate seat in New Jersey.^[65]

In an interview in February 2009, Schiff's position was summarized as a nonpartisan critique of American policymakers, comparing former presidents George W. Bush to Herbert Hoover and President Barack Obama to former president Franklin D. Roosevelt, with neither of the more recent incumbents comparing favorably to the earlier ones.^[66]

Schiff supports the reduction of government economic regulation, and is concerned that President Obama's administration may increase such regulation.^[67] Schiff says that the economic crisis of the late-2000s provides an opportunity to transition from borrowing and spending, to saving and producing. He is critical of the U.S. government's efforts to "ease the pain" with economic stimulus packages and bailouts. According to Schiff, the U.S. government's approach of replacing "legitimate savings with a printing press" could result in hyperinflation.^[68]

2010 U.S. Senate campaign[link]

In December 2008, Connecticut citizens created a website encouraging Schiff to campaign against the incumbent Senator Christopher Dodd.^[69][70] Approximately 5,000 people made campaign contributions using the web site.^[69] On February 21, 2009, a moneybomb raised over $20,000 for Schiff's campaign.^[71] In a May 2009 video blog, Schiff said that he was seriously considering a run for the senate and when questioned by a Washington Post reporter, he said the chance of him entering politics was "better than 50-50".^[72] In June 2009 Schiff commissioned a poll of likely voters which indicated that he trailed Dodd in popularity by four percentage points.^[73] On July 9, 2009, Schiff launched an exploratory committee and an official campaign website.^[69] He began accepting donations in an attempt to see if "people who really believe in freedom, liberty, sound money and the constitution are prepared to support that with an actual political contribution or to volunteer their services and work on this campaign." He received over 10,000 donations and many e-mails from around the world.^[69]

After giving some hints on The Daily Show^[74] Schiff officially announced his candidacy for the Republican nomination on September 17, 2009, during the MSNBC Morning Joe show.^[18][75][76] By October 2009 Schiff had received more than 10,000 telephone calls and letters^[69] and raised over $1,960,000 (USD) in campaign contributions.

At the May 2010 Republican convention, Linda McMahon received the most delegate votes but not enough to prevent an August primary election. U.S. Rep. Rob Simmons received more than the required 15 percent of the total votes necessary to force the primary. Schiff then collected the signatures necessary to earn a position on the August 2010 GOP primary ballot, submitting at least 400 signatures over the state requirement.

In July 2010, Schiff's campaign received endorsements from Steve Forbes and Ron Paul.^[77][78]

In the Republican primary, held on August 10, 2010, Schiff lost the nomination to Linda McMahon.^[79] McMahon collected 49% of the vote, with Simmons on 28% and Schiff 23%.^[80]

Ultimately, the election was won by the Democratic Party primary winner, Richard Blumenthal.^[81]

Broadcasting[link]

From 2005 to 2010 Schiff hosted a weekly podcast named Wall Street Unspun. In October 2010 Schiff began hosting a new radio show named The Peter Schiff Show. The show is broadcast weekdays from 10am-noon ET on internet and terrestrial radio. The show has featured guests such as Ron Paul, Rand Paul, Niall Ferguson, Dennis Kucinich, Rick Santelli, and others.^[82]

Books[link]

Peter Schiff is the author of six books published by John Wiley & Sons. His book, Crash Proof 2.0, appeared on both the New York Times and Wall Street Journal bestseller lists.

• Crash Proof: How to Profit From the Coming Economic Collapse, February 2007, ISBN 978-0-470-04360-8 1
• The Little Book of Bull Moves in Bear Markets: How to Keep your Portfolio Up When the Market is Down, 2008, ISBN 978-0-470-38378-0 2
• Crash Proof 2.0: How to Profit From the Economic Collapse, 2nd Edition, September 2009, ISBN 978-0-470-47453-2 3
• The Little Book of Bull Moves, Updated and Expanded: How to Keep Your Portfolio Up When the Market Is Up, Down, Or Sideways, 2010, ISBN 0-470-64399-4 4
• How an Economy Grows and Why it Crashes, 2010, ISBN 978-0-470-52670-5 5
• The Real Crash: America's Coming Bankruptcy---How to Save Yourself and Your Country, 2012, ISBN 978-1-250-00447-5

References[link]

External links[link]

Wikimedia Commons has media related to: Peter Schiff

Wikiquote has a collection of quotations related to: Peter Schiff

• Euro Pacific Capital US Brokerage Firm Website
• Euro Pacific Precious Metals Coin Company Website
• Schiff for Senate Official Campaign Website
• Peter Schiff Online, Official book site for Peter Schiff
• Peter Schiff radio, Schiff's daily radio show
• Peter Schiff's Official YouTube channel