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Oct. 11, 2024 - Ron Paul Liberty Report
33:35
The Fed’s Depreciating Dollar — with Peter Schiff

Today, we are very pleased to welcome Peter Schiff to discuss America’s dire economic circumstances. For 100+ years, the unconstitutional and immoral Federal Reserve has enabled the U.S. federal government to spend way beyond its means. The U.S. government is racing full steam into a financial crisis that even the Fed may not be able to extricate them from.

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Rising Prices Conundrum 00:11:36
Hello, everybody, and thank you for tuning in to the Liberty Report.
We have a special program today, but we first will introduce our co-host, Chris Rossini.
Chris, welcome to the program.
Great to be with you, Dr. Paul.
Very good.
And in a minute or so, I'm going to introduce that special guest.
Came all the way from Puerto Rico through the internet.
Right.
But before I do that, I am in a position where I need to acknowledge somebody that sells gold, and it happens to be Birch Gold, who helps us out at times.
And therefore, I want to suggest to people who are looking for ways to invest in gold and think that it might be a good idea to look at all the alternatives and switching maybe some stocks over to an IRA that would be able to invest in gold shares.
I first had a pension fund that you weren't allowed to do that.
And now it's messy.
But so Birch Gold offers some opportunity to explain how that works and what to do.
And if you text Ron at 989898, they'll send you some materials and help you along in getting that approved.
Because right now, people ask me, and every once in a while, they say, is it too late to buy gold?
And who knows?
On long term, it might be just the beginning.
That's the thing that we have to put up with.
Because when that happens, in spite of if you own gold, you might feel a little bit better, but the country might not.
But I want to now introduce our very special guest, somebody I've known for a long time.
And sadly, when I see or meet Peter, I think of his dad, and that makes me sad because it reflects some of the evils of our government.
But Peter's been a friend for a long time and worked with me in my first presidential campaign in 2008.
And he's known about 2008 because Peter, Peter, you know, was pretty strong on saying, watch out, bad things are coming.
But who knows what Peter's going to say today?
Maybe he's going to say, well, that's over.
We cured it.
We got rid of all the mad investment and we got rid of our debt.
I don't think that's what he's going to say.
But Peter, I want to welcome you to the program.
We haven't gotten together lately, but I try to keep up with what you're doing.
And it looks like you're still talking about gold.
And we want to follow up on that because we have a few questions for you.
But welcome to the program, Peter.
Well, thanks, Ron.
And yeah, my dad was a big fan of yours as well.
In fact, probably before I was.
Although it's been a long time.
But yeah, it's too bad you didn't win in 2008.
Maybe we would not be in the predicament that we're in today.
You know, you've got the Federal Reserve is claiming that the inflation problems have been solved, but we know that's not the case.
I mean, gold is almost $2,700 an ounce.
What does that tell you about inflation?
It doesn't seem like it's under control.
When we first started as a nation in 1789, you only needed $20 to buy an ounce of gold.
And 124 years later, when the Federal Reserve Act was passed, you could still buy an ounce of gold with just $20.
And even though Roosevelt devalued in 33 up until 1970, you only needed $35 to buy an ounce of gold.
Now you need almost $2,700.
It has been a disaster, a stewardship over our money ever since we turned it over to the Fed.
And I believe the gold, not the Fed, inflation problem is only getting started.
It's not even close to being solved.
Well, you know, before we get to Chris, because he has a question and he's interested on how this dollar internationally is going to operate now and in the future, and it is a pretty key question.
But one thing I like to do, and I'm sure that you wouldn't object, is defining terms.
Because if you waste your time watching normal television or natural telemainstream media, believe me, they're a little bit confused on monetary policy and definition.
But the one definition that bugs me is the definition of inflation, because, oh, inflation is rising, prices, food prices are going up, and we have to do something about it.
Give me more money because I can't afford it.
And very rarely do we hear, unless people know something about monetary policy in a libertarian circle, do they mention the fact that inflation is something different than just the food prices going up or rent prices going up?
But when people do that and get people convinced, oh, what we have to do is get more money from the government, they are misled.
Do you find that in a very important issue of trying to get people to understand what inflation really is?
Well, the government took a page right out of George Orwell's 1984 some time ago, and they were able to redefine inflation from what it was always meant from the origin of the term.
In fact, if you look at the word inflate, inflate means to expand.
And what was it that was expanding?
It was the money supply.
And even if you have an Oxford dictionary, even from even the 70s or 80s, I think that late, if you looked up inflation, it says an expansion of the money supply.
But of course, when you expand the money supply, one of the things that happens is prices tend to go up, or they're always going to be higher than they otherwise would have been had you not expanded the money supply.
But the government was able to succeed in convincing the public with the help of academia and Wall Street that inflation was actually a symptom or a consequence, which is rising prices.
And they did that so that they would not have to be blamed or held responsible for that inflation.
Because if you redefine inflation as rising prices, then you can blame whoever's raising the prices.
So you can blame greedy corporations.
You could blame OPEC.
You could blame Putin.
You can blame everybody but yourself.
But if inflation is properly defined, and everybody knows it has one source, and that is Washington, D.C., the government expands the money supply with the Fed.
We run huge deficits.
The Fed monetizes them.
Now they call it quantitative easing.
It's not an accident that we had all this quantitative easing and now we have record inflation.
And in fact, the price increases dwarf what the CPI reports.
Inflation is actually causing a much bigger increase in prices than the government admits.
And that's probably why we've been in recession for the last several years.
But the government measures don't report it because they understate the GDP deflator.
And that's why the public says the economy is lousy.
It's because it is.
It's the government numbers that are wrong, not the public.
Boy, that's well said.
And I have Chris with us today, Chris Rossini, and he has some interesting questions about what's happening internationally with the dollar, because that's important too, because, you know, a reserve currency of the world is pretty valuable and it's served our interest since 1945.
But they're temporary.
They have allowed us to get away with fighting wars we didn't need to fight and inflation.
So, Chris, what do you have on your mind?
Yes.
Hi, Peter.
First, yeah, it's great to talk to Peter.
If Peter is new to anyone in our show, he has a great history on YouTube.
You could go back, search up Peter Schiff was right.
I've been following him for maybe 20 years now.
It's been a very long time.
So it's great to speak with you.
But yeah, Peter, obviously our nation lives way beyond its means, not just the government, corporations, individuals, and nations around the world are changing.
We've been able to export inflation, but they're now making trade agreements with one another and excluding the dollar.
But there are many Americans who believe that these nations, China, India, Russia, that they need us as their consumers.
Otherwise, they'll explode.
Please talk about why this is such a big myth.
Yeah, you know, that's a fallacy.
You know, it always reminded me of that passage in Tom Sawyer, you know, Mark Twain's book, where Tom gets all of his friends to do his chores and whitewash that fence for him.
And that's really what we've done.
We fooled the entire world into doing all of our production.
And so they produce goods for us to enjoy and they don't get paid.
We just create money out of thin air and just hand it to them.
But they've got the short end of the stick because they get real goods that they can use and that improves their lives.
We get that rather.
And they just get a piece of paper that they could loan back to us for more pieces of paper.
But I think the world is wising up to this con.
They don't want to continue to support the American economy.
And the cost of supporting it gets higher every year because our economy, you know, we continue to allow our industry to wither away as we become more and more reliant on what the rest of the world produces.
That's why, you know, every administration we have record trade deficits.
So we become more and more dependent on the kindness of the rest of the world.
But the cost of providing us with that subsidy is an increasingly heavy burden on the rest of the world because Americans live beyond our means.
But that means collectively the rest of the world has to live beneath its means to make that possible.
If we consume without producing, they have to produce without consuming.
You know, we get to borrow without saving, but they save and don't borrow.
So we do all the fun part and they do all the heavy lifting.
So that's in the process of changing.
And I think the main thing that's really been keeping the dollar afloat is that there hasn't been any viable fiat alternatives because the Europeans, the ECB, the Bank of England, Japan, everybody else is acting recklessly.
All governments are running huge deficits.
All governments are creating inflation.
So by comparison, that helps us out because everybody else is just as bad.
But I think our economy is uniquely dependent on trade deficits being financed because Europe still has a trade surplus.
So does Japan.
So they have reckless central banks, but they still produce in line with what they consume.
We're kind of unique, and that's been a function of the reserve status of the dollar.
And we have really exploited that and taken advantage of it.
But I think we even accelerated the movement out of the dollar with the sanctions against Russia because we really showed the world how dangerous it is to rely on the dollar, to hold the dollar as a reserve, because we could yank the rug out from under you whenever we want by sanctioning you if you don't do what we want.
Dollar's Reserve Status Exploited 00:05:27
And that's why I think you see that one of the reasons the price of gold is almost 2,700.
The world is moving off the dollar standard, back on a gold standard.
Gold is going to be the primary monetary reserve.
Uh, to replace the dollar.
Yes, it's not going to be the pound, it's not going to be the euro or the r?
B or the yen or any other fiat currency.
The world is simply going to go back to real money as the basis for their currencies.
You know, there was a moment, uh in in my life uh, studying economics and monetary policy, that went.
Excuse me, that was a real enlightenment for me and I was just wondering if there was a moment for you where you say wow, this comes together, makes a lot of sense.
And I thought well maybe, maybe Peter had the same experience that I did, because back in 1971 was when the gold window was closed, I knew big things were coming.
So I looked up Peter's age and I decided he probably doesn't even remember that date, but he could have.
But did you, did you have a moment?
And uh, Peter was born in 63.
So he he, he couldn't have had the same experience I had, because many of us were anticipating and there were good people predicting what was going to happen.
But still, on that sunday night I was watching the tv and it really changed my, my willingness to speak out and try to wake people up.
Have you?
Did you have any moments like that and don't tell me you remember in 1971 I was a kid, but my father was very active at that time.
You know he was one of the people who testified in 1968 in front of the Senate Committee ON Money AND Banking against removal of gold backing for our currency and he was one of the few people that testified in defense of gold.
And if you go back and and you read his testimony and he actually reproduced it in his book the biggest con, everything he said that would happen if we went off the gold standard, it all happened.
And if you actually read what the then uh secretary of the Treasury and the then chairman of the Federal Reserve predicted if the?
U.s went off the gold standard, they predicted that the price of gold would fall from 35 an ounce.
They thought that we were propping up the price of gold by tying it to the dollar and if we simply liberated the dollar, the dollar would rise in value and the price of gold would fall.
And they also predicted that we would have lower inflation in the future if we went off the gold standard and, of course, my father predicted that inflation would run away, which is exactly what happened uh, in the 1970s, because they did not take my father's advice.
They took the advice of the chairman of the Federal Reserve and the secretary of Treasury, which shows you how bad it is to take the advice of those people.
And it was true then and it's true now.
Watching the news, the uh mainstream media news, and then uh, understanding it from a, from a position of sound money and libertarianism, you know it's so uh, so disturbing.
I often wonder whether the people in government uh, uh that uh do all the nonsense and follow all the stupid rules.
I wonder if they know exactly what they're doing.
And this is, and they learn how to even invest according to what the mob is going to do.
But I saw an ad or a statement made the other day when there was some statistic, I think it was on CPI or something.
And the statement was, it caught my attention.
I want you to comment.
It says, despite the hotter inflation, gold prices are trading near sessions high.
I thought, my reaction was hotter inflation in the old days when they thought understood a little bit differently.
They say, oh, that means that gold is going to go up, which it did that day anyway.
But that's the kind of misinformation that I think is very dangerous.
But I don't propose that we regulate it.
Yeah, no, certainly not.
I mean, the government is trying to regulate what they consider disinformation.
The real disinformation is coming from government.
That's why we need the free market to be able to push back against what really amounts to nothing but government propaganda.
It's the government that is misinforming the people intentionally.
The government lies about everything.
You know, at least they're consistent in that respect, but they lie about inflation.
It's much higher than it really is.
They lie about unemployment.
It's much higher than it really is.
They lie about GDP growth.
It's much lower than it really is.
They continuously try to fill the public's head with these fake news stories about how the economy is great.
Meanwhile, if you look at reality, Americans are now working multiple jobs in record numbers.
Moonlighting is now pretty much a standard thing where people have two or three jobs.
The savings rates are at all-time record lows.
Credit card debt is at all-time record highs, while credit card interest rates are at all-time record highs.
So families are struggling.
They can't make ends meet.
They're loading up on credit and working two or three jobs barely to pay the rent, to put food on the table.
They've got nothing saved for their retirement.
The government has completely destroyed the prosperous economy that the free market built.
War II Financial Strain 00:05:42
Right.
Chris has another question he'd like to ask about, and that has to do with for us from the Ron Paul Liberty Report that we're concerned about the economy, but we're also concerned about foreign policy to a large degree.
But I think you have some of the same concerns.
And there's now more talk about World War III.
And we don't put it just in those terms, but we know about the danger.
But you've talked about that.
And, you know, we have to be concerned about the economic turmoil that's coming.
But we also have to contest with the people who say, oh, you know, if you're in a deep depression, like in World War II in the 1930s, we got out of the depression by having a war.
What kind of nonsense is that?
Yeah, I mean, that is the Keynesian's view of the world that spending money stimulates the economy, you know, no matter what you spend it on.
You know, we didn't even actually get out of their depression until the end of the war.
The conditions in America were more dire during the war.
I mean, if you obviously, for the people who were fighting, I mean, they were risking their lives and a lot of people died.
We had 20 million men serving in the Pacific and Europe.
But for the people who stayed at home, everything was rationed.
Everything was scarce.
There was very little products to buy.
I mean, it was very austere because we were using all of our resources for the war effort.
There was nothing left for civilian production.
So it wasn't until we ended the war and basically decommissioned all those soldiers and everybody came home.
That's when the prosperity started.
It wasn't the war.
It was the end of the war that led to the good times.
But the big difference between now and where we were in the 1930s or 40s is we could actually afford to fight that war.
America was a rich nation.
The government was tiny.
So during the war, 1942, we had the victory tax.
And for the first time ever, American citizens paid income taxes.
Most Americans didn't pay any income taxes at all before the Second World War, but it started as a wartime tax.
But not only did Americans pay income taxes, they also bought war bonds.
Americans paid for the war with taxes and by loaning their savings to the U.S. government.
But today, Americans are broke.
They're already taxed to the hilt and they have no money to buy U.S. treasuries.
So we're too broke to fight a war.
And, you know, people keep talking about how we have the highest debt to GDP since the end of the Second World War.
But in 1945, we had the capacity to pay down that debt.
And we did.
The debt went down dramatically because unfortunately, when the war ended, they didn't stop the income tax.
So the government kept collecting all that wartime tax revenue, but they used it to reduce the size of the debt relative to the economy.
And it went down from maybe 125 or wherever it was, down to maybe a low of 35 before it started to blow up again.
But now we have no capacity to repay this debt.
It's growing astronomically.
The national debt is now growing at $3,4 trillion a year.
And we're spending over a trillion dollars a year just in interest payments on the national debt.
Chris, you might have a follow-up on that because you were interested in the ramifications and what would come of it.
What about the Fed and what about interest rates?
What will happen during that period of time?
Chris, can you follow up on that?
No, actually, Peter answered the question.
Nothing is more expensive than wars, and especially world wars.
In fact, they are what bring down empires.
I mean, after World War II, that was it for the British.
And then we stepped in and became what we became.
But could this and Peter laid out that we are not the country that we used to be in World War II?
So I'm wondering if World War III would be the coup de grace for us financially.
We couldn't even fight the war on COVID.
Look at how much we had to fight to combat a disease, let alone if we had to have a real war.
But of course, we don't even have to have a war.
I mean, that's the worst part of it.
There's no reason for war, but we go around agitating for war.
Why are we arming Ukraine?
Why is there even a war there?
There should not have been a war, and there would not have been a war, but for our interference, our willingness to continue to fund Zelensky's war effort that without the West, they would have had a peaceful resolution over two years ago.
And hundreds of thousands of Ukrainians and Russians would still be alive.
I mean, forget about all the money we've wasted.
What about all the human suffering?
People that have needlessly died for what?
What difference does it make?
It's not like the Ukraine was some bastion of freedom.
We tried to paint Zelensky out as a modern-day George Washington.
And we said Putin was like Adolf Hitler.
I mean, it was not those type of extremes.
There was a lot of corruption in Ukraine, probably more so than in Russia.
And they would have worked it out quickly.
But we interfered.
And, you know, who knows how much money has lying the pockets of all these Ukrainians who have skimmed off a lot of that aid.
I mean, that's part of what's going on.
People are getting rich off of this war, in addition to the military-industrial complex that makes money, supplying all the weapons.
But if government just did what it was supposed to do, we wouldn't even be having any of these wars.
Stagflation And Its Impact 00:09:40
I mean, forget about the fact that we can't afford them.
I mean, there's no reason for this.
And, you know, if we didn't pick so many fights and piss off so many people, we wouldn't have to spend so much money on defense because not that many people would be mad at us.
You know, we just have to have a big enough defense so that nobody invades us.
And that's not that difficult.
Yeah.
Peter, I want to get back to definitions of some of these terms.
And right now they throw it around, but I've talked about it.
I believe you probably have as well.
And that talks about stagflation.
You know, people have this conception that if you just have, if we can just stimulate the economy, it's going to solve the problem.
But stagflation existed in the 70s.
People are talking about it now.
But is it not true that stagflation is just a beginning term or a hidden term for something much more serious?
And that is a runaway inflation in a depression.
Yeah, you know, stagflation is kind of a word they came up with in the 1970s because the Keynesians couldn't explain what happened because according to their textbooks, it wasn't possible because they so misunderstood inflation.
They thought inflation was something you get when you have too much economic growth.
So they thought if you had high unemployment and a weak economy that you couldn't also have inflation.
And so the 70s confounded them and they came up with a word stagflation.
But I think what we're going to go through is going to be far worse.
We're going to have a severe recession, which I believe has already started.
It's just that we haven't acknowledged it officially, but we're in a recession, but it's going to get a lot worse than what it is right now.
So it's going to be recession, depression, but we're going to have very high inflation.
So you can call it an inflationary depression.
Maybe that's a way to describe it.
But that's where we're headed.
You know, inflation is going to run away.
There's no way to stop it.
In 1980, Volcker and Reagan were able to stop it.
We had interest rates go to 20%.
Inflation, even the way the government measured it, never got any higher than 12, 13% briefly.
So we had really positive, real interest rates, and we were able to break the psychology in the back of inflation.
But we don't have the capacity to do that now.
We're too broke to survive the cure.
So unfortunately, we're going to die of the disease.
Inflation is going to get much, much worse than it is now.
And of course, the idea that the government can stimulate the economy, all the government can do is stop sedating the economy.
There's nothing positive the government can do to help the economy.
All they can do is undo the things that they've done that have hurt the economy.
So the government can get rid of regulations that have made the economy less productive and less efficient.
So they can repeal regulations.
But they're not going to stimulate the economy by running budget deficits just by spending more money or cutting taxes and replacing taxes with debt and inflation.
No, the only real way the government can stimulate the economy is by making itself smaller, because government is dead weight.
Government is a drag on the economy.
So if you want to relieve the economy of the burden of supporting government, you've got to cut government spending.
But all government stimulus is the opposite of that.
Every stimulus program involves the government getting bigger, not smaller.
So the stimulus doesn't work.
It just creates the illusion.
It causes the stock market to go up because they create inflation.
They create money.
They lower interest rates.
So it creates a phony boom, but it sows the seeds for a real bust.
That is the problem.
You know, we're about to finish up, but I think Chris has another question because in a way, it leads to politics and what happens.
And Chris, what was this question that you had?
You want to ask them about what's going to happen to us, Americans that aren't prepared.
Yeah.
Well, Americans are addicted to the government and it's the biggest government ever.
So that's the flip side of it.
And they're so dependent on it.
Anything that happens in our society, the first thing is what do the politicians say?
What are they going to do?
All of this is going to change.
And there's going to be a lot of people that are going to have to change their thinking.
So, Peter, what do you recommend people that have become so addicted to being dependent on the government?
Well, the fact that there are so many people who now depend on government, that's not an accident.
That's part of the plan.
The whole idea, if you're a politician, is to make the voters dependent on you so they'll keep voting for you and you can stay in office.
And so all of these government programs are designed to perpetuate the need for the program.
Like the government cripples you, and then now you depend on the government crutch.
And so, and if anybody threatens to take that crutch away, well, they're not going to get elected.
So, unfortunately, a lot of people who would otherwise be self-sufficient are now completely dependent on government.
And so, now they vote for more government.
And it's hard to get rid of that government when they've captured such a large percentage of voters.
Like, look, even Donald Trump is Donald Trump saying we're going to cut Social Security?
No, he's going to increase Social Security by eliminating the tax on Social Security.
He's not going to cut Medicare.
It's not going to cut even Obamacare.
Nobody wants to touch these entitlement programs that so many people now depend on.
And so, you know, there's nothing we can do but create inflation and then blame greedy corporations when those Social Security benefits don't buy anything.
But what other Americans can do to protect themselves from the inflation tax, I mean, that's really what inflation amounts to.
It's the way the government taxes us.
They can either take our money through an income tax, you know, or a tariff, or they can print money and take our purchasing power because they could just print money and spend it, right?
They don't have to take my money, but now they've taken the purchasing power because the people who get the money that the government prints, they just go out and spend it and that bids up prices.
And so now I have to pay more for everything I want to buy.
So inflation is one tax that we know is coming and we can prepare for it.
I mean, we can't prepare for it so much about our wages.
You know, your future wages are going to get debased.
But if you have current savings, if you have an investment portfolio and you know you're going to get hit with a massive inflation tax, you can protect yourself.
And one way is, you know, you can own gold.
You can own, you know, real money that can't be inflated.
That's why the price of gold is 2,700.
You know, when this century began in January 1st of 2001, gold was $270.
It's gone up over eightfold.
The Dow has only gone up fourfold or a little bit more.
It's gone from 10,000 to, it's at a record high today, actually.
It's over 42,700, but it's actually lost almost half its value measured in gold.
And in fact, even though the Dow is up today, priced in gold, which gold's up $30 today, percentage-wise, gold is up more than the Dow.
So the Dow is down if you price it in real money.
So you can own physical gold and silver.
You know, that's why I set up Shift Gold to help my clients own physical gold and silver.
But I also own a lot of mining stocks.
I know Rob Paul owns a lot of mining stocks.
We've owned these stocks for a long time.
I think eventually they're going to really pay off when it comes to inflation.
They're a real leverage bet on a higher gold price and the remonetization of gold.
But also you want to own real things that the governments can't print.
That's why my clients, we own portfolios of dividend paying foreign stocks, stocks that are selling goods and services that people need to buy and that they will keep buying.
Even if we have to raise the price, they'll keep buying.
They may cut back on something else, but if you're selling products that people really need, they're going to buy them.
Maybe they'll buy a little less, but they're still going to buy them.
And so these companies own real assets, they pay real dividends, and so they'll hold their value.
You know, inflation also transfers purchasing power from creditors to debtors.
So debtors love inflation and savers, you know, get destroyed by inflation.
The U.S. government is the biggest debtor in the history of the world.
I mean, in fact, if there's life on any other planet, I bet the U.S. government has more debt than anywhere else in the universe.
So the U.S. government has more to gain from inflation than anybody else.
That's why it creates it.
But it also has to lie about it.
They can't be truthful and tell everybody about all the inflation.
They just have to lie that it's not there while they do everything they can to create it because inflation destroys the value of their debt, making it easier to pay.
But it also destroys the value of everybody's asset who owns that debt, which is why you don't want to do it.
So I tell my clients, don't own any U.S. treasuries.
Don't own any corporate bonds or municipal bonds, you know, because you're going to lose.
You're guaranteed to lose if you get into those instruments.
You've got to be in inflation hedges.
You'll have to own assets that will retain their value, not have their value destroyed.
Inflation Hedges Needed 00:01:00
Well, Peter, this has been great.
I want to thank you.
And you've been speaking to a very agreeable audience.
And I'm sure they've enjoyed this.
But I want to thank you personally for taking the time out to spend the time with us.
And I wish you well.
And I also want to.
Ron, I also want to thank you too on behalf of all Americans.
You've done us all such a great service, and you've got to find the son that you raised in RAND.
You know, he's doing a good job there in the U.S. Senate.
So, yeah, you've been an inspiration to so many of us, myself included.
So I really want to thank you for that.
And hopefully you'll continue to soldier on there for as long as possible.
I know it's getting harder as you're getting older, but we probably need you now more than ever.
Well, that's very nice of you.
And I appreciate that.
And I want to thank our viewers for tuning in.
And I'm sure they enjoyed this program.
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