Aug. 26, 2015 - Freedomain Radio - Stefan Molyneux
52:41
3059 The Death of the Dollar | Peter Schiff and Stefan Molyneux
As the financial markets plunge, many are desperately waiting to see if the Federal Reserve and Janet Yellen will decline to raise the Federal Funds Interest Rate from its current 0-0.25%. In light of the volatility shown by the Dow Jones Industrial Average and other economic indicators, Wall Street yearns for more quantitative easing in the form of QE4. | Peter Schiff and Stefan Molyneux discuss the latest news in the United States and global economy, including: the Chinese currency devaluation, fall of the Shanghai Stock Exchange Composite Index, mountains of debt, the Dollar compared to the Euro, the plunge in the price of Oil, Bernie Sanders popularity, Gold, Jon Stewart formerly of The Daily Show, minimum wage absurdity, the hatred of the rich and the economic future of the United States.
Have Peter Schiff back, Euro-Pacific Capital CEO and head honcho.
Thanks so much for taking the time today, Peter.
Sure.
Thanks for having me on your program.
My pleasure.
So we have a nice bit of chunk of time here because I know in a lot of the media stuff that you do, it's real flyby.
Like you kind of have to fax your data in a compressed format.
Here we have a bit more of a relaxed format.
And I guess I just wanted to start with...
Always tough to know exactly what happened and when and why.
There's so many psychological factors involved in market correction, such as we're seeing.
But there is this grim kind of inevitability about these kinds of market dislocations.
And the point that the markets become where even the hint of a 0.25% rate increase from 0 to 0.25% is causing a mass increase.
What is the big picture that investors can take away if they've not come across this kind of approach before?
Well, you know, first of all, you know, all bear markets start as corrections, right?
We never know it's a bear market until we're down by more than 20%.
But at this point, Wall Street is still labeling this a correction.
And a correction implies that everything is still okay, that the upward trend is still intact, and we're just having a little bit of a correction, so there's nothing really to worry about.
It's a buying opportunity.
Well, maybe not, right?
Maybe this is the beginning of a bear market.
And I believe if the Fed really was going to raise interest rates, like everybody believes that they're about to, then I do think this would be a bear market, because it's not just a quarter point.
See, that's just symbolic of the end of the party, right?
Because a quarter point means there's going to be more, right?
It's not just a quarter point.
The Fed is going to have to raise interest rates far more significantly than that because if it only did a quarter point, it would be pointless, right?
So once the process, though, is in motion and Wall Street says, okay, we got one quarter point, now we're going to get another and then another and then another, the markets begin to discount that.
And remember, the only reason that we had this huge stock market rally over the past several years is because of the Fed.
It's been living on 0% interest rates.
Now it also is being propped up by quantitative easing.
The Fed did that three times.
And every time the market started to go down in the past, it just launched a new QE program.
That's how come we had three of them, right?
Because the first one didn't work.
But now the Fed is saying we're not going to do a fourth one.
In fact, we're going to raise interest rates.
And so if they actually did that, we would be in a bear market.
In fact, I think we would be in another financial crisis.
I think we would finish the financial crisis that started in 2008.
Because the Fed didn't let the market run its course.
We didn't get to fully purge the excesses out of the economy, the excesses that were caused by the Fed keeping rates too long prior to the bursting of that bubble.
And now it's kept them even lower for even longer.
And so we have even more problems that we have to work out now than we did in 2008.
And so the second part of this financial crisis is going to be much worse than the first part.
Especially since all those banks that were too big to fail, we bailed them out.
Now they're bigger than ever.
And they're still going to fail if the Fed follows through with its threat to raise interest rates.
Now, I don't think they're going to.
I think the whole thing has been a bluff the entire time.
I think they're just talking about raising rates because they can't.
Actually do it.
I think if they could raise rates, they would have done it years ago.
And I think the market has been oblivious to this fact.
And it's been a bunch of Pollyannas who have thought, well, if the Fed raises rates, it's not going to hurt the market.
Of course, it's like they're sucking the air out of the bubble.
And because everybody thought the Fed was going to raise rates next month, That's why the market started to go down.
And not just our market, all the markets, including China.
You know, they want to blame this on China.
It's not China's fault.
It's the Fed's fault.
And the fact that there's been a bit of a rally this morning, I pulled out a data point that I thought was interesting.
I'd like you to comment on if you wouldn't mind.
Six of the ten largest point gains in the history of the stock market occurred between September 2008 and March 2009 in the very trough of what should have been a big bear market at the time.
So six of the ten largest point gains in the entire history of the stock market occurred between September 2008 And March 2009.
So the fact that people think that this is somehow going to go back up in any permanent way is not exactly supported by the historical data.
Well, first of all, the three-day decline, the Thursday, Friday, and Monday decline is the largest three-day decline ever.
So you're certainly going to get a bounce after an unprecedented drop, certainly on a Tuesday, which are renowned for being, you know, turnaround Tuesday or reversal Tuesday.
They tend to be counter-cyclical days, and a rally on a Tuesday in a downtrend is very unreliable.
There's a pretty good chance that Today's rally is going to be undone, and we're going to be challenging the lows from yesterday.
Remember, the Dow was off 1,000 points in the morning before closing for a loss of only about 600.
We still have a long way to go to get back down to the intraday low.
Of Monday.
Now the question is, is the Fed going to throw the markets a life preserver like it's done in the past?
Or are they going to continue to dangle an anchor in front of us by pretending that they're going to raise rates?
Now, what's wrong with, I mean, from an outsider perspective, they say, okay, well, maybe 0% interest is just the new normal.
I mean, the markets have adapted to it.
Things are kind of floating along.
What's the problem with just leaving them at zero?
And also, I mean, people say, well, you can't head into negative rate territory.
But if you count inflation, I think you can make the case that it's been negative rate territory since 2009.
What's wrong with staying at zero or negative?
How could anybody think zero is the appropriate price to borrow money?
Markets are all about discovering the price of things.
That's why we want markets to discover prices.
We don't want bureaucrats to just pull them out of a hat.
Because they're going to get a price that's going to be wrong.
They're going to end up with a shortage or a surplus depending on whether the price is too high or too low.
Only in a market do you get the actual price where you have supply and demand meeting in a way that there's no surplus or there's no shortage.
Well, if the government is going to replace the wisdom of the market and just guess the proper price of money, how could it be zero?
I mean, that's not even close to a valid guess.
I mean, I know that that's great for the borrower.
Hey, yeah, I can borrow at zero.
It costs me nothing, right?
But it takes two to tango.
What about the lender?
Is zero percent the ideal rate for the lender?
Of course not.
Who in their right mind wants to lend money?
And when you lend money, you take a risk.
Because you might not get it back.
And there's also inflation that can erode away the value of the money when you do get it back.
So why should I loan out my money to get zero return?
There's no way that rate makes sense.
And so if the government is going to pick that as the rate, it's going to cause all sorts of damage in the economy because you're not going to have enough savings because no one's going to want to save if the return on savings is zero.
And everybody's going to want to borrow to do all kinds of crazy, stupid things because the cost of borrowing is nothing.
You see, in a free market with higher rates of interest, you have a lot more savings because people want to get those returns.
And you don't have people doing crazy things with the money because they have a real rate of interest.
They have a real hurdle that they have to jump over.
And so ARCOM is screwed up because the Fed has deprived us of the savings that we need by keeping interest rates too low.
So we don't get any capital investment.
We don't get any real economic growth.
We don't get productive jobs.
We just have bubbles.
We have stocks overpriced, bonds overpriced.
We have a few people making money off the system, but at the expense of everybody else who's suffering under this phony bubble economy.
One of the things that's quite surprising is the idea that the euro has become a safe haven.
Given the work that I've done researching how the euro and the European Union as a whole is doing, it seems rather surprising that the euro is gaining in value.
What does that say about where the U.S. dollar is headed of people heading to the socialist paradise of Europe?
Yes, you know, I wrote an article not too long ago, the euro is not dead, and I pointed out that all the negativity surrounding the euro, I was quite positive on the euro, at least vis-a-vis the dollar, because while I recognize that there are some serious problems in Europe that I don't want to diminish, they're not as bad as the problems of the United States that everybody is overlooking.
I mean, if you're, you know, you're jumping from the euro to the dollar, you're going from the frying pan into the fire.
And I think some of the people are starting to feel the heat now, and they're jumping back to the euro.
That's why the euro has rallied from a low of about 105 in March to a high yesterday of 117.
And everybody was writing the obituaries for the euro.
Everybody was convinced for sure it was a lock that the euro was going to go to parity, and it went the other way.
And, you know, in the past we've had this.
People get very bearish on something like the euro, and then they end up being wrong.
That's what's happening with gold as well.
You have record numbers of people bearish on gold.
I think a few weeks ago we had the first time ever where hedge funds were net short gold.
More hedge funds were betting gold would go down than betting it would go up.
And that's never happened before.
And, of course, gold rallied $80.
You know, it's pulled back about $20 since then.
But there's a good chance that gold has probably made the lows, just like the euro made the lows.
And all the people that were betting against gold are going to end up losing money and they're going to have to buy back the gold they shorted at much higher prices.
Let's go back to China for a sec.
They've cut their rates five times since November, and that hasn't really done that much.
They've threatened to throw people in jail, who they call speculators, whatever that means.
I don't like the way you're trading.
Off to jail you go.
And it hasn't really done much to stop the downward trend.
And I get the sense, this is not any kind of analytics, it's just a gut sense, Peter, but I get the sense...
That the central banks are kind of out of ammo.
It doesn't seem like, other than the fear that they're going to not continue to bring cocaine to the stockbroker party, that they seem to be out of ammo as far as being able to solve this problem or these problems.
Yeah, well, first of all, the Chinese stock market problem, you have to understand what happened, right?
The Chinese stock market spiked up earlier in the year.
Because China relaxed their restrictions.
And for the first time they allowed individuals to buy stocks that in the past they were legally prevented from buying.
So it's like all of a sudden you opened up this door and you allowed everybody in.
And so everybody rushed into this door at the same time.
And so prices for stocks spiked up.
And then once all those people who wanted to buy rushed in and bought, the prices came back down.
Now when they came back down, everybody said, oh no, the market is crashing.
It wasn't crashing.
It never should have risen that fast in the first place.
It was just the noise of the market.
So to say, oh, the Chinese market is down 30% in the last couple of months, but it was up 50% in the month before that.
I mean, none of this counts.
If you smooth it all out, in fact, as of yesterday, the Chinese market was still positive on the year.
Now, it was down last night, so it's now negative.
But the Dow is down more on the year than the Shanghai market is.
And so no one's talking about the U.S. bubble.
They're talking about the Chinese bubble.
Chinese stocks are lower in price than they were in 2007.
How can that be a bubble?
The PEs in China are much lower than the PEs in the United States.
Yes, there are some Chinese companies that trade at outlandish multiples, but the same We've got plenty of companies that have multi-billion dollar market caps that haven't had a profit since the company started.
So we have the insane valuations going on here, too.
We've got a much bigger bubble than China, and there's a lot more air that's going to come out of this bubble if the Fed were to raise rates.
And even if they don't raise rates, eventually the bubble's going to pop all by itself.
And our economy is much more addicted To that bubble, and we rely on it in a much greater way than the Chinese.
Look, the Chinese, beneath the surface of all these bubbles, right, they got a real economy.
The Chinese are working, they're saving, they're producing, they don't rely on the government for their retirement money, for their health care.
America, we're just a basket case.
And we've got 94 million Americans who don't have jobs.
People are living off the government.
Those that do have jobs live paycheck to paycheck.
In many cases, part-time paycheck to part-time paycheck.
We have no savings.
We're drowning in debt.
Americans have credit card debt.
We got automobile debt, mortgages if they still have a house because homeownership is now at the lowest since 1967.
They got student loans.
They got worthless diplomas, but they're buried under a mountain of debt, so they're still held up in their parents' basements because they can't get jobs.
We got the lowest labor force participation ever for men in their 20s and 30s, and we got the highest ever for men in their 60s and 70s.
The old people who should be retiring are too broke.
They can't afford to retire, and the young guys can't get jobs.
I want to talk about commodities.
I'm going to preface this with a tiny rant.
So in the 90s, I was an entrepreneur, co-founded a software company.
We grew it, then we were involved in an IPO. And during the time of the IPO, this was during the tech boom, and it was complete madness.
I mean, complete delirium because the amount of wealth that was sloshing around the valuation of the company relative to what I thought was a great product and a great company was still madness in terms of its multiples.
I remember I kept going to board meetings and everybody only talked about the stock price and what was going to happen and what other stock exchanges we could list on.
I do remember going to board meetings and actually thumping the table and saying, remember, we're still supposed to be building stuff.
The value is what we build and what we sell, not the funny money that floats around the stock price.
A stock price is important.
I love the stock market, but when you look at the price of commodities, it seems almost inescapable that people have just stopped building stuff and everyone is chasing this giant herd of counterfeit currency that's floating around the world.
You see CEOs now focusing on buying back shares rather than building more stuff.
You've got Tim Cook, the CEO of Apple, I'm emailing Jim Cramer with information that's not even been released to the market as a whole because he's so scared about the stock price.
That guy could risk jail.
He might go the Martha Stewart route.
Not that America is going to mess with Apple.
It's sort of foundation of the economy.
But when we look at the returns on raw materials and we look at the trading values of commodities, they still seem to be going in the toilet even while share prices are heading up.
How is that possible?
If we're not converting raw stuff into value, how can share prices still be going up?
Well, a lot of the carnage in the commodity market has to do with the strength of the dollar.
Remember, the dollar is how a lot of these commodities are priced, and a lot of the emerging market currencies have been getting clobbered based on the belief, the false belief, that the Fed is going to embark on this tightening cycle.
And so as emerging market currencies are plunging, commodities themselves are getting much more For those consumers, because they have to buy the dollars to buy the commodities.
And because prices are rising in real terms, demand is falling.
And so that's what's really pressuring these commodities and also the emerging market currencies.
But I think once the realization that, you know, we're at zero percent forever here in the U.S., I mean, it's quantitative thing is just paused.
It's not over with.
The Fed is going to print a lot more money.
They're not winding down We're good to go.
Where their business is actually selling stock.
You know, they have to have a make-believe company that they can market.
But normally when you go into business, the goal is to generate a profit, right?
I mean, revenues don't mean anything unless you can convert them into profits.
Unless you're publicly traded and you convince somebody to buy stock in your company.
And now your real business model is selling shares at inflated prices.
And you keep raising money so that you can lose it at your business, right?
Your business isn't viable because you're losing, let's say, a dollar for every dollar in sales or for every dollar you sell, you lose a penny or whatever it is, but you lose money.
You don't make it up on volume.
You make it up by selling stock to replenish what you've lost.
But if you can convince the investor that at some point in the future there's going to be a big payday, that all of a sudden you're going to stop losing money and start making money, right?
You got all these people that are willing to gamble on that.
And so now you have entire companies built around the business model of, yeah, you know, the promise of a profit in the future, but the only thing you actually have is a loss in the present, but people are getting rich with these business models.
You know, it's much harder to actually operate a business at a profit than to operate at a loss.
Anybody can operate a business at a loss.
That's easy, right?
But then they convince people that one day it will make a profit.
But in the short run, the only people who profit are the ones who are selling the stock.
And those are generally the insiders, the founders who came up with the idea, or the early investors, the venture capitalists, right, who seeded the company when it was dirt cheap.
And then when they go public, they cash in to a gullible public that's buying a lottery ticket.
Yeah, and the great tragedy is the degree of talent that is drawn into these financial manipulations rather than actually building real things in the market.
I mean, I sort of sense like in Western civilization as a whole, since sort of the 18th, 19th century, we've been accumulating all of this capital.
You know, the reason it's called capitalism.
And that capital is the result of massive amounts of sacrifice, huge amounts of Of suffering, surviving wars, surviving recessions, building businesses, sleepless nights, you know, the 70-80 hours a week it takes to start any viable business that's going to sustain itself.
I feel like there's just giant vampiric bats.
They're just hanging off this capital that's been accumulated and we're just bleeding everything dry through debt, through keeping people in the workforce who otherwise wouldn't want to be, through transferring to unproductive people.
There just seems to be this giant, and the word is not strong enough, this misallocation.
It sounds like, oh, you know, just the ball went in the wrong hole.
Oops.
But this misallocation of capital is draining everything that generations have worked hard to accumulate.
It feels like we're just basically pissing it away in one generation of rampant regulatory self-indulgence.
Yeah, and it's not a misallocation that it's just a random occurrence that, you know, it's some kind of inherent flaw in capitalism.
It's the government that is behind the misallocation because the government is sending false signals to the marketplace.
The government is rigging the game.
And then the players are simply trying to work in this rigged game by altering their behavior to win the rigged game.
But what we need is real capitalism because capitalism benefits everybody.
That's the invisible hand.
That's Adam Smith.
But we don't have the invisible hand when government substitutes its own hand.
You know, for capitalism, and you have central planning, you have central banking, you have all this manipulation, and it is stifling real economic growth.
That is why the standard of living of the vast majority of people is falling, because the government is inhibiting the natural benefits that flow from real capitalism.
Now, as far as oil goes, it's a bit of a surprise, I think, to a lot of people.
Of course, a year ago, international price for oil, $103 and change.
On Monday, down to $42, which was down 6% from the previous Friday.
And I've heard a lot, oh, it's cyclical, oh, you know, there's better technology for extracting it, and there's overproduction, and there's...
Economies in China and India are reducing their consumption and so on.
Is it that important to people's investment portfolio as a whole and where do you think it's going to go from here?
Well, first of all, it's actually below $40 a barrel now.
This is, you know, around the vicinity of the lows from the 2008 financial crisis when everything was collapsing, not just oil.
Everything was collapsing.
But again, I think oil is a victim of the same idea that the dollar is going to rise due to higher interest rates at the Fed.
It's undermining all commodities, including oil.
It is undermining growth worldwide, and so demand for oil is down based on the strength of the dollar and based on the belief that the dollar strength is going to continue.
That as strong as the dollar is, it's only going to get stronger.
And this is putting even more downward pressure on oil prices.
But again, I think that this is wrong.
I think we're not going to get all these rate hikes.
We may not get any rate hikes.
I think we're going to get more quantitative easing.
And I think oil prices are headed much, much higher.
One of the most interesting parts of this, though, is that you've had this windfall for the American consumer, right?
In gasoline prices.
And of course, Americans use more gasoline than anybody else.
I mean, we don't have much of a public transportation system.
We drive our cars everywhere.
Many Americans, assuming they still have a job, commute long distances to work.
And then, of course, we spend a lot of time driving back and forth between the shopping stores, filling up our SUVs with all kinds of stuff.
And so we've had this big drop in oil price that should have been a windfall for the American consumer, yet you don't see any extra spending coming out of it.
Everybody, all the economists were waiting for the benefit from this tax cut, but we can't even see it, which really shows you how weak the U.S. consumer is, because imagine where he would be if he didn't get this lifeline.
Because obviously the consumer is saving money on gasoline, but it doesn't mean he has any extra money because he's using the savings to buy food, right?
To pay his electric bill, to pay for his health insurance, to pay the interest on the money he's already borrowed, to pay the higher cost of renting his apartment.
So, you know, that's how bad things are.
So imagine what's going to happen when the low oil price goes back to a high oil price and the consumer no longer has that crutch.
Well, it's going to be fairly gruesome and fairly brutal.
Now, you spend a lot of time talking to mainstream financial analysts or cheerleaders of delusion would be my phrase.
Whenever you tune in to see you on some of these programs, which I always recommend watching Peter in just about any circumstance, But they very much seem to be skating over the fundamentals.
Like, they'll talk about, oh, you know, the housing market, the commodities market, or whatever.
But the fact that there is, you know, $18 trillion of debt slated ahead to $24 trillion in about half a decade, the fact that there is this massively declining population of people who actually have jobs, let alone those who have productive jobs, the fact that there's, what, $100 to $200 trillion of Unfunded liabilities.
The fact that since 07, 08, the interest rates have been near zero.
All of these things which are fundamentally unsustainable.
And they don't seem to be able to rise above the immediate uppy-downy of the market and look at the sustainability of things in the long run.
Do you think that's just because they want people to keep investing?
Do you think it's because if they looked in a bigger picture, fundamental investment strategies would change?
Or why can't they just see what seems blindingly obvious even to an amateur outsider like myself?
Well, there are a number of reasons.
One might be that they don't understand the fundamentals, and so they don't bother to discuss them.
or they do understand them, and then they don't want to discuss them because it's too depressing.
You know, they are trying to generate an atmosphere that will appeal to their advertisers.
You know, the financial channels have an ever-diminishing audience because fewer and fewer Americans actually have any money to buy stocks and bonds, right?
Most of them are struggling just to buy food.
You know, they don't have anything left over.
But, of course, those that still can buy, right, these companies need to sell commercials.
And the commercials are mainly those who are peddling investment products.
And so they need to have an upbeat environment.
They can't have guys like Peter Schiff on all the time talking about all the problems of the U.S. economy.
That's not conducive to, you know, selling their investment products.
So they want guys to come on and basically spin everything positive.
Hey, that's why they want to bring the recent decline in the market on China, because it's more palatable to the investor.
Hey, there's nothing wrong with the U.S. Everything's fine.
It's just, you know, that's All that stuff, problems going on over there.
It's just kind of spilling over over here.
And don't worry about it.
We'll just shrug this off.
Nobody wants to chalk it up to any problems that underlie this bubble economy or this pyramid Ponzi scheme thing that we got going that nobody wants to acknowledge.
They just want to pretend that everything is fine.
Yeah.
I think, yeah, trying to get your mainstream, trying to get your financial advice from those guys can be a challenge and I guess has certain risks involved.
And sometimes I feel like they bring you on because people have heard negative stuff about fundamentals and they just want to be able to rebut it so that it can ease people's fears.
But I still appreciate you getting the message out there anyway.
Yeah, you know, and part of the problem is, though, guys like me, and I'm not the only one out there, obviously, you know, we're in the minority.
But I've been warning about these problems for a long time.
And from the perspective of the mainstream, they think I'm wrong.
Because all they see is the U.S. market going up.
They believe the government that there's no inflation.
They see this dollar rally.
And they say, oh, Peterson, it's wrong.
Look, there's no inflation.
The dollar's getting stronger.
Look, the price of gold has gone down, right?
It's only $1,100.
You know, he said $5,000.
They think, well, you know...
Nothing that I'm saying as far as they're concerned is happening, and so I must be wrong.
But they don't really pay attention to what I'm really saying, because if they did, they would see that all the things that I've been warning about are in fact happening.
We just haven't had the final consequences, right?
These chickens haven't come home to roost yet, but the chickens that I've been describing, they're all out there, right?
And all the problems are actually getting worse, but people are oblivious to that because they're just looking at government numbers.
I mean, look, if you looked at the stock market in 2007, that didn't tell you that a financial crisis was around the corner.
It told you the opposite.
What about in 1999, with all these dot-com stocks?
I mean, people would say, hey, the market isn't wrong.
That must be what these companies are worth.
No, the market was totally wrong.
They got it completely wrong.
What about the subprime market?
How quickly did that melt down?
The market was totally wrong.
So in many cases, the market is wrong for a long time until reality comes in and then people say, well, nobody could have seen this coming.
This was totally out of left field.
Nobody could have predicted this.
What about Peter Schiff?
He's just a stop clock.
He's been saying that for years.
You can't pay any attention to him.
This always bugs me when people say, Well, unless you can tell me when it's going to happen, I'm not going to listen to you.
But that's ridiculous.
I mean, if you're a chain smoker, your doctor can't tell you, well, on this day, you'll start to develop lung cancer.
But they're still going to say, if you keep smoking, you're going to get sick.
The fact that nobody can say exactly when is irrelevant to the direction.
If I knew exactly when, then I wouldn't even be talking to anybody, right?
I'd be so rich, theoretically, if I knew exactly when everything was going to happen.
But, you know, even if I knew exactly when, who would believe me?
It's like...
And how would I get people to prepare for it?
I mean, you can't—let's say I knew it was going to happen on a Tuesday, you know, in 2017, right?
You know, I'm going to wait until the Monday to get everybody prepared.
I mean, how am I going to—I mean, I've got to get people in advance in order for them to be prepared because if you wait too long, you know, you don't have enough time.
It's like, you know, you got to get in the lifeboat before the boat starts to sink, right?
If you try to get in it when it's halfway underwater and everybody is scrambling for You may not make it.
You've got to get out before the crowd.
And that's what I'm doing.
And as it turns out, I got people in this lifeboat years in advance, but at least they're not going to go down with the ship when it sinks.
But sometimes people think, gee, I've been in this lifeboat for so long, maybe I should get back on that ocean liner because they're having a lot more fun.
This boat ain't nearly as fun as the big one I got off.
Now, you, of course, have, like all prognosticators of all things financial, you've had some hits and some misses.
What are your top, proudest predictions that you feel are underappreciated in the media as a whole?
Well, I don't think any of them are appreciated in the media, even the financial crisis, even the housing bubble, the collapse of the mortgage market, the Great Recession.
I mean, people still don't appreciate that because they think that I got it wrong.
But also, what people don't credit me for is I predicted the government's response to the 2008 financial crisis before the crisis hit.
Not only did I say what was going to happen, but I predicted what the government was going to do about it.
And then I also predicted that what they did would not work.
And here we are seven years later, and it hasn't worked.
As much as some people still believe, the balance sheet of the Fed is $4.5 trillion.
We've had three rounds of quantitative easing, and the economy is actually in worse shape fundamentally than it was eight years ago.
That's what people don't understand.
That's what they don't appreciate.
And that the real crisis is the one that's still coming because we're going to have a dollar crisis because they're going to do QE again.
They are not going to understand that their cure is making the patient sicker.
And ultimately, the patient is going to die of an overdose of this toxic cure.
All right.
Now, we've had, of course, coming in literally out of left field is the Bernie Sanders campaign.
As Hillary Clinton appears to have wiped her own server and her own political futures, potentially, we see Bernie Sanders coming in.
And I mean, of course, I'm virulently opposed to leftism as a whole, but at the same time, I put out a video, The Truth About Bernie Sanders is doing pretty well, and skimming over the comments, people really dislike the rich.
Boy, you know, the rich have just become the whipping boys, the piñatas for everyone's frustration.
And much though I don't like class-baiting and don't like this sort of class warfare that goes on, The fact that the banks have been bailed out to the tune of over three and a half trillion dollars since the beginning of the financial crisis, I can really understand how that might bother the living crap out of people.
So what would you say to the Bernie Sanders people about their dislike of the rich, their frustration and anger at how they feel this predatory system is carving out the giblets of the middle class?
Yeah, well, first of all, the fact that the two most popular candidates are a socialist and a populist shows you just how bad things are because the real people living in the real economy are frustrated.
They're blaming politicians on both sides of the aisle.
We're very frustrated by their actual life.
They don't care about what the statisticians want to tell them, how great the numbers supposedly are.
They don't live in those numbers.
They live in reality.
The reality of diminished paychecks, rising standard of living, mounting debt.
You know, they feel they're being squeezed.
They don't have savings.
They don't have a comfortable retirement.
If they have kids, they can't afford to support them, or they're in college, they can't afford to pay for it, or they have to support their parents and their kids.
I mean, people see their dreams disappearing, and they're looking for solutions, and they're looking for people to blame.
And that's where guys like Bernie Sanders and Trump can tap into that You know, that frustration that people feel, that they're even willing to say, yeah, I'll vote for a socialist.
I mean, normally, there are a lot of Democrats who are socialists.
They just don't want to come out and say it.
They advocate socialism, but they don't want to brand themselves as socialists because they realize that that's bad at the voting booth.
But Bernie Sanders is able to embrace it.
He doesn't have to hide from the fact most of them are in the closet, right?
He comes out of the closet, "Hey, I'm a socialist," and he gets all his support.
And the same thing you get Donald Trump.
He's just promising to, you know, bash all the immigrants, let's export everybody, let's build a wall, let's get tough, let's make America great.
Yeah, people want to make America great.
But just, you know, exporting all the illegal immigrants isn't going to make us great.
We're just hiring smarter negotiators.
That's not going to change our trade deficit.
It's not that we have bad negotiators.
We have too many laws.
We have too much taxes.
We have too much regulation.
See, Donald Trump wants to put tariffs.
Now, tariffs could work.
If we have an industry to protect, like let's say there's a Chinese industry and there's an American industry, let's say they're both making the same thing, right?
Maybe let's say they're both making baby strollers and we put a 25 percent tariff on Chinese baby strollers or anybody's baby strollers to get imported.
Well, now the American baby stroller manufacturer, well, he's got an edge now.
He can, you know, he's got an advantage because now his strollers are going to be more competitive than the imports because he doesn't have to deal with a 25 percent tariff.
So that kind of tariff could help our domestic industry.
But Donald Trump doesn't realize that we don't have any domestic industries left to protect.
If you put a, you know, a 25 percent tariff on strollers imported, then people just have to pay 25 percent more for their strollers because there are no American companies making those strollers.
And it just because we put a tariff, it's not like, OK, let's go start a business making strollers because you know how much capital I'm going to have to spend on building my factories and getting all my workers trained.
I'm going to do that based on a tariff that could go away with the next administration?
There's no way that you're going to start a business if its existence depends on a tariff.
So it's a pipe dream that we're just going to put these tariffs and we're going to revitalize our manufacturing industry and we're going to create these jobs.
But this is what people are willing to buy because they're that desperate for something different.
And maybe Donald Trump or Bernie Sanders, they come off as genuine, you know, even though Bernie Sanders is attacking wealthy people and Donald Trump is unapologetically rich.
He doesn't lose an opportunity to tell the voters just how rich he is.
In fact, if you thought he was rich, he's going to tell you he's even richer than you thought.
And he's proud about going out of his way not to pay any taxes.
I do everything I can to pay as little taxes as possible.
I want to keep all the money for myself.
Which is fine, but people are voting for that, just like they're voting for Bernie Sanders, who's promising to steal all that money from Donald Trump and redistribute it to the people who vote for him.
Right.
Now...
I wouldn't exactly say your nemesis, but let's just say a gentleman that you've had some significant issues with in the past.
Jon Stewart recently, of course, retired, and he's had a huge impact on people's thinking.
It's hard to imagine that there'd be quite that groundswell of Bernie Sanders support without Jon Stewart's general snarky leftism filling people's brains with vacuous statements and funny faces every night.
And I talked about this one, your radio show, in the past at the degree to which I thought it just unfairly treated by the media as a whole.
But what are your thoughts on the passing of, you know, the left-wing comic legend from the social scene?
Well, I don't know what he's got up his sleeve.
I mean, maybe he's going to launch something else.
I don't know.
Maybe he's going to do something on the Internet.
Maybe he's going to do something like Glenn Beck did.
I don't really know what he's got up his sleeve, if he's really going to retire permanently or if he's going to come back in another form.
But, you know, I didn't have a problem with Jon Stewart.
You know, the fact that when Jon Stewart interviewed me in person, The first time I was on his show, it went very well.
I mean, I got a lot of applause from the audience.
He was very friendly to me.
It was a very good interview.
It was the second one that was highly edited that I did with Samantha Bee, where they took four hours worth of really good material I gave them on why we should have no minimum wage.
And I'm sure if...
But the Comedy Central Channel, if they actually ran that four hours, if they just put it up on their website, I would challenge anybody to listen to that and not be against the minimum wage.
I think I would have convinced the biggest liberal that the minimum wage is a bad deal.
But they were able to take my four hours of wisdom and just bend it over into making me look like just a horrible person who just wants to exploit the handicapped.
But that was the agenda that they had because they didn't want to present an argument.
Because, you know, whenever I talk about the minimum wage, I never talk about it from the perspective of the employer or the businessman.
And that's the mistake that the Republicans make when they say, oh, don't do this.
It's bad for business, right?
A higher minimum wage is going to hurt business.
Every time I hear Republicans say that, I want to shudder because that plays right into the Democrats' playbook.
They want the Republicans to be defending business, right?
Oh, it's good for business.
They want to defend workers.
There's a lot more voters there, right?
Most people have employers.
Most people don't own businesses.
So you don't want to say raising the minimum wage is bad for business because you're not going to get votes.
What I say is I don't want to raise the minimum wage because I don't want to hurt workers.
What the minimum wage is, it doesn't say that employers have to pay a minimum wage.
What it says is that workers cannot work unless they can convince somebody to pay them the minimum wage.
It's a limit on what you can sell your labor for.
If you don't have enough skills, if you can't meet the minimum, then it is illegal for you to get a job.
It is illegal for you to sell your labor.
Now, why do you want to diminish the ability of people to sell their labor?
I mean, that's all most people have.
Most people don't have any capital.
All they have is their labor.
And you want to make it harder for people, especially people that don't have any skills.
If I am unskilled and uneducated, what's my best chance of getting skills, getting a job?
But I got to get my first job, and if you say that, well, you got to convince somebody to pay you $15 an hour, I'm never going to get my first job.
Why not let me get a job for $3 an hour or $4 an hour?
That's better than no job, because if I get a low-paying job in a few years, I might have the skills that would let me get a higher-paying job.
So they always have to talk about it in terms of the worker.
You don't want to take away the rights of workers to take jobs, to sell their labor.
You know, and that is in fact the origins of the minimum wage.
It was labor unions that were trying to price out unskilled competition.
And in many cases it was white workers trying to keep black workers unemployed.
There was a lot of racism associated with the early minimum wage laws.
It was designed to make it harder For minorities to get jobs.
These are laws that hurt workers, and they hurt the poor.
They hurt the unskilled.
They hurt the minorities.
So when Republicans are opposed to the minimum wage, they can't make it about business.
They don't want to ally themselves with business, because that's exactly what the Democrats want.
They want to be the good guys representing the workers, and the Republicans are the bad guys representing the rich, greedy business owners, right?
So the Republicans have to get on the side of the workers.
By saying the Democrats want to diminish the ability of workers to get jobs.
Diminish the ability of workers to market their labor for the highest price they can get.
Well, the other thing too, I've always felt that the minimum wage is a way of covering up the incredible destruction or at least non-cultivation of human capital that occurs in government schools.
I mean, the fact that you can have someone and educate them for 12 years and have them come out and not be worth more than a couple of bucks an hour is really tragic.
Why wouldn't you change the government schools so that people actually come out of those schools with some useful job skills and then you wouldn't need to raise the minimum wage because the amount of value these kids would be able to bring to the economy It would be far more than anything you could bring to the table from a legislative standpoint.
Yeah.
You know, one of the most ridiculous arguments I heard made, and the people making it didn't even realize how ridiculous it was, is they said, we need to raise the minimum wage.
Because if we don't raise the minimum wage, how do we expect our college grads to pay back their loans?
You know, and think about that for a minute.
I mean, you know, we're educating people.
In college so that they can cook french fries at the minimum wage?
I mean, if that's the case, I have an idea.
Just don't go to college at all, and then you won't need $15 an hour to pay off your debt because you won't have any debt.
I mean, if all you're going to do is have a minimum wage job, why are you going to college in the first place?
And why are you borrowing tens of thousands, hundreds of thousands of dollars to major in some kind of liberal arts Mickey Mouse course If it doesn't do you any good.
I mean, this is the whole idiocy of what we've got going here.
We, you know, we want our college grads, you know, at minimum wage jobs.
And the problem is, that's what they're doing.
And why would anybody want to go to college when that's what a college degree buys?
I mean, you know, next time you're in a fast food restaurant, ask the person at the cash register where they went to college and what their major was.
You know, is that really, you know, is that what you want?
You know, when I was a young kid, what they used to say was, hey, if you don't want to end up working at McDonald's, you better go to college, right?
Now they say, if you want to get a good job at McDonald's, make sure and go to college first.
There's a pretty funny story that Noam Chomsky has about his mom because he was being told about how, you know, the Jews value so much education and so on.
He was saying, well, that wasn't really the case where I came from.
He said, when I told my mom I was in high school, I told my mom I want to become a linguist and his mom turned to him and said, you know, I walk up and down the street every day.
I have never seen a sign in a shop window that said linguist wanted.
And so I guess he made a pretty good deal of it, but that's not the case for most people as a whole.
So, we've got a couple more minutes.
There's just two other things I'd like to hear.
The first is, let me dangle the ring of power in front of you and say, you wake up tomorrow morning and you've been transmogrified into the chairman of the Federal Reserve or the Treasury Secretary or wherever it is that you could get.
I know that you've run for office, so I know you've had thoughts about this before.
You were also, of course, a financial advisor to the Ron Paul campaign.
What would you do?
Are you a slow band-aid off or a fast band-aid off kind of guy?
No, I mean, nobody wants to peel a Band-Aid off slowly, right?
Everybody wants to rip it off.
That's the secret with Band-Aids, right?
You can't peel them off.
So, look, we have a lot of problems.
And look, if I were an elected president, then maybe we actually could solve the problems.
Now, if you just appointed me, right?
Now, you know, the electorate might not be ready for the medicine that I was going to have it swallow.
But obviously, if they elected me, I might have prepared him for the experience.
So that would be a different thing.
It would mean the nation was actually ready for the freedom.
But, you know, there is a lot of cost to a free society up front.
And we've got to dismantle the welfare.
And people have to be willing to take a risk.
People have to be willing not to have the government there to provide for them and to protect them from every mishap.
I mean, my grandparents, I had four grandparents, all came to the United States on their own.
Nobody forced them here.
They voluntarily came.
And when they came, there were no welfare caseworkers here to meet them.
There were no welfare programs.
There were no food stamps.
There was no minimum wage.
Employers were free to exploit them to their heart's content.
There was nothing.
But there was also no income tax.
There was no social security tax.
There was freedom.
My grandparents were poor.
All four of them were poor.
Yet they came to America because there was no government.
So if they wanted big government programs, they would have stayed in Europe.
They came to America because they wanted a solution to their poverty and they wanted the freedom to work their way out of it.
And that's what American provided.
It provided poor people hope because it provided them with freedom.
And that's what we need.
Now, my grandparents could have failed, but they were willing to take a risk.
And the ones that weren't willing to take a risk stayed in Europe.
That's why we got so many hard-working industrial people, because the people that came here were motivated.
They were the doers.
They had something going for them.
They wanted to make something of their lives, and they weren't afraid to risk traveling across the Atlantic in horrible accommodations.
And in many cases, they didn't have any friends or family members.
Maybe some of them got here because some of the family members had come here earlier and told them how great it was.
But what about the ones that came first?
They didn't know anybody.
A lot of them didn't even speak the language when they landed on Ellis Island.
So that takes a lot.
There's a certain type of person that's willing to take that kind of risk, try to make something in this world.
So they were innovative.
They were hardworking.
They were intelligent.
And they built this country.
But what built it up was the freedom.
Because those people were in Europe.
Why didn't they succeed in Europe?
Because there was enough freedom there.
They had to come here in order to succeed because we didn't have the barriers in their way.
So what I would want to do is recreate that America.
And we have to dismantle all the government that has been created since then.
No more of these agencies, no more departments, no more income tax.
We've got to shrink the government back down to where it's no more than 5% of the GDP, all levels, state, federal, and local.
Right now it's, what was it, 40% of the economy?
We've got to take an axe to And it also means we have to be honest with people about the ability to make good on all these commitments that politicians have, you know, have promised to get elected over the decades.
Social Security, Medicare, the country is broke.
We cannot afford to tax the young generation of Americans to pay for the promises that were made to get the votes of their parents and their grandparents.
We just can't do it.
We've got to start over.
And, you know, I feel sorry for the people who entrusted their money with Bernie Madoff I feel sorry for the people who entrusted their money to the U.S. government.
But that doesn't mean that we're going to rob people.
I'm not going to go steal from some people because other people got conned.
We just need to fess up to the truth and we need to have a clean slate.
We need to move forward and go back to real free market capitalism, limited government, sound money.
And to the extent that I could help accomplish any of that, I mean, that'd be great.
But unfortunately, My name isn't going to be on that ballot, and not enough people will be able to write my name in.
Well, and it is tragic the degree to which people are expecting everyone else to shore up their mistakes and their lack of knowledge.
It's also tragic the degree to which this government interference has eroded a sense of community.
I mean, when you came over as an immigrant, there was strong sense of community.
People would really help you out.
And also, of course, people don't remember what it was like In the world of economics and the free market before a third of Americans needed a government license or some sort of permission slip to even have a job.
I mean, that's just become ridiculous.
Okay, last point, last question.
And I just want to remind people, of course, Schiffgold, S-C-H-I-F-Fgold.com, Europack, E-U-R-O-Pack.com is where you go to get more of Peter's wisdom and insights and where you can buy gold and do business with him.
I've done this series called There Will Be No Economic Recovery and prepare yourself accordingly.
And the most common comment that I get in response to those videos is, okay, I'm terrified.
And now what?
What do I do?
And I know we've talked about this before, but I really feel it's something we can't reiterate too often.
What is your advice to people as a whole to prepare themselves?
Stephan, there is a real crisis coming.
And unfortunately, I think it's going to take the form of a dollar crisis.
I think that is the way this thing ends.
I don't think our politicians are going to have the integrity to admit the truth and default on commitments that have been made.
I think they're going to try to pay off all their obligations, and they're going to print money to do it.
The Fed is going to cooperate with the government, as they always have, and they're going to create a lot of money, and they're going to call it Quantitative easing or whatever they want, but it's going to result in a huge decline in the value of the dollar.
And so people need to protect themselves From that.
And the way you do that is one way is to own gold.
You can own physical gold.
Shift Gold is my gold company.
You can buy gold.
You can hang on to it.
Gold and silver, real money.
And it's important that people who believe in limited government, who understand these problems, it's important that they don't go broke.
Right?
They don't go broke.
We want to make sure that the people that understand the real source of the problems have enough wealth to help finance the solutions.
So one way is through owning physical precious metals.
The other way is through investing internationally, which is what I do at Euro-Pacific Capital.
I help my clients invest in...
Stocks and bonds around the world in countries that aren't as screwed up.
Countries like Singapore or Switzerland or New Zealand.
There's a handful of countries that I think fundamentally are in much better shape.
And as it turns out, their currencies have also fallen recently as everybody has been preparing for a rate hike, which isn't going to happen.
And so as a result of that, I think their markets are on sale.
So it's a great time for Americans to be buying assets around the world in the true safe havens.
Fantastic.
All right.
Well, thanks, of course, Peter.
Always an enjoyable, enlightening, and engaging conversations.
I'm going to release you back to the mainstream media to hopefully bark some volleys of truth at them.
And thanks so much, as always, for your time.
And I just remind people to go to europac.com and shiftgold.com to check out what Peter and his excellent crew have to offer.
