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March 18, 2017 - Freedomain Radio - Stefan Molyneux
52:00
3623 President Trump: U.S. Economic Fallout | Peter Schiff and Stefan Molyneux
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Hi, everybody.
Stefan Molyneux, Freedom Aid Radio, back with our good friend and new Gandalf-bearded Peter Schiff.
He is an economist, financial broker, dealer, author, frequent guest on national news, the host of the most excellent Peter Schiff Show podcast, which we'll put a link to below.
below.
You should subscribe to that.
And the CEO of Euro Pacific Capital and the chairman of Schiff Gold.
Please check out his websites at SchiffGold.com, SchiffRadio.com, and Europac.
That's E-U-R-O-P-A-C.com.
Peter, great to have you back.
How are you doing?
I'm doing good.
I'm tanned and bearded and living in Puerto Rico, enjoying the sun and the favorable tax climate.
I just, I can't hear this kind of stuff when Canada's in the middle of its winter melt and everything's turned into a frozen World War I trench here.
But it's good to see you, Tan.
Now, let's start off with a bit of, I want to get into the details of what the Fed's up to these days.
But I thought it might be worthwhile, particularly for younger listeners, who've kind of grown up in this anemic economic situation that has kind of overtaken the U.S. since about the year 2008.
And people don't really understand what it used to be like, you know, the sort of old economy Steve meme that's sort of floating around, that in the past, it used to get pretty good growth and pretty regular growth that would go on.
And that all kind of changed around the year 2000, where the growth went down considerably.
And, you know, if growth rates had stayed at pre-2000 levels, sort of post-Second World War to 2000 levels...
for the last decade and a half, we'd have an economy 20% bigger, and income's 20% bigger.
Can you help people sort of understand what has changed from a big picture standpoint?
Because the minutia sometimes doesn't get us back to the big pointillism view of what we need to see. - Well, two big things have happened, The government has gotten a lot bigger and our debts have gotten a lot larger.
You know, when we had faster economic growth, it was because our economy was more free than controlled, right?
If the economy were completely free market based and it was totally laissez-faire, we would have, you know, the most amount of growth.
But as you water down the free market capitalism with socialist policies, taxes, regulations, subsidies, and all the way the government distorts the economy, You slow down the potential growth of the economy.
But also, as the governments were running these enormous deficits, all of the borrowing begins to weigh down economic growth because now we have all this debt.
We consume beyond our means.
We basically accelerated consumption forward.
We sacrificed our future to indulge our present.
And of course, today's present is yesterday's future.
And so we're catching up with our profligacy.
And so we have all this debt and all this government like an albatross around the neck of the economy.
And that's why all the economic growth is gone.
And if Donald Trump really wanted to make America great again, and unfortunately, nothing that he's actually about to do is going to accomplish that.
But to the extent that we wanted to make America great again, we have to make government small again.
And we have to take care of the debt.
And I think what we need is restructuring, similar to the one that's going on in Puerto Rico.
We can't repay the debt.
We can't grow our way out of it.
We just have to acknowledge that it's unpayable.
And we have to figure out a deal with our creditors that makes sense.
But we need to shrink the debt.
We need to shrink the government and unleash free market capitalism.
That's what we need to do.
The growth has been so terrible.
What they call this recovery has been so anemic compared to prior recovery situations.
And to me, if you are massively adding to your debt while claiming economic growth, you're really speaking out of both sides of your mouth.
You cannot have both.
You cannot have both a claim of an economic recovery while at the same time piling on massive amounts of debt into your economy.
And there's just not enough people who are basically talking about this equation.
Well, the problem with this recovery and the reason that it's so weak is it's actually a recession masquerading as a recovery.
I don't believe that we've recovered at all.
I believe that the recovery was actually worse Than the recession that we supposedly recovered from.
I think that's what propelled Donald Trump into office.
But if you look beneath some of these doctored up government statistics, and they're not doctored up because there's a conspiracy.
I don't believe that people get the numbers and then they go into some back room and then they change them.
I just believe the methodology for computing them in the first place was deliberately designed to give a deceptive result.
And so it's not dishonesty.
It's just that the system was rigged from the start by the government, which created this system.
And it makes sense.
The government wants the economy to appear better than it is.
So since they're in charge of figuring out how we calculate the numbers, they're going to figure it out in a way That would yield a good result.
Like if the mafia was in charge of calculating crime statistics, if they were going to come up with a formula, and if they knew the result was going to mean, well, if there was more crime, they would have more cops, and if there was less crime, they wouldn't need as many, obviously the mafia would want to have a methodology that told everybody there's no crime, there's nothing to worry about.
So the numbers are not honest.
And that is why the economy is actually so weak.
And if you look at some of the other numbers that the government can't fudge, look what's happening to incomes, look what's happening to real retail sales.
I mean, you have a lot of American retailers are on the verge of bankruptcy now.
And it's not because they're being put out of business by the onliners.
I mean, online sales have been here for a long time, and they've been growing steadily.
But all of a sudden, you have department store sales collapsing.
And look at our inflation is now at a five-year high, our trade deficit at a five-year high.
None of this looks like an economy that's recovering.
It looks like an economy that's still in recession.
Well, let's talk a little bit about this because I was reading that malls are slated, like a third of malls may be slated to close over the next little while.
We have commercial real estate, significant under demand.
There seem to be a lot of indications that the economy is going to hit a particularly rough patch over the next little while.
What are some of those indications that you see if that's a reasonable way to approach the topic?
Well, I mean, first of all, our labor force has been decimated.
Many able-bodied Americans that used to work no longer work, so they simply live off the productivity of everybody else who's still employed.
But unfortunately, a lot of Americans who are employed are not really employed in any kind of productive capacity.
Meanwhile, a lot of the service sector jobs are in the process of being replaced or just eliminated outright because minimum wage hikes across the country are pricing a lot of low-skilled workers out of a job.
And so this is going to further compound the problem where fewer people actually work and more people are drawing government benefits.
You have all these people on welfare, on food stamps, on disability.
And now you've got the Obamacare entitlement that may be replaced with the Trumpcare entitlement.
So this is all weighing down The economy.
But you talk about the commercial real estate.
What's been propping up the commercial real estate market has been low interest rates.
Well, the Fed just raised interest rates yet again.
And so those props are being gradually removed.
And eventually, the bottom's going to drop out of that market.
And it's going to be a perfect storm of destruction because not only are interest rates going to rise, which is going to Make it more expensive for the landlords to service the debt that they have on all this commercial property.
But their tenants are going to stop paying their rents.
A lot of them are going to go out of business.
And a lot of these malls, when your big anchor tenant It shuts down.
A lot of the leases, a lot of the smaller stores have clauses in their leases where their rent goes down if you lose the big anchor that is drawing all the crowds to the mall.
These things could just completely collapse.
The whole US economy is built on this asset bubble.
That is a byproduct of artificially low interest rates.
And even though interest rates are still very, very low, they're not as low as they were.
And so just like any kind of drug addict, I mean, if you're a heroin addict and you're used to a certain amount of heroin, If you get less heroin, that's going to be a problem for you.
Even though you still have some, it's not enough because your body has already built up a tolerance and anticipates a certain amount.
And so we need 0% rates.
And to the extent that they're higher than 0, because they were 0 for so long, even 1% could seem very, very high when you're used to 0.
Well, this is the thing that people, I think, don't understand, particularly younger people, is that...
Obama's presidency was largely a subsidized presidency.
I mean, of course, on two levels, right?
You got three rounds of quantitative easing, which used to be just called counterfeiting, but you got three rounds of that.
You've got 0% interest rates throughout almost all of his presidency, so heavily subsidized and heavily controlled to make things look better than they are, which, again, can't go on forever.
I mean, you can't keep interest rates that low forever.
Whether they're going to go for a QE4 if they can't get the economy jump started, I guess, remains an open question.
I think the Fed has said that they will if they see negative indications, which seem to be coming.
But this last eight years has been very surreal economically.
Well, first of all, yes.
I mean, the Fed is ready to do QE4. They're ready to cut rates.
They're just waiting until the economy is actually in recession, at least officially, where the government statistics reveal that the recession is here.
But right now, I think the Fed is actively engaged in its own propaganda effort to try to convince everybody that the economy is stronger than it is.
That is why they're raising interest rates, even though the economic growth forecasts are collapsing.
Because if you recall, the Fed always said that rate hikes would be contingent on their economic forecasts holding up.
If the economy evolved the way they believed, then they would potentially raise rates.
Well, the economy has not evolved the way they thought.
It's been much weaker.
See, that's why I thought the Fed wasn't going to raise rates, because I actually believed what the Fed was saying, that if the economy was very weak, that they wouldn't raise rates.
Yet the economy is much weaker than they thought, and they're raising rates anyway.
So the only reason for that is because they're afraid not to raise rates because they don't want to acknowledge what should be obvious that they were wrong.
And I think the other reason that the Fed has courage to raise rates is because of the Trump-inspired stock market rally.
That's letting the Fed raise rates because the optimism surrounding Trump Is actually trumping the negatives of the rate hikes, at least for now.
But ultimately, I think this is a lot of mispriced optimism because I don't believe that we're going to get the type of economic stimulus that is embedded in stock prices.
I don't think corporations are going to see a big increase in their earnings.
I think it's not even going to be a buy the rumor, sell the fact when it comes to Trump's reforms.
I think it's going to be a buy the rumor and then sell because the rumor turned out to be false.
And so I think ultimately, the stock market's going to fall.
So as the stock market falls and as the economy continues to weaken, the Fed will eventually Be forced to, you know, reapply the stimulus.
Not that it works, but because that's all they can do.
But they will blame it on some external factor.
They will say it had to do with something that nobody could have forecast, that everything they were doing in the past was right, and that none of their policies actually contributed to the problem.
But now they have a solution, which is to do exactly what they did before, which will make all the problems that much worse.
Well, and there is, of course, significant elements within the government that I believe are working actively to sabotage what President Trump is going to try and do.
I mean, like last fall, the US Treasury amassed a sort of war chest of almost half a trillion dollars, right?
They just messed around with a bunch of bookkeeping.
I think the prospects of having Trump be the scapegoat are very, you know, intoxicating for a lot of people.
A huge bubble was inflated under Bill Clinton.
And Bill Clinton got credit for the roaring 90s and Nasdaq 5000 and everything that was going on.
But the real maestro was Greenspan.
He was the one that was fueling that bubble.
And Clinton just got to take credit for it.
If it wasn't for his indiscretions and stuff with Monica Lewinsky, he would have gone out even far more popular than he was.
But the problem was George Bush.
George Bush inherited the bubble that was inflated under Bill Clinton.
And when it burst, it was Bush that got the blame.
And the problem was that when the bubble initially burst, right?
Because this dot-com bubble burst early in his presidency, he made the mistake Instead of allowing the bubble to fully deflate and allowing the recession to be much worse and blaming it on Clinton and saying, look, this is the payback from eight years of false prosperity, right?
And saying, look, now we're going to take our medicine and have a real recovery.
He tried to stimulate the economy with tax cuts and more government spending, and the Fed came in with some rate cuts, and we were able to cut that recession short and blow up an even bigger bubble.
But then by the time that one burst in 2008, we couldn't blame it on Clinton anymore.
All the blame was on Bush, and that's what set the stage for Obama.
So we had Obama.
We had eight years of Obama because everybody was able to blame the financial crisis that happened in 08 on Bush when if the Fed had done nothing and if we had just taken our medicine in 01, we could have blamed it on Clinton and maybe we would have solved the problems under Bush.
Now Trump is in an even worse situation because the bubble that he has inherited I mean, the sooner the better so that it'll be harder to blame it on Trump.
But, you know, Trump in a way is his own worst enemy here because instead of continuing What he said as a candidate, talking about the stock market as a bubble and criticizing phony government statistics, he has now embraced the stock market and embraced those same statistics.
He now tweets positively every time the Dow makes a new high, and he's celebrating his government unemployment number.
He's basically putting his name on this economy.
He's taking ownership of the stock market bubble.
When it bursts, they may be able to blame him.
The longer the Fed is able to postpone the collapse with more cheap money, the further into the Trump presidency the ultimate collapse happens, the easier it will be to blame the collapse on Trump.
And in fact, the Republicans, if they actually repeal Obamacare and replace it with their own monstrosity that they've got, Then, when that whole thing falls apart, they're going to let Obama off the hook, they're going to let the Democrats off the hook, and they're going to own the collapse, because neither plan works.
Obamacare doesn't work, and Trumpcare doesn't work.
But if the Republicans replace Obama's failed plan with their own, then guess who gets blamed when the whole thing falls apart?
Well, I would argue, though, that I would say that Trump is probably waiting till he gets his guy in on the Supreme Court, and he may be waiting until he can get new leadership in the Fed, because he used to be very critical of the Fed, which is one of the things I liked about him.
He's kind of got radio silence since he became president, and I think it's because he's waiting to get new leadership.
Into the Fed so that he can avoid this kind of stuff because they're doing quite a bit of undermining, right?
So there's half trillion dollars.
They were going to spend it, I think, to keep President Hillary, who they were anticipating getting in last November, they were going to keep her floating up with all of this money.
And since Trump got in, they've been burning through like $90 billion a month.
And now the federal government has like a month's worth of walking around money left.
The federal government in America has less money in its accounts than Google.
Yeah, but unfortunately, you know, Stefan, you know, we're running up against the newly imposed $20 trillion debt ceiling, and unfortunately, it appears that the Republicans are willing to raise it without even the pretense of a fight.
At least, you know, they tried to hold Obama's feet to the fire by threatening not to raise the debt ceiling unless they got some cuts in government spending.
But apparently now that they have a Republican in the White House, it's the sky's the limit.
They don't want to impose any restraint on government spending.
And, you know, the media likes to portray this as if the responsible thing to do is raise the debt ceiling.
When that is the irresponsible thing to do, the responsible thing to do is not raise the debt ceiling and actually stop taking on additional debt.
You know, they keep saying that our creditors want to see us raise the debt ceiling because that will somehow assure them that everything is okay.
It's the opposite.
You know, if you've loaned a lot of money to somebody, the last thing you want is the person who owes you money to go deeper into debt because now it makes it less likely that they could repay you.
So I think what our creditors would prefer to see is an end to the debt.
That would at least make it more likely that we could pay.
They keep saying that we have to raise the debt ceiling because America pays its bills, which is a lie.
The reason that they want to raise the debt ceiling is because we don't pay our bills, and they want to keep not paying the bills.
By raising the debt ceiling, you go deeper into debt.
Paying your bills means not going deeper into debt.
But unfortunately, America doesn't want to pay its bills, and most likely, it can't pay its bills.
That's why it raises the debt ceiling.
But it's not just domestically as well.
I sort of think around the world, the number of people who are dependent on the value of the U.S. dollar, which I think would in the short run take a hit if America crushed the size of the state and had this fundamental reshuffling.
There are a lot of people whose balance books, their asset sheets and everything all hold a huge amount of imaginary value based on the value of their treasuries and the U.S. dollar.
And if there is interruptions in what the US can pay, if there are interruptions in what the US can borrow and print and generate, I think that there would be quite a house of cards that could come down around the world.
Well, absolutely.
It is a house of cards.
And the reason that Americans are able to live beyond our means, the reason we're able to enjoy these large trade deficits, and Trump has also got that wrong.
I mean, we're winning on trade in the short run in that we get more from the world than the world gets from us.
We get real products that make our lives better, and all we send them are IOUs.
So in the short run, America benefits from the foolishness of our trading partners.
But when our trading partners wake up and decide that they don't want to lose anymore, that they want to gain the benefit of a higher standard of living that comes with consuming rather than stockpiling US Treasuries, Then the dollar is going to collapse.
And you know, ironically, if we're actually dumb enough to pass that border adjusted tax, that will actually hasten the dollar's demise.
You have all these idiot economists that actually think that the border tax is going to mean the dollar is going to go way up.
And in fact, the dollar is going to go way down.
They have it backwards.
I mean, yes, it will result in a smaller trade deficit, but it's not going to make the trade deficit go away completely.
Foreigners will still have More than enough dollars to buy whatever we want to export.
But what is going to happen is foreigners will no longer have as much excess dollars to recycle into US treasuries, into mortgage-backed securities, into our stock and real estate markets.
And all those US asset markets are going to tank.
Interest rates are going to rise.
Americans are going to be hit with not only rising prices as a result of the VAT, but rising interest rates.
And then as the dollar sinks, it's just going to make prices that much higher.
It's going to hasten our move into recession, which means we get QE Four faster.
We get rate cuts faster, which puts even more pressure on the dollar.
So all this is going to unravel, right?
We have been living this artificial standard of living for a long time.
You know, there's a lot of chickens out there, but I think they're coming home to roost.
And I think they're coming home soon.
And I want to make sure that the blame is squarely on the central bankers and the central planners and on big government.
And it's somehow not laid on the feet of capitalism or the free market.
Sure.
Well, and this, I really want people to get educated in these basic principles.
It's always frustrated me, though.
It is perfectly inevitable, Peter, of course, that governments don't like to teach students about economics, which you could start teaching them in like junior high school and sort of, because one of the things that's a big challenge, of course, with Obamacare, and this is pre-Obamacare, it's one of the reasons why Obamacare was perceived to be necessary, is you cannot have an insurance situation where people aren't exposed to risk.
The whole point of insurance, of course, is risk.
You can't get fire insurance after your house is currently on fire.
And once the government, and this is long before Obamacare, once the government said you can't discriminate against people with pre-existing conditions, they put the final nail in the coffin of the remnants of the free market in health care in the U.S. because then people often just waited until they got sick and then applied for health care insurance, which cratered things in a catastrophic they put the final nail in the coffin of the remnants I mean, the government wants to redefine insurance as just free health care.
Because if you don't have to buy insurance when you're healthy, if you can just wait till you're sick and actually need it, then it's not insurance.
Right?
It's only auto insurance when you buy it before you have an accident, because you know you probably won't have an accident, but in the unlikely event that you do, the insurance policy is there.
If you could simply wait until you've already had the accident and you need the money, you've totaled your car, and it costs you $40,000 to buy a new one, obviously you're going to want to buy an insurance policy where you could just pay, you know, one premium for one month and then immediately put in a $40,000 claim, right?
But of course, if we could do that, there would be no auto insurance.
The only reason the auto insurance market exists is because they get to discriminate based on pre-existing conditions where the pre-existing condition is the accident.
So everybody has to buy the insurance when they don't need it so that the people who do need it can actually draw the money.
And the same thing happens with health care.
You cannot allow very sick people to go and buy health insurance after they get sick.
They have to buy it before they get sick when they don't need it.
But here is the government created problem.
It's the government that linked health insurance to employment.
If it wasn't for the government, nobody would get their health insurance from their employer.
Everybody would buy their health insurance just the way they buy their auto insurance.
The reason they get it from their employer is because the government created a preference For being paid through insurance.
Because if you're a worker and your boss gives you $5,000 of cash, you have to pay income taxes on that $5,000 at your marginal rate, which for a lot of people is 30%, 40%.
But if instead your employer gives you $5,000 worth of health insurance, That's free.
No tax at all.
So people would rather get the health insurance than the money.
And of course, to the extent that they can wrap all their medical care into their health insurance, that's another tax benefit.
So the government created this.
Now what happens is somebody loses their job and now they've lost their insurance.
And let's say they developed A condition while they were employed, right?
They were healthy when they got their job, and now while they're employed, they get some kind of condition, and now they get fired, and now they lose their health insurance.
And of course, how are they going to buy another policy?
Because who's going to cover somebody when it's a sure loser?
Because they're already sick.
So what the government should have done to solve this problem is simply de-link employment from insurance by changing the tax code.
Obviously, the best way to do it is just eliminate the income tax entirely.
So now you eliminate the distortion, and then everybody will just buy their own insurance, and the healthy people will buy it.
And if they get sick, they'll still have it because it won't be tied to their jobs.
But if they're not going to eliminate the income tax, The next best thing is to subject employer-provided health insurance to income taxes.
Now, then the tradeoff would be you lower the rates dramatically so that the rate is lower, but all your income is taxable.
You don't exclude the health insurance.
And then that would create the incentive to no longer get your insurance from your employer.
Now, actually, there is a Republican plan That does the next best thing.
And what it does is it allows the individual to take the tax credit or the tax deduction on his own return for the insurance he buys.
So it kind of levels the playing field.
And that will also, in a roundabout way, solve the problem.
And in fact, that plan, which is, I think, supported by Rand Paul and the Liberty Caucus, it actually does something for preexisting conditions.
It basically says, OK, If you screwed up and you don't have any insurance or you got fired and you lost your job, you have a two-year window.
You got two years to buy your insurance with your pre-existing conditions, and then the window is shut.
And now you're stuck, which that could work.
We'd have to eat the cost in the short run, but at least in the long run, people would now know that they have to buy insurance while they're healthy.
But under the current Obamacare Nobody's going to buy insurance while they're healthy because all they have to do is pay a small penalty for not buying it.
But under the Republican alternative, the incentives not to buy insurance are even greater because there's no penalty at all.
All that happens is if you ever get sick, The insurance is just going to be a little bit more expensive than it would have been had you bought it when you were healthy.
But the odds are you're not going to get sick.
Meanwhile, years and years can go by before you do get sick.
In the meantime, you pocket all the savings for not paying the insurance until you actually need it.
So the Republican plan actually, in many ways, is worse than the Democrat plan in that incentive.
And in fact, what it does do, it also creates incentive For people to buy insurance that they really don't need, that has massive deductibles or copays, so they can buy it very cheap, so they can pocket the difference between the tax credit and their insurance premium.
But then, of course, as soon as they get sick, they'll just cancel that policy and they'll buy one that is more generous when they actually need it.
But of course, the insurance companies won't be there, right?
Because if the Republican plan actually goes through, Eventually, there'll be no health insurance because nobody can profitably stay in business when the only people who buy the policies are the people who are sick and the people who are drawing the benefits.
If you don't have healthy people paying premiums and not putting in claims, the industry doesn't work, which maybe is the goal of the government anyway, is to destroy the entire industry so we can have single-payer socialized medicine.
Well, the Republicans seem all very tough on pushing back against government programs when they know that they can't achieve their pushback, right?
I mean, they're fine.
Oh, yeah, we'll repeal Obamacare.
They know Obamacare is going to veto whatever repeal comes along.
And so they keep pushing back against things.
But once they get into power, sometimes it can be a different story.
And this employer-provided health care, it's so funny.
And tragic, Peter, how far back in time this stuff goes.
This comes out of the Second World War when they put a price cap on salary increases.
You couldn't increase people's salaries.
So in order to attract better workers, the employers began to offer free health care or subsidized health care by the employer.
It goes back that far.
And if I were on the government side...
That was the origin of it.
But also what kept it going was the fact that it was tax-free.
Right.
It was tax-free to the employee, but it was still tax-deductible as an expense to the employer.
And why can't they work on the supply?
It created this massive incentive for people to pay for medical care using insurance, where previously they just paid for it out of pocket.
And so the result is the same thing you have in education, right?
Why are college tuition skyrocketing?
It's because of government subsidies.
The government pays for it with grants and guaranteed loans.
And so there's no longer any free market control on costs.
Costs are just skyrocketing.
I mean, any time the government gets involved in something, whether it's education or health care, it drives up the prices.
And then it tries to pretend that prices are going up because Things are better now.
We have better healthcare.
Look at computers and cell phones.
They get better every year, but they get cheaper every year.
Just because something gets better doesn't mean it's supposed to be more expensive.
In fact, part of the benefit of capitalism is not only does it improve the quality of stuff, but it reduces the cost of stuff.
And the reason that capitalism is not reducing the cost of education and the cost of healthcare is because the government is interfering and not letting it happen.
And so what we need is not more government, but less government.
Well, you could work on the supply side, of course.
You know, things like tort reform to take away some of these crazy malpractice suits.
You could work at reducing paperwork.
I mean, the amount of time that doctors spend on paperwork rather than actually dealing with patients is enormous.
You could recognize the inefficiencies that people on Medicare don't have better health outcomes than people with no insurance at all.
You could work on allowing more competition along state lines to help drive down those prices.
Yeah, well, you can also have competition internationally.
Why can't I buy an insurance policy from Switzerland or Japan?
I mean, we should have international competition, not just interstate competition.
But a lot of that paperwork is all the result of government, whether it's rules and regulations that cause all kinds of defensive medicine because doctors are afraid of getting sued or having their malpractice insurance go up, or because everybody pays for everything With insurance.
Look, whenever I go to the doctor, if I go to the dermatologist, I pay with insurance.
I mean, everything.
I don't pay cash for anything.
And that's wrong.
That's not the way it used to be.
People used to pay cash.
And when they used to pay cash, they used to know what things cost.
I never know what anything costs.
Every time I go to the doctor, all I know is my copay.
I have no idea what I'm actually being billed for anything that's being done to me.
And so if I don't care what the doctor is charging me, he's going to charge me as much as he possibly can.
The only time I know What something costs is if you're going to do a cosmetic procedure that's not covered by insurance.
If my wife is going to the doctor and she's getting a jubiderm injection or I forget some of these things, these fillers they put in, none of this is covered by insurance.
I got to pay out of pocket.
But you shop around for that.
You can call three or four doctors.
Hey, what do you charge for these injections?
And you know what you're going to pay.
Like iLASIK surgery, too.
That's something that insurance doesn't cover.
And the cost has been going down steadily ever since it was invented because people shop around, because they know what it's going to cost.
So for cosmetic things or for iLASIK, prices are going down and quality is going up.
But that's because you have market-based competition.
But in everything else, there is no competition.
Nobody cares.
And so nobody knows what it costs.
So we have to stop that.
People have to start paying for their medical care.
If you sprain your ankle and you go to the doctor, just pay for it.
But here's one of the big problems.
Back in the 1940s, 1950s, 1960s, People actually had money.
If you got into trouble, you had savings.
You could write a check and pay your medical expenses.
Now I read that half of Americans can't even write a $500 check.
They've got nothing.
They're broke.
They need somebody else to pay for their medical care because they have no money to pay for it themselves.
And the crazy thing is back in the 1950s, You only had one person working, right?
If you had a family, you had a mother and a father.
You had four kids.
Only the father collected a paycheck.
The mother didn't have a job.
Yet, if any of the kids or the mother got sick, the father could pay for it.
It was no big deal.
Now, you got two people married.
They barely have one kid if they can even afford that.
And if anybody gets sick, nobody has any money.
I mean, I guess they can put it on a charge card, but there's a limit to how much credit card debt you can carry.
Right.
Right.
No, it's...
And I think the other bubble that people don't talk about, we talk about healthcare and commercial real estate, we've mentioned this on the show before, but I want to circle back on it because I think it's going to be a big topic over the next couple of years with this crazy student loan bubble.
Well over, well over a trillion dollars.
And such a mismatch.
You know, my father, when he wanted to become a geologist, he got a company to pay for his doctorate.
And in return, he committed to work to that company for a He graduated.
So there's a match then between the skills demand and the skills supply.
Now the government's just firing money at everyone to get these ridiculous made-up degrees.
They graduate in debt.
They can't oppose any kind of system that's going on.
They're stuck in low-rent wages.
They become kind of like serfs to student loans in a lot of ways.
And this really is going out of focus with regards to market demand.
And I think that's something that people aren't understanding.
What might change with that?
Yeah, you know, this again, it's all politics because it's good politics to talk about education and we need more money for education as if more money equates to better education.
It doesn't, but it does equate to more money for the, you know, educational bureaucracy, the educational establishment, right?
Everybody talks about the military industrial complex.
What about the educational complex?
I mean, it's there.
There are a lot of people who benefit from all this government money flowing into education.
But the one people who don't benefit are the kids who are supposedly the beneficiaries of the education, because they don't get an education.
They just waste their formative years You know, in government schools, but they're not actually learning anything.
They're not learning marketable skills.
They're not increasing their human capital.
They're just biding time staying out of the workforce where they might otherwise get some real-life experience.
They might get some on-the-job training.
They might learn how to do something.
Instead, they're squandering their youth.
And by the time they get out with their worthless degrees, they have a pile of debt.
So not only did they not earn money during the years that they wasted in college, but they borrowed a bunch of money and now they graduate in debt.
And so now you have a lot of these young kids moving back in with their parents and they have no hope of ever getting out because they have no skills.
And even if they get a job, the job isn't enough to pay their income tax.
And their Social Security tax and repay their student loans.
So a lot of them just never work.
And that's really, if you look at the labor force participation rate, where participation is dropping the fastest is among people in their 20s and 30s.
And that's the opposite story that the Fed is telling when they're trying to claim that it's the retirement of the baby boom, when the baby boom is so broke that they're not retiring.
You got people in their 70s and their 80s that are still working because they can't afford to stop.
Meanwhile, their grandkids can't start.
Right.
One thing the Republicans have talked about that they won't touch is Social Security and Medicare and so on.
Now, just those two programs alone combined with interest on the national debt is going to consume 100% of federal outlays in just a couple of years.
What would you like to say to the Republicans with regards to looking at these giant entitlement programs and how they could be approached in a way that, you know, wouldn't end up with lynch mobs in the streets?
Look, we have to admit that these programs were mistakes from the beginning.
They are Ponzi schemes.
They do not work.
They amount to intergenerational theft.
And I feel sorry for people who believed government promises and who didn't save for their own retirement because they believed the government was going to do it for them.
Well, the government stole their money.
I feel sorry for people who trusted Bernie Madoff, but he was a crook and he stole their money.
Well, the US government You know, stole everybody's money.
It's not there anymore.
And I don't think it's right to enslave young people, right, force people in their 20s and 30s and 40s to pay taxes so that people in their 60s and 70s and 80s can receive benefits that they were promised but that can't be delivered.
Because when the people who are now in their 70s and 80s, when they were in their 20s and their 30s, the Social Security tax was tiny.
Right?
And now, it's enormous.
In fact, most young people pay higher Social Security taxes than they pay income taxes.
In fact, a lot of people who don't pay any income taxes at all, the only tax they pay is the payroll tax.
And it's a transfer of wealth from the young and the poor to the old and the rich.
And I think this has to be ended.
Now, you do have a transition problem.
How do you take care of the indigent?
Because there are now so many people that are so poor That they completely depend on Social Security.
And so I think we have to have a welfare system, a transition system to help take care of those people who are truly in need.
But we also have to make sure that this entitlement goes away and that younger people know that, look, save for your retirement, because you've got to do it on your own.
It's not that the government's going to do it for you.
You have to act responsibly and you have to do it on your own.
But there are a lot of people who didn't have the opportunity because they relied on this scam.
But there are a lot of older people who have a lot of assets, who have a lot of wealth, who should not be getting any Social Security at all.
It should end.
It should be means tested.
And not just based on your income, but based on your assets, right?
If you have millions of dollars of assets, start selling those assets before you start taxing younger poor people.
I mean, all we're doing is subsidizing the inheritance of rich kids by taxing poor kids, you know?
You got a lot of assets, start selling your assets if you don't have the income, and that's how you can finance your retirement, you know?
But don't try to retire on the back of a young kid who can barely afford to pay his own rent, right?
You've got these Senior citizens that are living in nice condos or houses that they own down in Florida, meanwhile the people paying the taxes can't even afford to move out of their parents' basements.
And people wonder why vampire movies are so popular.
And this thing too that people think that there's some sort of like I paid into the system.
There is no system.
The money that you gave was burned up the moment you handed it over.
Yeah, you paid into a Ponzi scheme.
That's the problem.
And I know reality, it's unfortunate.
But no politician wants to tell the truth, because there's a lot of older people who vote.
And they vote for whoever promises not to cut Social Security.
And a lot of the young people don't understand that these promises can't get met.
And of course, they're getting promise-free stuff, too.
You know, that was the popularity of Bernie Sanders, you know, free college and, you know, all sorts of free stuff.
So the government wants to give free stuff to everybody.
The problem is, who's going to pay for it?
I mean, they all said, well, it's the billionaires and millionaires who are going to pay for it.
They're not.
There's not enough of them.
And, of course, as we raise their taxes, then, you know, they're not going to generate the income that we're trying to tax.
I mean, that is the problem with taxes, right?
You discourage the behavior.
If you want to get all this revenue from the rich people and then you raise the taxes, the revenue disappears.
But so too do the activities that create the economic growth, that produce the products and create the jobs.
So you end up killing the goose that lays the golden egg.
But this is all Difficult politics.
I mean, Trump knew this.
That's why when Trump ran for office, he promised not to cut Social Security.
He did not want to touch that political third rail because he knew what would happen if he did.
But what I would like to see Donald Trump do is touch that rail now and be willing to sacrifice a second term to do the right thing in his first term.
That's why we need a non-politician in office.
See, I don't care what he does to get elected.
What's important is what he does now that he's been elected.
Because he can say the right thing because he's there.
And the right thing is, you know what?
We got to cut Social Security.
We got to cut Medicare.
Because if we don't, then all these little mini cuts that he's making in the State Department and the EPA, it's not going to amount to a hill of beans, right?
Because you're spitting in the ocean.
I mean, everything that he's not cutting is growing much faster than the stuff that he is.
Meanwhile, there's a lot of places where he's adding spending, like the military.
So none of this is consistent with making America great again.
So let's end up with some technicalities, which I think are important for the more, I guess, informed members of the audience.
So the dollar, U.S. dollar.
I think people have been waiting for the Fed to raise rates forever because they'd be, oh, as soon as there is a recovery, we're going to raise rates.
Oh, we're in a recovery.
And I think that that has added to the value of the dollar.
But Fed raises, I think, are smaller.
The rate raises are smaller than people expecting.
The real rates can be seen as declining.
And, you know, the Fed has said, if we hit any kind of recessionary stuff, we're going to cut rates, do quantitative easing, and so on.
Isn't that going to trigger a dump on the U.S. dollar and cause a fundamental economic restructuring?
Well, absolutely.
Markets tend to act on the anticipation of events.
They don't react to events as they happen or after they happen.
They anticipate those events, and they price them in before they happen.
And so the dollar rose for years based on the idea that, oh, the Fed's going to be raising rates, and that's going to be good for the dollar.
And so before the Fed actually got around to raising rates, the dollar had already risen by the full benefit of those higher rates.
It was priced into the market.
And that's where you get the expression, buy the rumor, sell the fact, which is often what happens.
And in fact, the minute the Fed started raising rates, that was when gold bottomed, and Gold has risen ever since the Fed started raising rates because gold sold off based on the anticipation of the rate hikes.
Now, the dollar, too, this dollar had been rising the entire time the Fed was talking about raising rates.
By the time the Fed raised rates, the dollar stopped rising.
And in fact, the dollar was lower Before Trump was elected than it was before the first rate hike.
So what caused the dollar to rally was not the rate hikes, but the anticipation of a more robust economy and fiscal stimulus under Trump.
And so that caused the dollar to rally, but the rally has not been substantial.
The dollar has only moved up marginally despite that rally and despite the fact that we've had more rate hikes.
But ultimately, the markets are going to start to anticipate the next round of rate cuts, the next round of quantitative easing.
Because ultimately, the only reason the Fed is raising rates is so that it can cut them again.
And we're overdue for a recession.
This is already one of the longest recoveries in history.
And it's the weakest recovery in history.
But it's about to end.
And so the markets are going to start to anticipate that.
And now the dollar is going to start to go down.
I'm anticipating the Fed changing its rhetoric and then eventually cutting rates and launching QE4. I think it's about to get killed.
I don't think it's just going to go down this time.
I think it's going down for the count.
The last time the dollar was collapsing under Bush, It was saved by the bell, right?
The dollar was at an all-time record low in 2008.
It had fallen for almost every year of the Bush presidency.
And then the financial crisis actually, and paradoxically, saved the dollar.
The dollar had a huge rally as the economy imploded.
But I don't think we're going to get that lucky this time.
Not that we're going to avoid an economic collapse.
We're going to have a larger one.
But I think instead of causing people to flee to the dollar, it's going to expedite the rush to get out of the dollar.
So I think the dollar decline is going to turn into a crisis at the end.
And so it's going to be a much bigger drop than the one that we had under Bush.
And the fact that the dollar has been sort of this international reserve currency for a lot of people has propped up its value for decades.
If people go another direction and find some other form of currency, basket of commodities, some gold-backed thing, some electronic, who knows, right?
They're not coming back.
You know, once you come up with an alternative, you very rarely remarry the woman you've divorced.
And if you do, you'll pretty much find out why.
But I think that...
Aspect of things, once it goes away, I really can't see a scenario, Peter, under which it would ever be restored as a reserve currency.
No, and I think that the dollar's demise may make it almost impossible for any other currency to fill that role.
I think what's more likely is we go back to gold as being the primary monetary reserve.
And a gold standard worked much better than the dollar standard.
And I don't really think that people will simply move seamlessly from the dollar to the euro or to the yen.
I mean, these currencies are also flawed.
So I think gold will fill that role.
People don't even have to use government money anymore.
I mean, that is the beauty of capitalism out of the free market.
I mean, what might end up happening as a result of the collapse of the dollar and this whole dollar monetary system is that people just don't use government money anymore.
They just go back to using gold.
Now, the reason that people used government money, other than the fact that government's accepted in payment of taxes, right?
But of course, you can always buy the currency to pay your taxes.
But the reason was convenience.
I mean, you couldn't write a check against your gold.
You couldn't use your gold to buy your groceries.
I mean, you could use your silver or your copper, right, because you carried the coins around.
But if we had to conduct all of our commerce with dimes and quarters, obviously, it would be very difficult.
And so having checking accounts, credit cards, the banks made commerce that much easier.
But now the internet, right?
You look at a company like Gold Money.
Right?
Which enables you to own gold but have it stored in a digital wallet where you can spend your gold as easily as you can spend your dollars or your euros, where you can earn gold.
You can invoice your customers in gold and be paid in gold.
As easily as you can be paid in dollars or euros, where you can get a debit card that you can use to access your gold as easy as you can access your dollars with your debit card, or eventually you can write a check against your gold holdings.
When people can opt out of government money and opt into free market money, I think they're going to do that all around the world.
I mean, just like a lot of people now are using Uber instead of a government cab where you're running under some government imposed monopoly.
You just go and hail an Uber or order up an Uber, where a lot of people started to use Federal Express instead of using the post office.
I think people all around the world will see that the government's version of money is a flawed product that does not work.
And more and more people will just realize, I don't even need to be part of the banking system.
I can have all the convenience of being in dollars or euros without any of the liabilities of being in a bank that might fail or a currency that's going to lose value due to inflation.
I can keep my savings in gold.
I can spend gold.
If I'm a consumer, I can earn gold.
If I'm a businessman, I can have my employer pay my wages in gold.
If I'm a landlord, I can accept rents in gold.
I mean, everybody can start conducting commerce in gold, and then the governments are out of business because the governments now lose their power over our monetary system.
So the ultimate Demise of the dollar could end up being a very good thing for the world to the extent that we wean ourselves from this government fiat system and embrace a real free market system where we have real money, honest money, not government phony money.
So just for my listeners who may not have heard the gold argument before, and I'm sure they hear it as something like, hey, let's go back in time.
Let's start using carrier pigeons and burning witches at the stake.
They don't really understand why the gold thing is important, and it does seem like going back to Roman money.
So help people to understand if you could, or if you would, Peter, why the gold argument is so important and what it means for what used to be called actual money.
Yeah.
Well, first of all, gold isn't going backward in time.
Gold is actually an advancement in money.
I think gold was progress.
And of course, they've had paper money for hundreds of years.
And every time it's been tried in the past, it's failed miserably.
I mean, you can look at some of the biggest examples of hyperinflations that have happened, whether it was in Germany or whether it was in France or whether it was in Argentina.
I mean, we've had horrible experiences Look, the first democracies were in ancient Greece, right?
And they failed so miserably that the founding fathers learned from history and they created America not to be a democracy, but to be a republic instead.
It was an advancement.
It was progress moving away from failed democracy toward a republic.
We went backwards.
When we went towards democracy and going to fiat money, paper money is not a step forward.
It's a step backwards because you don't learn anything from history.
You just repeat all the mistakes, all the things that failed.
Gold works and paper money does not.
It has never worked.
And this experiment in fiat money is not going to work any better than all the experiments that have failed in the past.
But the problem is people don't learn history in America.
I mean, yeah, they spend their time in school, but they learn revisionist history.
They learn what the government wants us to believe happened, not what actually happened.
Right.
Well, so I would strongly urge my listeners and anyone else who gets a hold of this to educate yourself about gold.
And anything that is limited, anything that can't be wished or willed into existence has value.
And that is a wide variety of alternative currencies to fiat currency.
But if you can type whatever you want into your own bank account, you basically end up with this kind of hyperinflation and collapse.
Yep, yep.
The real advancement, though, Stefan, is what gold money is doing to gold, making gold easier to transact in, making it so that you can buy a pack of chewing gum or a cup of coffee with gold.
You don't even need to use a penny.
You don't even need copper.
You can actually make tiny transactions using gold, and you can make them instantaneously anywhere in the world at no cost.
So the technology of the internet is going to enable a modern day gold standard to work so much better than the older gold standards.
And we don't even need the governments to coin the money.
We don't need them to take the gold and put it into some kind of official coin.
We can bypass the middleman, and we can just use our own money digitally, electronically.
So anybody who's listening to your program here, they're They should go to goldmoney.com and open up an account.
Buy yourself some gold.
It's only a half a percent over spot.
Buy yourself some gold.
Keep it in your account at Brinks.
And you get a free debit card.
And you can access your gold.
And you can now, you know, hopefully more and more merchants will begin to realize that they have the ability to accept payment directly in gold so that people won't have to use their debit cards.
They can pay directly in gold after all.
If you're a merchant and you can be paid in gold, why would you accept payment in anything else?
Gold is the best form of money.
Gold is the gold standard of money.
If you can get paid in gold, anybody who can get a contract, if I can do a long-term contract, I'm going to be paid over five years or 10 years.
Wouldn't I want to be paid in gold?
At least I know gold is going to have value 10 years from now.
What's the dollar going to be worth?
What's the euro going to be worth?
What's the yen going to be worth?
Who knows?
I would much rather have a future income stream Guaranteed in gold than any other paper currency.
Well said, well said.
Okay, so I want people to go to shiftgold.com.
Sign up for shiftradio.com.
You put your podcast on YouTube as well, so you can sign up and subscribe there.
And you can go to europac.com to get more of Peter's insights and follow his reasoning.
Very, very important stuff in these turbulent times, and I think more turbulence ahead is probably the prognosis.
As always, Peter, a great and enjoyable chat.
Thanks so much for your time today, and I'm sure we'll talk again soon.
Yes, my pleasure.
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