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Sept. 14, 2017 - Freedomain Radio - Stefan Molyneux
54:33
3825 $20 Trillion: U.S. Debt Crisis | Peter Schiff and Stefan Molyneux
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Hi everybody, Stefan Molyneux from Free Domain Radio back with a good friend, Peter Schiff, an economist, financial broker, dealer, author, frequent guest on national news, the host of the most excellent Peter Schiff Show podcast, the CEO of Euro Pacific Capital and the chairman of Schiff Gold.
You can check him out at Schiff Gold, that's S-C-H-I-F-F Gold, SchiffRadio.com and Europac.com.
Thanks, Peter, for taking the time today.
Well, my pleasure. So, shock of all shocks, they seem to keep raising the debt ceiling.
Now, this is a pretty abstract term for a lot of people.
I wonder if you could give us a brief history of how it started, what it's designed to accomplish, and why it just seems like a kid trying to reach for a helium balloon that's constantly out of reach.
Yeah, well, first of all, you know, they didn't actually raise it.
They extended this suspension.
See, the last time, they didn't even raise the ceiling.
People are too embarrassed to vote to raise it.
So, they just suspended it so that it really doesn't apply, and so we can run up as much debt as we want to up until the end of the suspension, which is now sometime in December.
During the time that they suspended it, of course, all of a sudden the debt shot up and now we're almost at $20.2 trillion because apparently there was a bunch of debt that they weren't even showing officially because technically they weren't allowed to have it.
So it's like they cooked the books for a while and then all of a sudden it shows up, right?
But now they're talking about eliminating the ceiling.
Donald Trump said he's got some kind of gentleman's agreement going on with the Democrats that, hey, let's just get rid of this debt ceiling so that we never have to deal with Uh, the fact that maybe it won't be lifted because the politicians have succeeded in making irresponsibility look responsible because every time there's a threat not to raise the debt ceiling, they label the people who don't want to raise it as you're reckless, you're irresponsible, you have to raise it.
I mean, America is always pays its bills.
You can't monkey around with our faith and credit.
The irony of it is We never pay our bills.
That's why we have all this debt.
If we were paying our bills, we wouldn't have to raise the debt ceiling because our bills would be paid.
We have to raise the debt ceiling so we can continue to not pay our bills, so we can take on debt instead of paying our bills.
And the whole idea that we're going to default If we can't borrow more money, we're going to default, is an admission that the whole thing is a Ponzi scheme.
It's like we need to raise the debt ceiling so we can keep the Ponzi scheme going, so we can borrow more money that we can never repay to pay off the people who have already loaned us money.
But if you want to go back to why we even have a debt ceiling, you know, why did Congress pass one, you got to go back about 100 years.
That's how long it's been here.
So the Federal Reserve was created by an act of Congress in 1913.
Prior to the Federal Reserve, there was no central bank, and all the currency was issued privately by banks, and it was all backed by gold.
That was the money we had.
Now, when the Federal Reserve came around, the Federal Reserve was created to be a national bank, and it was also going to issue a currency that was backed by gold, but it was going to be backed by other paper, other debts of other banks, commercial paper.
But the original Federal Reserve Act prohibited the Federal Reserve from buying or owning any obligations of the US government.
So they couldn't buy treasuries.
And that was by design because they didn't want the government to be able to borrow from the central bank.
They didn't want the central bank to work in concert with the government to make it easier for the government to go into debt.
And if they didn't do that, they never would have passed the Federal Reserve Act.
Nobody would have voted for it if it could lend money to the government.
But, you know, there's an old saying about the camel and the nose in the tent, right?
And so a few years after they created the Federal Reserve Act, the government got us into World War I. Which was a giant mistake, which I don't even want to get into, because had we never even got into World War I, there would have been no World War II. There would have been no Adolf Hitler.
But not that I'm saying it's our fault, but it was a big mistake to go into World War I. But the government did it, and then they quickly used the war to take advantage of the public to grab power that they couldn't do.
And so we got things like the estate tax and the gift tax that have never gone away.
Which is why I say we lost every war, because every time there's a war, we get new taxes, and then when the war is over, the taxes are permanent.
But one of the things that happened is that even though taxes went up during the First World War, and they did because the income tax came in in 1913 also, and the top rate was, I think, 6%.
And during the First World War, they jacked it up to like 70%.
So they really went up there.
But they needed even more money.
So they amended the Federal Reserve Act because we were at war.
And they amended it to say that the Federal Reserve could buy treasuries.
That way, the Federal Reserve could help finance the First World War.
But in order to do that, because there were many congressmen that didn't want to vote for that, because they were like, wait a minute, if we do this, We have really opened up a floodgate.
We've opened up a Pandora's box.
We have now allowed the government to borrow from its own central bank.
We want to have a limited government.
We want small government.
This potentially can make government much bigger.
So what they did is they said, okay, we will let the government borrow from the Federal Reserve, but we're going to limit how much the government can borrow with a debt ceiling.
So they passed the debt ceiling back then to make sure that the government didn't abuse The privilege that it was just given, that it could borrow to help finance this war, but we're going to put a ceiling so that we don't have too much debt.
Well, the mistake that they made was that having a ceiling that could be raised, because obviously the initial debt ceiling wasn't $20 trillion.
I'm not even sure what it was.
I mean, it was probably a couple of billion at most.
And so they've raised it every time we've gotten near it.
It really- it hasn't been a ceiling, but you have to believe that it has been some type of break, that had we had no ceiling at all, the debts would be much higher.
That is why it's so scary now.
They want to get rid of it. If we have 20 trillion in debt despite the ceiling, Imagine how much more debt we're going to have if we get rid of the ceiling altogether.
We don't even have a pretense of a ceiling, and we can just spend whatever we want, borrow, borrow, borrow, until we have a complete catastrophe.
But I don't see how that would happen, Peter, because if they say, we are not going to have a debt ceiling anymore, they're signaling to all of their lenders that they functionally have no interest.
They're never going to repay anything.
Now, isn't that going to dry up lenders?
And isn't that going to drop the value of the US dollar?
Are they going to substitute some Chinese gold-backed currency for the international reserve currency?
I mean, isn't that a clear signal that, you know, you have no interest whatsoever in paying anything?
How are they going to get lenders outside of the Fed after that?
Well, I mean, eventually, yes.
I mean, they could read the writing on the wall.
I mean, while we have a debt ceiling, we can pretend that there's some limit and there's some type of fiscal responsibility.
In fact, you know, when I ran for US Senate, my whole campaign, one of my stump speeches was send me to the Senate and I will do my best to make sure the debt ceiling is not raised.
Because, you know, a lot of people campaigned on a balanced budget amendment.
In fact, almost every Republican who wants for office says, I want a balanced budget.
Well, they do that because they know it's never gonna happen.
It's never even gonna come up for a vote.
But what Republicans could do if they wanted to, if they were actually serious, and of course, most of them are not.
I would have been. If they simply refuse to raise the debt ceiling, the budget has to balance that year.
That's it. The party's over.
So that's something that's doable.
That's what I wanted to do.
But if they get rid of the only tool that could possibly rein in the profligacy, then the sky's the limit on borrowing.
And then, if we're not going to have our own ceiling, then it's going to be up to our creditors, the lenders, to impose a ceiling.
Because, you know, we can borrow as much as we want so long as there's somebody that's willing to lend.
It takes two to tango.
We can't dance by ourselves.
We need a partner. And if our partners say, wait a minute, now you owe us $20 trillion or whatever it is, and now you just took away the debt ceiling, and we don't want to loan you anymore, at least not at these really low interest rates.
So we'll loan you some money, but give me 5%, give me 10%.
But we obviously can't afford to pay that.
We can barely afford to pay 1%.
If that's the case, we only have one dance partner, and that's the Fed.
That dance is going to rain money, right?
Then we destroy the dollar.
Then it's just, Katie, bar the door.
Everybody's going to be going. Then it's a monetary crisis.
It's going to make Hurricane Irma look like a sun shower.
This is going to be more than Category 5 financial storm, much bigger than 2008.
Well, isn't there some evidence that that lack of trust in the US dollar is already happening?
I mean, the dollar index is down 12% recently, which is, as you pointed out, the worst year for the dollar since 1985.
And that dollar depression lasted quite a long time.
So isn't there some evidence that people are waking up to the fact that the US has kind of given up on paying back its bills?
I mean, a little bit, but I mean, I think more and more is going to become evident.
I mean, that dollar bear market lasted 10 years from 85 to 95.
And then the dot-com bubble kind of inflated and then bought the dollar a new lease on life.
And then when that bubble popped, we had another six-year dollar bear market.
Dollar went to a record low.
Ironically, the financial crisis saved at that time.
But this time, I don't think there's going to be no saving by the bell.
I think this time, the dollar is going to be the crisis, and it's going to fall until it collapses.
And yes, more people are going to wake up to this reality.
You know, one of the reasons the dollar rallied for a few years is because people were deluded into believing that the Fed actually solved our problems.
They believed Ben Bernanke and all the other central bankers who were congratulating themselves for putting out the fire that they lit.
But the problem is they put it out with gasoline, so it's coming back.
It's not really out. But people thought everything was great.
We're going to normalize interest rates.
We're going to shrink our balance sheet.
Job well done. And the dollar was rising based on all this false optimism.
Well, people are going to find out that the Federal Reserve made all the problems worse.
That they're never going to come close to normalizing interest rates.
In fact, they're only back at 1% now despite the four or five rate hikes.
We're at 1%. The Fed hasn't shrunk its balance sheet by one nickel despite all the talk.
Meanwhile, we're about to go back into a recession.
It's long overdue.
Then what? The Fed's going to cut rates again, but they're starting from one.
They're going to do another round of QE, but they're starting with a $4.5 trillion balance sheet.
And when the markets wake up to this reality, and they realize that I was right from the beginning, that they checked us into a monetary roach motel, that there is no way out, that there is no end game, that it's QE forever, that it's zero or negative rates, the bottom is going to drop out of the dollar.
And people have better be protected.
I mean, that's why I've got my clients.
I've got their money invested around the world.
I've got stocks in currencies in countries that are relatively sound.
That's why I've been buying gold for people.
They see the problem, but they've got the wrong solution.
They bought all these cryptocurrencies.
I know they've gone off, so people think they're smart, but they just don't realize that other people are even more foolish than they were and who bought into these things.
You're not going to weather this storm in cryptocurrencies.
It's like people that went to Miami, then they went to Naples.
Naples wasn't the place to be.
These cryptocurrencies are like Naples.
Actually, they're not like Naples. They're like Barbuda.
They're like that island that got completely decimated.
In fact, these cryptocurrencies could collapse before the dollar.
Well, just because you and I have had our tangles on cryptocurrencies before, I just wanted to point out that Peter and I strongly disagree on this, but I always appreciate the robust pushback, but I strongly disagree with you on cryptocurrencies.
But let's talk about the natural disaster.
Sorry, you wanted to throw something in there?
Come on, let's do it. All right, go ahead.
Well, so these natural disasters that are occurring, you know, it's funny.
It's sort of like the termite thing.
Like the house looks strong until there's, you know, if there's a bunch of termites eating away at the foundations, that the house looks fine until there's a strong wind, right?
Or until something happens.
And the one thing that has troubled me is that the Fed over the last, well, you say over the last hundred years or so, but certainly over the last 10 years or so, It's sort of like, hey, I've got a toothache.
I'll just take heroin or I'll take morphine or I'll take painkillers.
And it's like, oh, look, my symptoms have gone away.
But the rot spreads.
And then by the time you do end up in the dentist's chair, you have a lot more problems than just one rotten tooth.
And that's sort of my concern that some of the natural disasters, the expense that is going to be racked up could be one of the things that reveals the weaknesses of the foundations.
Yeah, and we caught a break in that we didn't get a direct hit on Miami and that hurricane didn't move up the East Coast and go through all the expensive real estate That is there, right?
Because even though we had some damage on the west coast of Florida, it's not nearly as much real estate there, highly as developed as the other coast.
But you're right. I mean, there's an old expression, right?
You have to save for a rainy day.
Well, I mean, we get a lot of rain when you get a hurricane.
We have nothing saved.
All the money that Trump It wants to sprinkle down, right, on all the hurricane victims.
We don't have any of it.
We have to borrow that money.
Borrow it from who? I mean, maybe the Fed's going to do a QE program just to come up with hundreds of billions of dollars for hurricane aid.
And so this is just another straw on the camel's back.
And you're right about the termite analogy.
I think it's a very good analogy for our economy because superficially, right, if the termites eat the house to the paint, but you look at it, you don't know.
You know, the condition of that house, you don't realize how bad it is.
And there are a lot of people that superficially just look at the United States, and they see a lot of people spending money and buying things, and they think the economy is south.
But it's not. Beneath the surface, it's a disaster, and it's not going to take, you know, a hurricane-force wind to topple it at this point.
And so, you know, I think just the next recession is going to be all it takes, you know, whether these natural disasters are the catalyst.
I mean, you know, the catalyst for the 2001-2002 recession was September 11 terrorist attacks.
So that was a manmade disaster.
And so these are natural disasters.
But, you know, they could be the catalyst to finally tip us over the edge.
And then we have to come up with a new stimulus program.
And then that exposes all this.
And as I said, the dollar starts to fall.
It becomes the crisis.
Consumer prices are already rising.
And the weakening dollar is going to put more pressure on inflation.
The hurricane has taken out a lot of supply.
And if we have a lot more demand for construction, for raw materials, You know, you could really start to see prices going up.
And then what is the Fed going to do when inflation is well above 2%?
They can't do anything because if they raise rates, they collapse everything.
So then they expose the box they're in, which is they can talk tough about fighting inflation.
But if it ever rears its head, they have to back off and do nothing.
Then that exposes their impotence, and then it creates even a bigger loss of confidence, and people run out of the dollar.
I think they're going to run into gold.
They're going to go into other currencies, but they're going to go into gold as an ultimate safe haven and store value.
And, I mean, there are, of course, the natural disasters that are unpredictable, and then there are the inevitable mathematical disasters that are entirely predictable, right?
So you pointed out recently in a tweet, America paid out over $432 billion in interest in 2016.
It's on track to hit $460 billion in 2017.
That's interest! That's not to reduce the deficit.
That's not to pay off a single dime of the debt.
That's merely interest payments and the water is coming in way faster than it can be bailed out.
But that's less than we paid in interest in 1980 when the national debt was under a trillion.
So you can realize that The reason that the bill is so low, despite the mountain of debt being so high, is because the Fed has got interest rates so low.
If inflation picks up, if confidence goes down, and long-term interest rates ultimately rise, then imagine what happens to the cost.
That was why we had the collapse in the housing market.
One of the big reasons was the expiration of the teaser rate, so a lot of people bought Houses and they had an introductory mortgage where for the first couple of years the payment was really low and then after a couple of years the payment jacked up.
Well, the problem was people could afford the teaser rates.
They couldn't afford the higher payments.
Well, the same thing is going to happen.
We've got a teaser rate on the national debt.
Well, if the debt resets at a higher interest rate, we can no more afford to pay.
Then those subprime borrowers.
Now, of course, if we get the Fed to cooperate, then we don't need a real buyer.
The Fed could keep printing money, printing money, and loaning it back to the government at a low rate of interest.
But that's a banana republic.
I mean, when the markets figure this out, right, that's it.
Then we have- then the dollar's going to implode, and then it's a real crisis.
I mean, again, it'll make 2008 look like a Sunday school picnic.
So, there's the view from inside the bubble, which looks like a wonderful IMAX, the universe, it's distracting, everything looks great, there are people dancing, and then there's a view from outside the bubble, and you've pointed out recently, foreign stocks are outperforming US stocks, because everyone's so excited that the Dow is hitting new highs.
I think that there's been some decent stuff that's come out of the current administration, some relaxation or repeal of certain regulations and so on.
There's been some good stuff, but I don't think that's enough to drive the kind of economic growth that's being seen.
So, if you can help people to sort of understand how the bubble looks from outside the U.S., because you're not going to hear a lot about it from the mainstream media inside the U.S. Yeah, well, I mean, there are bubbles everywhere.
I mean, because central banks all around the world have kept interest rates too low.
And so whenever you do that, you distort the economy, you create allocations of resources that would not take place if interest rates were set by the markets.
We've got, sorry, just that you've got a bunch of European central banks with negative interest rates kicking around.
Mistakes are being made all around the world.
Assets are being misallocated all around the world because of the meddling of foreign government central banks.
But I just think that the damage is going to be particularly onerous in the United States.
And obviously, I'm an American, and most of my clients are American.
So I'm trying to do what I can to help Americans.
Now, there are a lot of countries We're, you know, the governments aren't doing this, you know, and you have sounder economies.
And a lot of these economies will benefit from a weakening dollar.
I mean, people don't understand the degree to which the dollar has been used globally as a currency.
A lot of countries borrow in dollars.
I mean, all of our debt is in dollars.
So our debt and our incomes are the same.
But you have a lot of countries where their debt is in dollars, even though they don't earn dollars.
You know, their governments can't print dollars.
So when the dollar goes up, that's hard for a lot of countries because it means their debt is higher.
It's harder to service it.
It's harder to repay it.
But as the dollar is going down, that is a gigantic stimulus for a lot of the world because it's like their debt is going away because they're earning their own currency, yet they're repaying dollars that are losing value.
So it's like a big reduction in your mortgage payment, your principal gets reduced.
So a weak dollar is a big boom For a lot of the world.
And also, if you think about all the global commodities that are priced in dollars, when the dollar is going up, that makes food more expensive for a lot of people.
That makes energy more expensive.
Well, the reverse, when the dollar is falling, those things become cheaper.
So this is a benefit Out to the rest of the world, because now they free up income to buy other things.
If food is cheaper, if gas is cheaper, well, now I have more money to do other things.
The world is going to benefit, but America is going to suffer.
People don't understand, because the reason that Americans are able to enjoy the standard of living that we have, despite the fact that it's been falling, is because we're able to export dollars and import all kinds of things that we didn't make.
But as the dollar really starts to fall, the price of those imports is going to go up dramatically.
That's why I used to joke, you know, that eventually going up to Walmart is going to be like going to Saks Fifth Avenue because the prices are going to be much higher.
People are going to be shocked. And we don't even need to have the Trump put on tariffs.
The price is going to go up without the tariffs.
And then a lot of the stuff that we make ourselves is going to be expensive because when the dollar plunges, we're going to start to export more.
So that means some of the products that used to be available to Americans are going to be exported and they're not going to be here anymore.
Or if you're going to want to convince the exporter not to send them abroad, you're going to have to pay more money because he can make more money.
So our whole standard of living is going to go down When we can no longer just print money.
Ironically, we are actually hastening the dollar's demise by using the dollar as a club, and we're bludgeoning everybody with it.
We're threatening everybody with sanctions.
If you don't do what we want, we are going to punish you by restricting your access to the US banking system.
Yes, you're using dollars, and we're going to restrict your access to the Fed.
You're not going to use the wire, the SWIFT system.
And countries are like, wait a minute.
Why are we giving America a weapon that they can use against us?
China, Russia.
They say, wait a minute. Why are we going to empower the United States?
Why are we going to give them this incredible gift of having the reserve currency if they're going to use it as a weapon?
So you know what? Let's disarm them.
Let's get away from the dollar.
Let's find ways to transact without the dollar.
And, you know, we're just basically putting nails in our own coffins.
Right. And of course, I think it has significant effects on foreign policy, America's influence in the world, if, you know, you keep threatening people this way.
And of course, you know, there's a bunch of dictators out there who are like, they look at what happened to Gaddafi, they look what happened to Saddam Hussein, and so on, just disarm and everything will be fine.
And so America's losing leverage militarily, it's losing leverage economically, and I think culturally, it's fairly dead that way as well.
Which, you know, I'm sort of half and half.
I know that world's policeman thing is very seductive, but I think that money is better spent at home and rather it's better left in the pockets of consumers and entrepreneurs and free market people to create jobs and improve the economy and so on.
So all of these things are going to end up better off for everyone in the long run, but the transition can be, well, it can be pretty rough as we know historically.
Oh, yeah. There's no precedent, really, for this, the scale of this problem, and how big it is, and how many countries are involved in it.
People are just going to get blindsided because people, they have a lot of faith in this system, and they've known it their entire lives.
Most people alive today have no history of ever Being on a gold standard, they've been using fiat currency, and the government's been able to borrow, and look, the debt's gone up to 20 trillion, and as far as everybody's concerned, it's fine.
Now, you can actually look beneath the surface and say, wait a minute, before the government started doing this, we went off the gold standard in 1971, but you go back to the 1960s, the beginning of that decade, married women didn't work.
Their husbands could afford to support them.
People didn't have debt.
People could afford to buy cars and pay cash.
People didn't have credit cards.
People saved to retirement.
In fact, when they retired, they no longer had a mortgage because they paid off their house.
So we used to have a higher standard of living.
And despite the fact that we've invented more things, which is something that's always going to happen, now people are struggling.
You know, a guy can't support his wife even if he has a master's degree.
In fact, his wife has got a master's degree, and they're both working, and they have no assets.
They both have student loans.
You know, they can't afford to have kids.
Or if they have a kid, maybe they have one.
You know, no one has big families anymore, right?
I mean, who could afford that? People get married later and they have tons of debt.
They have nothing saved. I mean, how many people didn't even have insurance in this hurricane because they can't afford it and because they assume the government's going to take care of them, so you got the moral hazard.
But, you know, the whole standard of living has really gone down.
And, you know, technology has been able to help us keep our heads above water.
But we haven't had the real collapse yet.
We haven't had what's coming.
I think we can have a dollar crisis, and it'll look more like Venezuela.
People experience a little bit of it when there's a hurricane, and we run out of food.
We run out of gasoline. But what happens when the dollar crashes, and we run out of all those things?
We import a lot of our food.
90% of our seafood is imported.
And even though we have a lot of farms, I mean, the farms need a lot of imported products.
They need energy to operate those machines.
The dollar crashes. We can't afford to buy.
And then what happens if the government, seeing prices really start to rise, they put on price control.
Well, then you're really out of luck.
I mean, so really, things are going to happen that have never been experienced in America.
Maybe they've been experienced in lesser countries, but not a country of our status.
It's funny, too, because people live on, so many people live on such a razor wire of income versus expenses.
I mean, the studies I've seen, it's like significant proportions of Americans are like, you know, one car repair bill away from just falling out of the middle class or even the lower middle class.
People just don't have the reserves.
They don't have the backup. So people have an inflated kind of income.
And of course, as you know, half of Americans' households are significantly or totally dependent on the government for, Yeah, you know, back before the government created this welfare state, you go back to, you know, as late as the 50s or 60s, and if a guy was married and had a few kids, assuming he lost his job, he had plenty of savings, right, to weather while he was looking for another job.
And You know, he could always get a part-time job while he was looking for a full-time job, and his wife, who didn't have a job, she could take a part-time job.
It's like you had somebody on the bench who could pitch in.
Sometimes women would take a secretarial job or something to help make ends meet, While the husband was looking for another real job.
So you had somebody come up the bench.
You had a lot of savings.
Today, if a guy loses his job, first of all, his wife is already working.
She can't get another job and they have no savings.
So they have nothing.
All they have is the ability to use their credit cards.
But a lot of people who have no savings are also in debt.
So what do you do? You lose your job and you're in debt.
Or if you have a natural disaster, something bad happens to your house, you've got no money.
Nobody saves anything.
And in fact, the government tries to encourage people not to save because anytime people start saving, they think that's a problem.
Oh, we've got to stimulate the economy.
The consumer's not spending enough.
He's saving too much. Quick, let's try to figure out a way to get people to go deeper into debt.
That's our whole economic philosophy.
More and more debt. Well, and of course, the government loves it when people spend in the here and now because that stimulates jobs and economic activity right now.
Governments think in terms of quarters, but of course, entrepreneurs have like their five-year plans, their seven-year plans and so on.
So when people are spending and they're draining money out of the banks, there's less money available for entrepreneurs to create new jobs, for upgrade, to become more efficient, to make the labor value of the employees richer and so on and so on.
This is the problem with politicians is they're always trying to stimulate things in the here and now rather than actually building the foundation for a solid and growing economy in the future.
That's because their horizon is the next election, right?
So there's always an election every two years.
So they only think short term.
It's what can we do to make things look as good as possible before the next election so I can get reelected.
But all of this is undermining the long term.
But they don't think long term because their terms are not long enough or they're not limited.
I mean, if we had term limits or something, then if they knew they had to leave, then they might be more inclined to actually do something good.
But a lot of these politicians want to spend their life there.
And so it's always getting from one election to the next.
And if there's a crisis, we'll deal with that after the election.
But in the meantime, how do we get to the next election?
So it's all about artificial stimulus.
It's all about boosting the economy.
Like in your example with the dentist, they never want to go to the dentist because they don't want to deal with, you know, the pain or they don't want to have to get a, you know.
So by the time they go there, all their teeth are rotten, you know.
And, you know, it's it.
It's totally. You need a complete You know, all artificial teeth installed.
I mean, you're done, right? And that's because nobody wants to tell the American public, you got a cavity.
It says, no, no, no, don't worry.
Just keep eating chocolates and everything is great.
Just suck on this face tube and everything will be fine.
Now, let's talk a little bit about something that shows up every single natural disaster.
And it's going to show up, of course, in the next one and the next one and the next one.
Price gouging! Oh no!
They're overcharging for water when there's no water around and so on.
And to me, it's like, well, I'd rather actually the prices be higher because that's going to draw people's attention in.
They're going to try and ship more water in.
It's going to drive the prices back down.
A spike in prices is the market's way of saying there's a huge demand and people are going to rush in to fill it and drive it back down.
And yet, it is considered to be the most evil thing to charge more than a buck for a bottle of water for people who are really thirsty in a natural disaster.
Yeah, you know, this is all this nonsense about appealing to people's economic ignorance, you know, like the minimum wage.
I mean, nobody should profit from the hurricane.
Why not? I mean, you know, it's like saying nobody should profit from people's being sick.
Oh, why not? I mean, I want somebody to get really rich curing cancer.
Wouldn't that be great if somebody could get rich finding a cure for cancer?
Nobody should be able to get rich because of people with cancer.
Okay, fine. Then no one's going to spend any time or money trying to cure it.
Well, we're going to, you know, let's say somebody spends $100 million finding a cure for cancer, which then saves how many tens or hundreds of billions of dollars a year for the entire economy.
I mean, everybody ends up better off when there's a strong profit incentive, but somehow it's gouging and it's like, well, why didn't you store up some water?
You live in a hurricane district.
I mean, it's a tax on people who don't plan, which reminds them to plan.
But you know what you could do?
If you are allowed to sell water for higher prices, more stores would stockpile it because they knew, hey, I'm going to have some extra water just in case there's a hurricane and I could charge more for it.
But if you can't do it, then why go to the added expense of storing it up?
That even happens, too. There's a lot of gas stations.
If they had their own generators, then they can get gas during a power outage.
But they're not allowed to charge more, so they're not going to make the investment in the generator or the extra storage if they can't charge a premium When there's short supply, so you don't get the supply.
Prices is a way to allocate resources and ration.
So let's say in a hurricane, And people want to run to the store and buy extra water.
Well, if the price of water doesn't go up, people will just, yeah, I mean, buy as much as I can carry out, even if I don't need it.
I mean, it doesn't go bad.
I'll just have it for the next hurricane.
But if you let the store raise the price, and maybe water is $10 a barrel bottle, all right, I'm not going to buy this expensive water now.
I'm just going to buy what I need.
That way, you don't run out.
And that way, Somebody else can get water instead of showing up to a sign, no water.
And then what ends up happening is the legitimate merchant can't charge more.
But now there's a black market.
Some guy's like, hey, come over here.
I got some water for you.
And they gouge it.
Because a lot of these stores, they lose a lot of other money during the hurricane.
I mean, let them make a little extra selling their products.
Because what if there's a bunch of damage?
They got to repay it. So let them make a little extra money selling the things.
Let everything be rationed so that people don't run out and people don't stock up and buy things.
This whole idea that we can't charge people more money is complete nonsense.
And worst case scenario, you know what a supermarket could do?
If at the end of the day, it raises its prices, doesn't run out of merchandise, and it doesn't have Tremendous losses.
He can take those extra profits and donate them to Hurricane Relief.
If they want to let the public image, hey, I didn't make any money.
I didn't profit off of this.
Look, we took all the money because it's better than just having a few people rush in and buy everything and then you run out of everything.
Well, and then those people will simply resell to other more needy people.
And anyway, so now let's talk a little bit about something that we've, well, you've certainly discussed before, Peter, and it's one of the bubbles that people don't see, which is higher education, like over a trillion dollars in student loans for some, I don't know, economically questionable job skills, such as I now hate capitalism.
I'm having trouble finding a job in the free market.
So, some of the diversion of, you know, precious capital from, say, manufacturing or entrepreneurship into these Marxist money pit fire sales of higher education, I think people don't really recognize how dangerous and difficult it is for the economy, not just in terms of the content of what's taught to the kids, but all of the opportunity costs of where else that capital and those job skills could have been created.
I mean, I think for most people, Going to college is probably the worst financial decision they could make because they are going to spend some of the formative years of their lives, 18, 19, 20, 21, 22, 23, where they can still live at home.
They don't have the big overhead.
They can afford to take a lower paying job because what's more important is getting the work experience, getting the skills, getting the connections, learning what they're good at, getting into the real world and working.
Instead, they spend those four, five, six years Getting drunk, going to parties, right?
And taking a bunch of worthless liberal arts courses.
And they get out and they know absolutely nothing.
In fact, in many cases, they've been brainwashed and they actually know less than when they got in because they learned a bunch of stuff that's all wrong.
Well, there's actually studies that show that people who've taken a year of economics end up scoring less well on general economics knowledge than those who've never been exposed to it because you at least have the common sense of the real world, but you get into the indoctrination mill of leftist economics and you come out not knowing your ass from a hole in the ground.
They wring all that common sense out of your head.
And so then, when you graduate though, now let's say you graduate, you're 23, 24 years old.
You don't know how to do anything.
You've never had a job. And now you have $50,000 to $100,000 in debt.
Now what are you going to do?
A lot of people don't, at that point, they just move back with their parents.
Like, I can't afford to work because I have to start paying these loans.
You certainly can't afford to go into business for yourself.
That's why entrepreneurship in America is the lowest it's ever been, because our young people have too much debt to go out and start a business.
You need savings to start a business.
And we're graduating all these kids with a bunch of debt.
Look, when my father, who recently passed away, but when my father went to college, he didn't have to borrow any money.
But his parents didn't have any money.
So how did he go to college?
He got a summer job.
And that's what all of his friends did.
There was the expression, I'm working my way through college.
And so you graduated college with no debt.
And it wasn't expensive.
And when my dad went to college, most people didn't go.
Most people finished high school and then they got a job.
It was like 10% of people in the 50s went to college or so.
It's pretty rare. Yeah, so when you went to college, you actually had a degree that was kind of rare.
It meant something. Oh, yeah, I'm a college man.
You went to college. Now it's like they give them out like chewing gum.
Everybody's got a college degree.
So now you've got to go get a master's degree.
You've got to get a PhD.
How much is that going to cost you?
You go rack up those bills.
We've got people graduating with $200,000 of student loans.
That's like a mortgage.
Well, and the opportunity costs, especially if you're going to go do a PhD, that can take you 10, 12, 14 years.
All of the opportunity costs of burning through money rather than earning money, it's really hard to justify.
Unless the PhD is going to get you to be chairman of the Fed, it's really tough to justify.
Most people, look, if I had a choice between hiring two people in most businesses, a kid that graduated high school and spent the last four or five years working and gaining some And I can actually see his work experience and what he's done and what he's learned.
I'd rather hire that guy than a kid who's never worked and who's got a philosophy degree.
I mean, what does that prove?
What does that show me? It doesn't show me anything, right?
I mean, so for most of that, look, if you want to be a doctor, you know, there are certain occupations where you've got to go to college, you know, and if you're a really smart kid and you've got, you know, straight A's and you've got 15, 1600s on your SATs and You know that, Kyle, there are certain things, but fine. But the vast majority of people, the C students, the B students, the guys who are going to junior college, community college, what the hell?
They're wasting their time. They're wasting their money.
They could be out in the real world.
And even if you get an internship and work for free, it's better than paying tuition to learn nothing.
Go to some company and say, hey, let me work for free.
What can I do? Let somebody see you.
Absorb what you can. You're like a sponge.
You're 18. Learn.
Some of the richest men, on my video, I talked about it on your show before, but on YouTube, if you go to Peter Schiff's college degree, is it worth it?
I go down Bourbon Street in New Orleans, and I talk to all the people working there who have college degrees, and all of them have menial jobs that they don't need degrees for.
On that video, I mentioned that the richest Americans that have ever lived, Rockefeller, Carnegie, what was the other one?
I forget the third one. You mean like a Robert Banner like Mellon or someone like that?
It wasn't Melvin, but the three richest Americans that have ever lived adjusted for inflation.
I mean, way richer than Bill Gates.
None of them went to college. I mean, some of them dropped out of elementary school.
I mean, none of them even finished high school.
And they became billionaires, multi-billionaires.
And they all started with minimum wage type jobs.
None of them inherited money.
Their children inherited money and their grandchildren.
But these guys that originally earned this money, They came from humble beginnings and they started in the mailroom and they worked their way up.
So you don't need to go to school.
And in fact, today, I think college is even less useful because you can use the internet to learn so much.
I mean, you can educate yourself.
You don't need to pay a college to educate you.
People say, oh, Peter, you're anti-education.
I'm not anti-education. I think people should learn.
What I'm against is these government-run schools that just steal your money and don't educate you.
They brainwash you. They teach you nonsense.
You know, they're more concerned about not offending anybody than actually educating people these days.
So educate yourself.
I mean, a lot of the founding fathers were self-educated men, and they were a lot better educated than people today who, you know, who've gone to college in the United States.
So I am very pro-education.
I'm just anti-government.
I don't want government doing it.
I mean, I'd like to get the government out of K through 12.
I like to let people go to private schools, get the government out of this business because they don't give a damn about the kids.
They run the schools for the benefit of the administrators, for the benefit of the teachers.
No one even cares about the kids because the kids are a captive audience.
They're a monopoly and they're not there to make a profit.
See, when people say, We don't want people making a profit on education.
Why not? We'll get better education.
Whenever somebody makes a profit, that means you get something better.
People wanting a profit, they have to do two things.
They have to give you a good product at a low price because they have to win your business over your competitor.
Government schools can give you a lousy product at a high price and they don't give a damn.
Well, and there's been a lot of studies that have shown that if you really want to figure out how well someone's going to perform in a job, a couple-hour IQ test is the most reliable thing that you can possibly get over the long run.
And of course, for most American businesses, it's either illegal to run an IQ test on potential employees, or it's strongly discouraged, or you might get sued.
And so basically, these big, giant educational institutions are now like these ridiculous multi-year IQ tests to try and replicate what a standard IQ test could give you in a couple of hours with no debt.
They're not even an IQ test.
I mean, because A, there's a lot of great inflation there and a lot of people cheat.
On their exams, and the exams, a lot of them are easy because the colleges just want to graduate everybody.
They don't want them all flunking out.
But yes, I mean, if you graduate at the top of your class from Harvard or Yale, yeah, you're probably pretty smart.
But from the majority of colleges, I mean, it's nothing.
And it's like we don't need Somebody to spend five or six years just to get accredited.
I mean, they could just have a basic skills exam, not even an IQ test.
They could just give you a test and say, how did you pass on that test as a screening?
I mean, it's a very expensive way to screen kids by saying, oh, I got a degree.
And plus, a lot of people could just make it up.
I mean, how many people, I mean, if you told your potential employer that you went to some college in Iowa or Nebraska, would they even check?
I mean, of course. I mean, if you say, yeah, I went to Yale.
Okay, did he really go to Yale? But I mean, so everybody goes to college.
What's the big deal? I mean, saying you went and actually went.
I mean, there's probably a lot of people who have said they went to college who didn't go.
And then, you know, what if somebody said, what if you have to be a college grad to get into a job, right?
And so you lie on your application.
You say, I went to college.
You really didn't, right? And let's say you're working there for a few years and you're doing a great job.
Are they really going to fire you because you pretended you were?
No, why would they care?
I mean, it's just college is about getting your first job, right?
Once you got your first job, your second job is not where did you go to college.
It's what are you doing now?
What was your last job?
So you only needed to get your first job.
Right? But, you know, if you start a lower down, I mean, there are a lot of people, let's say there's a college, they want a college degree for the job and it pays, you know, $35,000 a year.
So go apply for that job out of high school and say, you know what?
I'll do it for $15,000.
I'll do it for minimum wage.
How much worse can it be?
Look, here's my GPA. I got straight A's.
I took, you know, I could easily go to college if I wanted to, but I'd rather have this minimum wage job because I don't want to spend all this money on a college degree.
Give me a shot. You can get me cheaper.
And so there's a lot of ways for young kids.
I mean, these colleges always want to pretend that, well, if you don't go to college, you've thrown your life away, and they have these phony statistics about how much more money the college grads earn than the non-college grads.
Yeah, sure, but the people who go to college are not earning more money because they went to college.
It's faulty logic. If you look at the kids that go to college out of high school, they're the smarter kids, they're harder working, They're more ambitious.
They're more dedicated. That's why they earn more money, not because they wasted five, six years in college, but because of the other characteristics that they had That made them choose college.
Yeah, it's like me saying, well, if only somebody would cast me in a hair commercial, I have long flowing locks of lustrous hair.
It's like that's how, hey, draft me on the basketball team.
I'm sure I'll get a foot and a half taller.
No problem. So let's close off with an argument that recently I saw you being interviewed and you weren't allowed to finish the argument.
Almost drives me crazy because, you know, disagree, disagree, but at least here and out.
And the argument was, hey, Peter, What do you mean low taxes lead to economic growth?
Don't you remember in the 1950s, there were these massive income taxes and there was huge economic growth.
So let's crank up taxes on the rich and have a vibrant and flourishing economy.
Yeah, that's another example of faulty logic, right?
I mean, you can't just think that two things happen at the same time and the one cause the other.
You can't see, oh, we had strong economic growth in the 1950s, and we also had high taxes.
Therefore, it was the high taxes that caused that growth.
The reality of it is that America's economic might on a relative basis peaked in the 1950s, and it's been downhill from there.
The reason was because of the introduction of these taxes, because before the 1950s, very few Americans even paid income taxes.
It was the victory tax in the Civil- in the Second World War that Americans started paying taxes.
But we built this country without an income tax.
Those robber barons paid no income taxes, right?
We didn't pay any income taxes at all in the 19th century.
And not in the beginning of the 20th century.
And then it started in 1913, and then they started jacking it up.
But the average American didn't even pay any taxes at all until the Second World War.
So that was up until the mid-1940s.
So these high taxes were a new thing in the 1950s.
But America was already rich from all the years of low taxes.
But here's what started in the 1950s.
Americans started thinking about how to avoid taxes rather than how to make money.
That's when the Japanese and the Germans started to eat our lunch because we owned all the manufacturing businesses.
We made everything. Nobody would buy anything made in Germany or Japan, but what happened is in the 1950s and 1960s, while our businesses were trying to avoid taxes, they were trying to make money because they had much lower taxes than we did.
That was the beginning of the end.
That was when our standard of living started to go down.
People were trying to avoid these 70% taxes.
And I just want to point out that you saw that Germany and Japan, the enemies in World War II got really, really low taxes, and the winner of World War II got crushingly high taxes.
And that's what you don't call victory in a sane world.
Sorry, Peter, go ahead. Yes, they got freedom and low taxes, and we basically got big government.
Now, of course, some of the losers, like East Germany, They got stuck with the Soviet system.
They didn't get the benefit of the low taxes that the West Germans had or the Japanese had.
They were able to get out of a gigantic hole, but they eventually passed us.
By the 1980s, they dominated.
To say, oh, these high taxes were good, that's what destroyed our economy.
What built our economy was no taxes, low taxes.
So that's what we need to go back to.
If we want to have vibrant economic growth, if we want to get out of this hole, we need to slash taxes.
But in order to do that, we need to slash government spending.
I mean, you hear Donald Trump.
He's out today. He's talking about, I want tax cuts for the middle class.
We can't afford tax cuts for the middle class.
If we don't cut government spending, we need to raise taxes on the middle class.
But no one wants to say that.
So if we really want to reduce the burden on the middle class, and I'm all for that, but I want to reduce the burden on everybody.
I don't want class warfare.
Let's get rid of the income tax or at least have a flat tax.
But if we want lower taxes, we need smaller government.
So what are we going to cut?
What programs are we going to get rid of?
Right? How are we going to afford this?
Because if we just borrow the difference, if we just have bigger government but pay for it with debt, that's worse than paying for it with taxes.
That's going to be even more expensive.
Well, it's so frustrating as well because thinking of sort of the magic White House chair or whatever you could do is so frustrating to say, okay, I'm going to lay off all of these government employees.
Well, is that going to save you money?
I'm not sure because then they go on unemployment insurance, they go on disability, and you're just paying through a different mechanism.
So, I think it's really, really tough to get any kind of short-term savings out of government.
I mean, you could sell off a bunch of federal land and buildings, and I think that would help and also transfer them to more productive uses.
But it's really tough to get short-term savings in government because there are all of these support mechanisms for people who lose their jobs.
Well, there's probably a lot of government workers who are getting paid $100,000 a year, $150,000 a year that we don't need, and they wouldn't collect that much in unemployment.
So we'd still save some money if we got rid of a lot of government workers.
But, you know, we have to cut government pensions.
For workers who are retired and collecting pensions, we don't have the money to pay it.
We've got to make cuts to current entitlements.
People who are getting Social Security checks, you know, have to be told that they're going to get smaller checks or no checks at all.
So, you know, we can means test that, so at least that if we're going to take away someone's Social Security benefit, you know, they're not going to starve.
You know, but we've got to cut back on government spending.
We've got to make government smaller, not bigger.
You know, we need to cut back on the military.
But what does Donald Trump want to do?
He wants to spend more on the military.
He wants to spend more on infrastructure.
He wants to spend more on entitlements.
So how can you spend more on everything and then cut taxes when we already have deficits?
We're already not taxing enough for the money we're spending right now.
So that means that either taxes are too low or spending is too high.
But Trump wants to just let spending keep growing and then cut taxes.
That's not going to work. That's just going to increase the problem.
Well, he never did campaign as a sort of libertarian, small government, cut government kind of thing.
He thought, well, we can improve government.
I think the theory, and you've probably heard this before, but I think the theory is something like this.
If you reduce regulations, if you get out of the way of businesses creating jobs and so on, then you can transition people from dependence on the state to the...
You know, creation of jobs, they're paying taxes, not consuming government revenue, and you can sort of ease the burden that way.
That's a pretty slow way to solve things that seem to be accelerating in terms of the widening gap between expenditures and income for the state.
I don't know it's going to close it that quick.
Yeah, well, you know, they have gotten rid of some regulations that were added under Obama.
But we still have a lot more regulations than we had when Obama was elected.
And it's not like we were a bastion of, you know, freedom under Bush.
We had plenty of regulations that preceded Obama, and we haven't gotten rid of all of them.
And of course, the mother of all, Obamacare, they didn't get rid of that.
I mean, they couldn't even get rid of that.
So that's still there.
So we're not freeing up the economy with massive deregulation.
We're not going to even get real tax reform.
They keep talking about tax reform.
They're not going to reform anything.
They're just going to cut taxes.
They're going to lower taxes.
They're not going to reform. We're not going to go from a, you know, like to a flat tax.
We're not going to go from an income based system to a consumption system.
We're not going to get rid of the income tax and go to a national sales tax.
We're not going to reform the tax code to make it less of a burden on On business, we're not going to lessen the compliance costs.
So we're not going to get the economic benefits of that.
We're just going to get lower taxes, higher government spending, bigger deficits.
So I think the sedative of the larger deficits will more than offset the stimulant of the lower taxes.
So the net is going to be a loss for the economy, not a gain.
Well, in this, we've seen this movie before, right?
Those of us who are old enough, which is Reagan did exactly the same thing in the 80s.
He cut taxes without cutting government spending and the federal government grew by two thirds under his reign.
And somehow he's considered to be this free market kind of guy because he read a couple of books of Milton Friedman's.
And remember, initially, there was some kind of deal.
They were going to get two or three dollars of spending cuts for every dollar of tax cuts.
So it was supposed to, but, you know, the problem is it was a promise that was never delivered.
They should have made, they should have cut spending first.
Right? It's always like if your kid says, look, let me eat my dessert first and then I'll have my meal.
I'm not going to trust my four-year-old to tell me that.
And look, you want your dessert?
You eat this meal first.
So it should always be, you want tax cuts?
You cut spending first.
Once the spending is cut and now you have a surplus, then you can reduce taxes to get rid of the surplus.
But never trust the government to cut taxes now and cut spending later because they'll never make the Yeah, I think I remember reading that as a kid, the character from Popeye, you know, I would gladly pay you Wednesday for a hamburger today, and then Wednesday comes and he's nowhere to be found.
Well, thanks, Peter. I really appreciate this.
I'm sure people will find this immensely clarifying because a lot of these buzzwords float around the media without much explanation.
I think you did a fantastic job of unpacking it for people.
Just wanted to remind people, check out Shift Gold at shiftgold.com, Shift Radio at shiftradio.com, and Euro-Pacific Capital.
If you've got a few bucks that you want to protect or increase, you can go to Europac, that's EU. R-O-P-A-C dot com.
And I really appreciate your time.
I hope you enjoy the fine weather out there and stay dry and empowered electrically if you can.
We had a rainstorm that came and went during this interview.
But I want to remember people to not only shift gold, but gold money.
Small investors can go to goldmoney.com, open up an account, even take some of your cryptocurrencies and buy some gold that you could use in commerce.
You can earn it, save it, spend it.
So maybe cryptocurrencies work.
Maybe they don't. But we know gold works.
Gold has always been money. It always will be money.
And if you have a gold money account, you can use your gold as money.
You can spend it. You can send it anywhere in the world for free.
You get a free MasterCard debit card so you can access anyone who takes MasterCard.
But you can get out of the US banking system, out of the US dollar, yet still be able to transact, but put yourself- I call this you're putting yourself on a gold standard.
You don't have to wait for the government to do it.
You can adopt your own gold standard all by yourself, protect your savings, and have income streams that are based in gold and not have to worry about the banking system, not to worry about inflation.
You can sleep soundly.
It's like a lot of people got out of the way of the hurricane, right?
They evacuated. Evacuate the dollar.
That's the hurricane. And you take refuge in gold.
And gold money can help anybody do that.
And that's goldmoney.com. Thanks, Peter.
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