The Overpriced Dollar Makes Gold a Great Buy (Video)

Greg Hunter spoke with Peter Schiff on USAWatchdog over the weekend. Peter shared his thoughts on the first-quarter GDP figure and the future of the US dollar. Peter warned that the coming crisis is going to be worse than the last, because the boom is even bigger. However, this boom has only benefited the Wall Street elite. 25% of Americans spend more than half their income on housing, and the basic costs of living continue to rise, no matter what the government claims. Unfortunately, things are only going to get worse when the dollar collapses. Peter recommends investing in foreign countries that have more economic freedom, as well as saving a portion of your wealth in physical gold and silver.

Highlights from the interview:

“I think the real crash, unfortunately is going to be a dollar crash, rather than maybe a stock market crash. Certainly, it’s going to be an economic crash for the average American when their cost of living goes skyrocketing. The GDP contraction that the government reported for the first quarter – first of all, they’re trying to say it was good news, because it was only a contraction of 0.7 and they were looking for 0.8. But in order to get to 0.7, the government actually assumed negative inflation. Instead of a deflator, we had an inflator. The government claims the cost of living declined in the first quarter by 1/10th of 1%. So nominal GDP actually declined by more than real GDP. I don’t believe that for a minute. I think inflation is a positive number. I think the contraction is much bigger.

“In fact, there was an inventory build again. Without that inventory build, I think it would have been a 3% contraction. All this inventory is going to come back to bite corporate America. Their customers are too broke to afford these products. They’ve got part-time jobs, minimum wage paychecks. They don’t have the money. Meanwhile, corporate profits in the first quarter (we also found out on Friday), plunged by 5.9%. That’s the biggest drop since the 2008 financial crisis. And the economy is supposedly in good shape…

“The dollar has been going up for the past year-and-a-half, because everybody believes the recovery is real because the Fed keeps pretending it is. Everybody thinks the Fed is going to raise rates, because the Fed is talking about when they’re going to raise rates. I don’t believe any of that. I think it’s a bubble, not a recovery. I think if the Fed raises rates, they’ll prick that bubble. I think the air is coming out of it anyway, just because of the absence of QE. I think they’re going to have to do another round of QE in order to prevent the bubble from deflating.

“But when the world figures out the predicament that we’re in, that the Fed is just all talk, that this is not a real recovery, that we need a constant supply of QE, that we’re so addicted to this that even a smaller dose will send us into withdrawal – then I think the dollar plunges, because everybody bought the dollar in anticipation of higher rates. When that’s not going to happen, I think the dollar collapses…

“Now we have a situation where 25% of Americans are spending half their income on housing. They’re spending more of their income on food, on utilities, on insurance. Healthcare costs are skyrocketing. Americans have no more discretionary income. When the dollar plunges, that’s going to send already rising consumer prices through the roof. That’s the real crisis that Americans will have to deal with. The Fed may want to pretend that there’s no inflation, or embrace it as a good thing, but it’s going to be the average American’s worst nightmare…

“If Greece leaves the eurozone, it’s going to be a great example for other people why you shouldn’t leave. I think it’s going to be a nightmare. I think if they try to resurrect the drachma, it’s going to be very scary… At the end of the day, [Greek politicians] want a villain. They want to be able to blame somebody. Being in the eurozone, they can blame Brussels; they can blame Germany. But if they leave and it’s a bigger disaster, they’ve got no one to blame but themselves…

“The San Francisco Fed basically took a look at the numbers for the first quarter, and rather than acknowledging that they reflect the economy, they said, ‘The numbers are wrong. The GDP is wrong. They’re not seasonally adjusting it enough. So if we doubly-seasonally adjust it, all of a sudden the economy looks a lot better.’ What does that mean? That means all the other first quarters, you were actually much stronger than what the government reported? This is the Fed’s way of not acknowledging reality…

“The bust is always proportionate to the boom. This is a bigger boom, even though it doesn’t feel like it is. Sometimes you have so much drugs in your system, even if you take a lot of drugs, maybe you don’t feel as high because you’ve built up a tolerance. We had a record dose of this monetary heroin and we barely had a party. Yeah, the 1% of the 1%, Wall Street partied. But the middle class was left out. At least the middle class felt like they were along for the ride in the last bubble. But this time there was only enough to benefit the financiers and the hedge funds. This is going to be the biggest bust yet…

“[Things] are on sale now, in that the dollar is over-priced. You can take your dollars and you can buy some gold now. You won’t be able to afford it later, because your dollars won’t buy very much gold. They won’t buy very much food. They won’t buy very much of everything. But right now, they’ll buy a lot. Not as much as they did years and years ago, but more than they’re going to buy in a few years. For your investment money, what I do with my clients is we buy assets in countries that aren’t as screwed up as the United States. I want to bet on freedom. Limited government is the key to prosperity, so I invest in countries that have less government than we have in America. They have lower taxes, fewer regulations, they have more economic freedom, and they have better – or less reckless – monetary policy… I expect those currencies to rise. I expect assets in those countries to rise sharply relative to assets in the United States…

“We also recommend our clients own precious metals. I think gold is going to be a scarce commodity in great demand worldwide when the dollar collapses and people are looking for alternatives. I think that’s why the Chinese have been secretly buying up as much gold as they can. They realize that their trillions in US dollars may not be viable reserves for the RMB. They want to have something real, like gold. Before Bretton Woods, the entire world was on the gold standard. We convinced them to adopt the dollar standard, based on the fact that the dollar was as good as gold. Not only was it backed by gold, it was redeemable in gold. But we reneged on that commitment in 1971, and ever since then there’s been no gold backing any currency… The dollar is backed by nothing, just political hot air. When the confidence goes, other countries are going to need something to back up their currency. I think the only thing that makes sense is to go back to what backed it up before, which is gold. That’s why all these central banks still have gold…”

Get Peter Schiff’s latest gold market analysis – click here – for a free subscription to his exclusive weekly email updates.
Interested in learning more about physical gold and silver?
Call 1-888-GOLD-160 and speak with a Precious Metals Specialist today!