American Pipe Dreams: Dissecting Mainstream Misinformation (Video)

Stefan Molyneux hosted Peter Schiff on Freedomain Radio last week. They discussed at length the decline in the United States equity markets and the effects of Federal Reserve monetary policy. They also had a broader conversation about the fundamental economy of the US, as well as Peter’s track record of economic predictions. In the second half, they got into a discussion about the big-name presidential candidates, Jon Stewart’s retirement, and what Peter would do if he were elected president.

Highlights from the interview:

“I don’t think they [the Fed] are going to follow through [with their threat to raise interest rates. I think the whole thing has been a bluff the entire time. I think they’re just talking about raising rates, because they can’t actually do it. I think if they could raise rates, they would have done it years ago. I think the market has been oblivious to this fact, and it has been a bunch of Pollyannas who thought, ‘Well, if the Fed raises rates it’s not going to hurt the market.’ Of course [it will hurt the market], it’s like sucking the air out of the bubble. Everybody thought the Fed was going to raise rates next month. That’s why the market started to go down… They want to blame this on China. It’s not China’s fault, it’s the Fed’s fault…”

“While I recognize there are some serious problems in Europe that I don’t want to diminish, they’re not as bad as the problems in the United States that everybody is overlooking. If you’re jumping from the euro to the dollar, you’re going from the frying pan into the fire. I think some of the people are starting to feel the heat now and they’re jumping back to the euro. That’s why the euro has rallied from a low of about $1.05 in March to a high yesterday of $1.17… Everybody was for sure it was a lock that the euro would go to parity, and it went the other way. In the past, we’ve had this – people get very bearish on something like the euro and they end up being wrong. That’s what’s happening with gold as well. You have record numbers of people bearish on gold…

“The Chinese, beneath the surface of all these bubbles, they got a real economy. The Chinese are working, they’re saving, they’re producing. They don’t rely on the government for their retirement money, for their healthcare. America, we’re just a basket case. We have 94 million Americans who don’t have jobs. People are living off the government. Those that do have jobs, live paycheck to paycheck… We have no savings. We’re drowning in debt…

“You have all sorts of new companies, where their business is actually selling stock. They have to have a make believe company that they can market. But normally, when you go into business, the goal is to generate a profit. Revenues don’t mean anything unless you can convert them into profits. Unless you’re publicly traded and you convince somebody to buy stock in your company. Now your real business model is selling shares at inflated prices. You keep raising money, so you can lose it at your business… If you can convince the investor that at some point in the future there’s going to be a big payday, that all of a sudden you’re going to stop losing money and start making money, you got all these people who are willing to gamble on that. Now you have entire companies built around the business model of the promise of a profit in the future. But the only thing you actually have is a loss in the present. People are getting rich with these business models. It’s much harder to operate a business at a profit than to operate at a loss…

“The financial channels have an ever-diminishing audience, because fewer and fewer Americans have any money to buy stocks and bonds. Most of them are struggling just to buy food. They don’t have anything left over… They can’t have guys like Peter Schiff on all the time talking about all the problems with the US economy. That’s not conducive to selling their investment products… That’s why they want to blame the recent decline on China. It’s more palatable to the US investor…

“People want to make America great. But exporting all the illegal immigrants isn’t going to make us great. Or just hiring smarter negotiators – that’s not going to change our trade deficit. It’s not that we have bad negotiators. We have too many laws. We have too much taxes. We have too much regulation. Donald Trump wants to put tariffs – Tariffs could work if we had an industry to protect. Let’s say there’s the Chinese industry and the American industry and they are both making the same thing. Let’s say they’re both making baby strollers, and we put a 25% tariff on Chinese baby strollers, or on anybody’s baby strollers that get imported. Now the American baby stroller manufacturer, he’s got an edge now… That kind of tariff could help our domestic industry. But Donald Trump doesn’t realize that we don’t have any domestic industries left to protect. If you put a 25% tariff on strollers imported, then people just have to pay 25% more for their strollers, because there are no American companies making those strollers. Just because we put a tariff, it’s not like… [people] will go start a business make strollers, because you know how much capital I’m going to have to spend on building my factories and getting all my workers trained? I’m going to do that based on a tariff that could go away with the next administration? There’s no way that you’re going to start a business if its existence depends on a tariff…

“One of the most ridiculous arguments I’ve heard… They said, ‘We need to raise the minimum wage, because if we don’t raise the minimum wage, how do we expect our college grads to pay back their loans?’ Think about that for a minute. We’re educating people in college so that they can cook french fries at the minimum wage? If that’s the case, I have an idea – just don’t go to college at all and then you won’t need $15 an hour to pay off your debt, because you won’t have any debt. If all your’e going to do is have a minimum wage job, why are you going to college in the first place?”

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