The World Is Preparing for a Post-US Dollar Economy (Audio)

Peter Schiff spoke with the Shadow of Truth podcast last week. They had a friendly conversation about the Chinese yuan, the downfall of the US dollar, and the condition of Peter’s imprisoned father, Irwin. They also discussed the track records of the Federal Reserve Chairmen and how the price of gold can be used as a yardstick to judge the success of their monetary policies.

Alan Greenspan used to say that he could tell whether or not he was doing a good job by the price of gold. If the price of gold was lower than $400 an ounce, he was doing a good job, and if it was above, he was doing a bad job…

[So] Bernanke wants to discredit gold, because gold is discrediting the Fed. Gold prices going up is a vote of ‘no confidence’ in the fiat money that the Fed is creating. What is really a barbaric relic is the federal reserve note, the dollar, just a piece of paper backed by nothing. Gold is real money. It has a tradition of safety. Paper money has a tradition of failure.”

Highlights from the interview:

“The reason that home ownership rates are at the lowest level since 1967 is that houses are much too expensive for the average American to afford. The Fed’s monetary policy has propped up home prices, while suppressing wages. So real estate is now more unaffordable than it has ever been. The only way people can hope to get a house is with a government guaranteed mortgage, minimal down payment, and an artificially low interest rate. But I think the home ownership rate is going to keep falling as more and more people lose quality jobs and are settling for low-paying, part-time jobs. And rents keep rising. If your rent keeps rising, you have no way to save up for a down payment if you’re spending everything you earn renting your apartment. The rest of it goes to utilities or food or insurance. So American’s standard of living is going down. In 1950, the average new home cost about twice what the average American earns in a year. Today, the average new home costs about 10 times what the average American earns. That’s why it’s unaffordable…

“The dollar is not magic beans. Magic beans would be a big improvement. Those magic beans grow into the clouds, and you can get all kinds of stuff from the giant… The dollar is nothing. The balance sheet matters a lot. The main reason the dollar hasn’t collapsed is because people think the balance sheet is going to shrink. They don’t realize that the balance sheet is going to grow to the sky, like those magic beans. When people realize that the Fed is not finished printing money; that it’s only just starting to print money; that we got QE4 coming, we’ve got QE5 coming – we’re going to have a crash in the dollar. I think people have to do what they can to protect themselves…

“[The Fed] wants to pretend they can raise rates, because they want to pretend the economy can withstand higher interest rates. But they don’t want to actually raise rates and prove that the economy can’t withstand higher interest rates…

“[The Chinese yuan] is only down two or three percent against the dollar, which means it’s still way up against every other currency. The significance to me of China’s move was what they said when they did it. They said they want their currency to be more reflective of what is happening in the market, not just rigidly pegged to the dollar. So that’s going to work both ways. That means the next time the dollar starts to fall, it’s also going to fall against the yuan. What really helped keep the dollar from collapsing when they did QE1 and 2 was the fact that the Chinese kept buying dollars to support our currency. They might not do that next time. They might let their currency rise. Which means there will be no reason for a Currency World War II, because one of the reasons all the other emerging markets were buying dollars was so they could keep their currency from rising too much against the yuan… The next currency crisis could be much worse, because when the dollar falls, China won’t be there to catch it…

“Look at how much gold went up during Bernanke’s time at the Fed… If you look at the price of gold as a report card, Bernanke got an ‘F’ based on how hight he price was. Alan Greenspan used to say that he could tell whether or not he was doing a good job by the price of gold. If the price of gold was lower than $400 an ounce, he was doing a good job, and if it was above, he was doing a bad job… [So] Bernanke wants to discredit gold, because gold is discrediting the Fed. Gold prices going up is a vote of ‘no confidence’ in the fiat money that the Fed is creating. What is really a barbaric relic is the federal reserve note, the dollar, just a piece of paper backed by nothing. Gold is real money. It has a tradition of safety. Paper money has a tradition of failure. There is no paper money that has every survived. They’ve all collapsed. They’ve all become worthless. I don’t think the current crop of paper money is going to be any different…

“[Janet Yellen] is probably the least competent of the bunch. She’s a step down, literally. She’s not just shorter than the other guys. The stature has been diminished ever since Paul Volcker. We’ve been getting shorter and shorter. As we go down in height, we go down in competence…”

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