America’s Dysfunctional Economy: Peter Schiff on Lions of Liberty

Peter Schiff appeared on the Lions of Liberty podcast with Marc Clair to look back at the Trump economy and ahead to what the Biden years might bring. Along the way, Peter and Marc talk about the stock market bubble, Peter’s move to Puerto Rico, the looming dollar collapse, and bitcoin.

The Trump economy will probably be most remembered for the surging stock market. The president constantly pointed to record stock values as a measure of his success. But Peter reminds us that we also had a strong stock market in the last couple of years of the Obama presidency. In fact, Trump ran a campaign attacking that stock market bubble. He promised he was going to fix Main Street by addressing the trade deficit and the budget deficit, rebuilding America’s manufacturing economy, and draining the swamp.

And none of it happened. Instead, all Trump is doing is pointing to the stock market bubble, which is now bigger than the one he inherited, and claiming a successful presidency based on the stock market. Meanwhile, the budget deficits he’s leaving to Biden are far greater than the ones he inherited from Obama. The trade deficits he’s leaving Biden are much bigger than the ones he inherited from Obama. In fact, the trade deficit with China has never been larger. So, to the extent we were losing on trade before Trump, we’re losing even bigger than ever with Trump — and this is even before COVID.”

Of course, it wasn’t all bad. Trump did deliver promised tax cuts. But he also increased spending.

Trump made government a bigger burden on the economy than it was before. He just changed the way that burden is borne by the public. Instead of paying for government with income taxes, we’re paying for it through inflation. The government is printing more money and taking the purchasing power. I mean, the dollar is just beginning to fall.”

Ultimately, everything Americans buy will become more expensive thanks to the inflation created to finance the huge expansion of government during the Trump years.

Of course, Peter doesn’t think things will improve with Biden in the Oval Office. In fact, he said Trump has left the Republican Party in a weak position to act as the opposition to the Biden agenda. And what is that agenda? Grow government more substantially and pay for it with bigger deficits and more money printing.

Republicans didn’t object to the bigger deficits when Trump policies produced them. They didn’t object to larger deficits when they were cutting taxes on the rich. So, how would they object to bigger deficits for all these social programs that are going to benefit the middle class and the poor? At least that’s the Democratic rhetoric. So, I think it’s going to be difficult for the Republicans to really have the type of roadblocks in front of Biden that they did successfully erect in front of Obama.”

Peter also noted that the far-left “Bernie Sanders-AOC wing” of the Democratic Party is far more popular than it was when Obama was in office. Even though Biden is a more mainstream Democrat, he will have to make some concessions to the far left for political reasons. Peter said he thinks we may well see a federal $15 an hour minimum wage, implementation of some aspects of the Green New Deal, and perhaps even a move toward student loan forgiveness, “Medicare for All” or a universal basic income.

Marc followed up with a key question: how can we protect our wealth given what is likely coming down the pike? For one thing, Peter recommends avoiding the US stock market. But he doesn’t suggest keeping your wealth in cash.

If the choice was between US cash and US stocks, I’d hold my nose and buy US stocks. Because I think at the end of the day, the biggest losers are going to be the people who hold cash. And the worst thing you could do with your cash is buy bonds. So, it’s going to be the bondholders who suffer the most, not the stockholders. But I think that foreign stocks, emerging markets will dramatically outperform the US stock market over the next five to 10 years. In fact, over the next one year. And you know, the only way the US or the Federal Reserve, the US government, could prevent the stock market from crashing, which it should do because it’s so overvalued, but the only way to save the stock market is to sacrifice the dollar. And that is what they’re doing. They’re keeping on printing money and keeping rates artificially low to prevent the air from coming out of these bubbles. They don’t want stock prices to crash. They don’t want real estate prices to crash. So instead, the dollar is going to crash.”

In effect, the real value of stocks and real estate will come down. But you can’t see that when you’re measuring it in dollars because the dollar loses value faster than your stocks.

If I keep shrinking the value of the dollar, it makes it look like your stock portfolio is growing. But if you then take your stock portfolio and measure it in gold — how many ounces of gold can I afford with the stock portfolio? — that’s where you’ll see the falling value of your stock, or your real estate, or whatever you happen to have.”

Peter said ultimately, he thinks we will see a major macroeconomic transition as the world moves away from the dollar as the reserve currency.

The dollar is going to collapse and that is going to turn the world upside down, because now Americans can’t live beyond their means anymore. Americans can only consume if they produce. Americans can only borrow if they save. And our dysfunctional economy is so screwed up now from all these years of having the benefit of being the issuer of the reserve currency that we’re no longer going to be able to function in a different world where we have to pull our own weight.”