Gold Is Rising Because People Are Losing Faith in Fiat Currency (Video)

David Asman interviewed Peter Schiff on Fox Business on Friday. They discussed why inflation created by central banks doesn’t actually create a strong economy, but rather serves to prop up irresponsible governments. Peter also explained why the price of gold is going up even while the US dollar is rising against other currencies.

Follow along with this partial transcript:

David Asman: Peter, I want to get your comment on this breaking news from Der Spiegel that the ECB is coming to an agreement with the Germans over this new plan that national central banks will only be allowed to buy the sovereign debt of their respective countries. That way, if one of those countries goes under, Germany isn’t left holding the bag or at least left paying a portion of it. What do you think of that plan?

Peter: Well, I think it’s better than just doing full-blown QE. I think this will limit the scope of the quantitative easing that the Europeans can do. Europe will benefit from that, because quantitative easing is the wrong medicine. It makes all the problems that you’re trying to solve worse. We’re going to find that out the hard way when the Fed is forced to launch QE4.

Asman: I’ve heard the arguments about deflation, [and] why it’s so bad for us. Are falling prices really that bad?

Peter: They’re not bad at all. They’re good. Everyone is talking about the benefit of falling oil prices, how consumers catch a break; it’s like a tax cut. Well, that’s the same thing when the price of anything goes down. And if the price of everything goes down, it’s an even bigger tax cut. So we all want to buy more. You said the central bank has the goal of inflation. Most people’s goal is to be able to buy more, not buy less. The real reason central banks want inflation, is because they can’t afford to repay their debts. So they want inflation to wipe out their debts. They don’t have the integrity to do it honestly, so they do it dishonestly through inflation. But they have to create a pretense to create it. So they lie to the public, and say inflation is necessary for economic growth when it’s not…

Asman: You’re saying that the central banks are essentially bailing out the big governments who are not doing the necessary things to get the economy working. They’re trying to do it artificially through monetary stimulus.

Peter: Absolutely. They’re bailing out the banks, and they’re hoping to prop-up financial markets. The stock market wants inflation. The real estate market wants inflation. But economic growth does not need inflation. In fact, inflation is deterring economic growth. That’s why the real US economy is actually going down as the markets are going up.

Asman: Let’s talk about another disconnect that usually doesn’t happen, but is happening right now. Gold… For decades, when inflation came down, so did gold. Gold was a hedge against inflation. We now have inflation coming down, but gold going up. Why?

Peter: I don’t think inflation is coming down. I think central banks around the world are creating it. The price of gold is up more than 10% in terms of euros in the last two weeks. Of course, it’s up strongly in the dollar as well.

Asman: Oil is going down. The dollar is going up. But gold is going up as well. That is not usually something that happens. Why is it happening now?

Peter: All currencies are being debased. So yes, the dollar is going up, but only relative to other currencies. All these central banks are creating too much money. Yes, oil prices now have fallen. They had risen rather spectacularly. I think they’re going to rise again when the Fed takes these rate hikes off the table.

Asman: But why is gold going up right now?

Peter: Because people need a safe haven from paper money, from fiat currency. People want to buy something that a central bank can’t create. That is going on. People are talking now about the Swiss franc. I said from the beginning that the Swiss were going to have to pull the plug on this peg, because I said it was a mistake from day one, that they would have to end it when they got tired of throwing good money after bad. But where everybody has to look is not in the rear view mirror, but look ahead. Look at the big peg – China and the dollar. When we launch QE4, I think the Chinese are going to have to pull the plug on that peg. When the dollar goes down the drain, it’s going to be a much bigger shockwave in the financial markets than what the Swiss did to the Europeans.

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