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New Peter Schiff Interview: Rates are Still Too Loose

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Last week Peter appeared on the Futures Radio Show podcast with Anthony Crudele. In their interview, they discuss the factors affecting gold’s price, why the Fed can’t control inflation, and the viability of Bitcoin.

Early on in the interview, Peter argues today’s inflationary environment drives gold higher:

“What’s driving gold higher is inflation and the understanding that it’s impossible politically for the Fed to actually stop inflation— that inflation is actually the lesser of the two evils in the Fed’s mind. And so rather than a winning inflation fight that would cause a severe financial crisis and force the US government to default on its debts and cut spending, the Fed is going to monetize debt and buy bonds and do whatever it takes to prevent those political choices from having to be made.”

With Congress spending more and more money every day, inflation is not going to be tamed. A recent foreign aid bill is a perfect example of this:

“This is a tremendous amount of money that is going to the Ukraine with no end in sight. Who knows, maybe we’ll end up sending a trillion dollars to the Ukraine over the years. But this money is being borrowed. We have a ticking fiscal bomb here. And rather than defusing it, we’re just making it worse. We’re adding more debt. There was no discussion about whether or not we needed to pay for this aid, whether spending should be cut somewhere else in the budget, or taxes should be raised. No, there’s no consideration to where the money is coming from. Let’s just spend it, and we’ll just run up the debt, completely oblivious to the debt crisis that is already looming.”

To reduce inflation, the Fed needs to incentivize saving over-borrowing. Current interest rates aren’t high enough to do this:

“If the rates are not high enough to stop people from borrowing, then they need to raise them some more. They also need to encourage savings. They need to make the rates high enough that people want to save. But the savings rates are near all-time record lows. People aren’t saving because the rates are still too low. The entire time the Fed has been pretending that its rates are restrictive. It has been the opposite! They’ve still been too loose. They’re just less loose than they were.”

Peter and Anthony pivot to other topics, including the viability of Bitcoin. Peter sums up why it (and other cryptocurrencies) aren’t going to last:

“The value gold has is its properties as a metal. Those properties don’t diminish over time. But Bitcoin doesn’t have any properties as a metal. It’s not a metal. It’s nothing. It’s just a string of numbers. So the only thing Bitcoin has is a price. And you can’t store price. Price is a function of just supply and demand.”

In response to listener questions, Peter gives some interesting thoughts on how he’d address the debt and inflation crisis if he were given control of the federal budget:

“I wouldn’t just cut entitlements like Social Security and Medicare and government pensions. I would actually cut the debt. I would restructure the debt. …I think everybody that the government owes money to needs to take a haircut. And so that means that if you own US Treasuries, you’re not going to get 100 cents on the dollar. … Everybody is going to share in the pain when it comes to cuts. But, you know, if you don’t do that, everyone’s going to share in even more pain. Inflation is going to wipe out more of the purchasing power of debt than what I would wipe out in a legitimate restructuring.”

They wrap up the show with Peter’s prediction for the future of gold:

“I think gold is going to be remonetized. I think gold is going to replace the dollar as the primary reserve asset for central banks. I mean, gold was the primary reserve before the dollar. And even while the dollar was the reserve currency, it was gold because the dollar was as good as gold. … So I think we’re in the early stages of the transition back to gold. And so over this period of time— whether it’s five years, 10 years— I don’t know for sure, but we’re going to transition. And I think that’s the main reason that foreign central banks are accumulating dollars. They are preparing now for that transition.”

For more insights from Peter and coverage of last week’s frightening economic reports, listen to Peter’s most recent podcast episode: The Secret Word is Stagflation.

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