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Peter Schiff and Johnny Bravo: The End of the Dollar Standard

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Peter Schiff recently did an interview with Johnny Bravo. They talked about the gold standard, inflation, the looming dollar crisis, presidential politics, and the foolishness of Modern monetary theory.

Johnny opened up the show declaring that governments will never allow a gold standard. They hate gold. He asked Peter, why?

Peter’s answer:

The reason that governments don’t like gold is probably for the same reason that kids don’t like chaperones at the senior prom. Because the chaperones are there to keep the kids in line and prevent them from doing things they really shouldn’t be doing. And that’s really what gold does. It’s kind of like a chaperone for government politicians because it keeps them honest. Because if you have real money, and government wants to spend money on programs, it needs to collect that money in taxes. And that generally puts a brake on a lot of programs because the public doesn’t want to pay.”

Peter said that when politicians can convince people that programs don’t really cost anything, they become much more popular. It’s easier for politicians to buy their reelection when they can give out something for nothing.

Gold stands in the way, because you can print paper out of thin air. But gold can’t be printed into existence; it needs to be mined. And if we’re on a gold standard, and gold is money, then the government needs real money. And since it doesn’t have the ability to make it, it has to collect it in taxes before it can spend it back into circulation.”

Government will always oppose honest money because it stands in the way of deficit spending. Sound money is crucial if you want to have a strong, viable economy.

The price of gold continues to climb. It has pushed above $1,800 per ounce and seems to have consolidated above that key level. Peter said it’s not so much that gold is going up, but the dollar is going down.

It’s not just the dollar. It’s fiat currencies around the world that are losing purchasing power as their central banks are conjuring them into existence at a rate that’s far more rapid than the miners are pulling gold out of the ground. Gold’s a good store of value. So is silver. Bitcoin – no. Because bitcoin doesn’t have any value and you can’t store what you don’t have.”

Johnny asked if we’re finally starting to see inflation.

It’s not like we’re finally seeing it. We’ve been seeing it for decades now. The monetary expansion is inflation. And the Fed’s been expanding the money supply – they’ve been inflating the money supply for a long time.”

But Peter said the impact of inflation on prices has been hidden from consumers in a CPI that is intentionally designed to hide just how much prices are rising.

So, I think that if we had a more honest CPI, the effects of inflation would be more apparent.”

Also, price inflation has been concentrated more in financial assets and real estate than in consumer prices. But Peter said he thinks the latest rounds of money creation won’t enter the economy through the stock market. It will run through the supermarket.

The government is really basically dropping money from helicopters, and it’s about to drop a lot more. And that’s going to go right into consumer goods, and it’s going to push up prices.”

Johnny brought up the dollar milkshake theory proposed by Santiago Capital CEO Brent Johnson and the bets Johnson has made with Peter.

Last year at the Vancouver Resource Investment Conference, Peter bet Johnson a gold coin that the Fed’s next move would be a rate cut. At this year’s conference, Peter collected his gold coin. Brent and Peter went on to debate the future of the US dollar. Brent says the dollar will go up this year. Peter thinks it’s going down. Peter put his money where is mouth is and went double or nothing against the dollar.

Peter told Johnny he’s confident he’s going to win that bet.

I think the dollar is going to fall for a long time.”

Johnny and Peter closed out the show talking about Modern Monetary Theory (MMT).

A. There’s nothing modern about it. It’s not like they just discovered the printing press. Central banks have been destroying their currencies with a printing press for a long time.”

Peter said it’s not much of a theory either because “theory” implies that maybe it will work.

But if it’s already been disproven multiple times, it’s really not a theory. It’s a tragedy is what it is. So, the whole name doesn’t even make sense.”

According to MMT, countries that borrow in their own currency don’t have to worry about how much debt they have because the central bank can just print the money to pay the debt. You will sometimes hear MMT proponents claim, “We just owe the money to ourselves.” But they will admit that if you get too much inflation, you have to stop printing. But as Peter pointed out, printing money is inflation.

If you’re creating all this inflation, eventually it’s going to lead to a big increase in money supply, and then by their own definition, they’re going to have to withdraw all that money from circulation if they don’t want it to become worthless. But it’s easier said than done. Once you get everybody high on heroin, how do you take the heroin away without them going through withdrawal? That’s what the Federal Reserve just found out — again — when they tried to normalize interest rates after keeping them at zero for so long. The markets started hemorrhaging. They went into withdrawal in the fourth quarter of 2018 and everything started falling apart. So, they had to go back to QE. They had to go back to rate cuts. They had to keep the addict juiced up.”

In conclusion, MMT is a disaster. But of course, politicians love it, for the same reason they hate the gold standard.

It’s the ultimate something for nothing.”

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