Peter Schiff: Consumers Are Concerned; Investors Are Clueless

Is bitcoin an inflation hedge?

Peter Schiff recently appeared on RT Boom Bust with Natalie Brunell of Coin Stories to discuss inflation and whether bitcoin is a hedge. Peter said bitcoin is not an inflation hedge. He called it a “speculative token” with its price driven by supply and demand.

But what about gold? It didn’t perform like an inflation hedge in 2021 despite the inflation freight train. Peter said the reason gold has had some problems is because the market wrongly believes the Fed.

They believe Powell when he says he’s going to do whatever it takes to bring inflation back down to 2%. He’s going to raise interest rates. He’s going to start shrinking the balance sheet. And the markets are believing Powell. But I think he’s just bluffing. And even if he follows through with the rate hikes he’s promised, that’s too little too late. It’s not going to be nearly enough to slow down inflation. And so, it’s not going to restrain gold.”

The type of rate hikes and balance sheet reduction necessary to get ahead of the inflation curve would be too much for the bubble economy to bear.

If Powell actually tried to fight inflation, he would destroy the bubble economy. The stock market would crash. We’d be in a massive recession. Lots of unemployment. A huge financial crisis. And we would force the government into insolvency. Once the markets come to terms with reality, they’re going to be buying gold.”

Natalie agreed that the Fed can’t fight inflation and will be forced to pivot back to providing liquidity to the market. She said that will send both stocks and bitcoin higher.

So where will consumers look to hedge? Will they turn to gold? Bitcoin? Or possibly other cryptocurrencies that are out there?

Peter said right now most investors aren’t even really worried about inflation.

They believe the Fed. So, they think that the inflation problem is going to be solved.”

But at some point, people will realize that it’s actually going to get worse. The Fed is ultimately forced to do an about-face because Powell actually thinks he can raise rates without hurting the economy.

He thinks we have this strong economy. We don’t. We have a gigantic bubble. And even the smallest of pins is going to prick it. In fact, just talking about raising rates, and this has already pricked the bubble. We’re already pretty much in a bear market now. And so, I think that sometime this year, whether it happens before the first rate hike or after, Powell’s going to cave and he’s going to go back to bigger QE and rates go back to zero. And that’s when the markets are finally going to understand the predicament that we’re in.”

Peter said the markets should realize it already. “But for some reason, they need a safe to drop on their head.”

And when that happens, then they’re going to be looking for inflation hedges. They’re not going to care about bitcoin. That’s for gamblers. They’re going to look for a real store of value and they’re going to be buying gold. They may be buying silver as well. And I think they’re going to be buying all sorts of real assets to get dollars.”

Peter emphasized that consumers are concerned about inflation. Consumer sentiment data bears this out. But Peter said investors are clueless.

Consumers are very concerned. And they should be. And unfortunately, it’s going to get much worse for consumers.”