Peter Schiff: Gold is the Canary in the Economic Coal Mine

This weekend, Todd Sachs interviewed Peter on the state of the economy. They discuss the parallels between now and the 2007-2008 housing crisis, the role of economic sentiment in voters’ opinions, and why foreign central banks are losing faith in the dollar.

Peter opens with the fact that the United States is probably in a recession already, even though the government statistics say otherwise:

“We’re in a recession. I don’t care what the statistics are showing, and they’re very likely to be revised in the future to confirm that we’re in a recession right now. I mean that’s what happened with the Great Recession, which started in December of ‘07. But for a year the government gave out fake economic data, and then in December of ‘08, they came back and said, ‘Oh, by the way, we’ve been in a recession for an entire year. You can throw away all the data we gave you because it was wrong.’”

American voters are not swayed by government reports, and they blame the current administration for the state of the economy:

“When they poll the voters, where Biden scores lowest is on the economy! … The voters are saying this despite— as you said— being inundated every day with regurgitated propaganda from the mainstream media about how great the economy is. So imagine if the media told the truth! … You’ve got to trust your eyes, not the government. I’m not going to walk outside in the rain when I know it’s raining just because some government weatherman is trying to convince me it’s sunny.”

America isn’t alone. Other countries around the world are already reaping the consequences of poor policy exercised for the last decade:

“All the countries are experiencing the negative consequences of the same monetary and fiscal policy mistakes. We all made them, especially during COVID. But everybody had interest rates too low. I mean, in Europe and Japan they were negative! .. They didn’t even stop at zero, they went negative! And all these governments ran large deficits, so everybody is paying the price.”

Furthermore, the United States’ use of the dollar as a strategic weapon in foreign policy is leading to greater instability as foreign countries lose trust in their main reserve currency:

“There’s an old expression: you don’t bite the hand that feeds you. We were being fed by nations that were holding onto dollars as their reserves, and then we punished Russia for doing what we wanted them to do, which was hold large US dollar reserves instead of spending those dollars and having them bid up US prices. And they invested those dollars in US treasuries. … We punished the Russians for doing that, and when we did that we sent a clear signal to the rest of the world: ‘You could be next. If you do anything that the United States does not like, this is what’s going to happen to you.’”

This is exactly why gold’s price has risen recently. Foreign central banks losing faith in the dollar are buying more and more gold, and the retail sector is unwittingly dumping their gold when they should be buying more:

“People are dumping gold stocks while gold prices are soaring! That’s how clueless people are. They’ve been so dumbed-down by the mainstream media that they don’t know what’s happening, and they’re not doing the proper things financially. … The gold price is not just some other commodity. If gold is really going up, that is the canary in the coal mine. You better get the hell out of that mine, because something bad is going to happen! And the Fed is— of course— ignoring most of these warning signs, and most investors are too.”

Peter wraps up the interview with a warning:

“If the Fed goes back to buying mortgages, then inflation is going to go even higher. … The credit is going to dry up if rates aren’t allowed to rise to a level that would compensate the lender for what they’re losing to inflation. But look, this is a disaster that the government has created, and it will blame it on everybody else and not accept responsibility. … It’s going to be worse than anything we’ve lived through in either the Great Recession or the COVID times.”

Even Jerome Powell recognizes that American economic policy is unsustainable. When trillions in debt and mistaken foreign policy finally catches up to Uncle Sam, the economy is sure to suffer and may even take the dollar with it.