Schiff on Palisades Gold Radio: Be Prepared for the Worst

This week Peter appeared on the Palisades Gold Radio YouTube channel for an interview with host Tom Bodrovics. The duo cover a variety of topics, ranging from the definition of inflation and modern equity markets to economic developments in China and disruptions in the yen carry trade. For more of Peter’s analysis, check out his other recent interview on Pinnacle Digest.

To begin, Peter explains the true nature of inflation and its hidden costs:

The reason that the public believes that inflation is rising prices, when rising prices are just a potential consequence of inflation, is deliberate, I think, on the part of the government and with the help of academia and Wall Street, to redefine inflation to help obscure the cause. Once you understand that inflation is the expansion of money supply, well, you know who causes it. It’s the Federal Reserve that causes it. But if you think inflation is rising prices, then you can blame the grocery store for gouging you. You could blame the companies that are raising prices or you could blame labor unions for demanding higher wages. That serves the government’s interest. 

Reflecting on the misguided and rarely-met targets for inflation, Peter criticizes the hubris of Keynesian economists:

That’s assuming that you want to entrust the economy to a handful of bureaucrats who think they know more than the market. I would rather have sound money. I don’t want central government planning. I don’t want to deliberately create inflation just so these idiots think they have extra room to micromanage the economy when it’s in a recession. What if that recession is necessary and by inhibiting it, they actually do more damage? 

Tom asks Peter about overvaluation in the stock market, and Peter gives his take on the AI and crypto standouts in Wall Street:

Yeah. I think the Federal Reserve, with all the cheap money, has turned the stock markets into a casino. I don’t think there’s a lot of actual research that goes into buying stocks. I think people just buy what’s going on. They buy whatever has the sexiest story. The old saying on Wall Street is you sell the sizzle, not the steak. Well, in a lot of cases, there’s no stake there. It’s just sizzle. The epitome of that is the crypto market. 

Discussing developments in Asia, Peter points out that last year’s carry trade crisis could get much worse, especially with Japan’s reliance on treasuries:

They have to start unwinding this stuff. That means the Japanese become big sellers instead of big buyers of risk assets around the world, including things that aren’t, like treasuries. They had a positive carry in treasuries, but that turns negative. It’s like a major rug pull from all over the world or a giant margin call. Plus, I think that Japan has got more treasuries than any other nation. I think one of the things that Japan might do to try to reduce its debt is to sell off its treasuries to pay off its own debt. That is also going to have a big impact on the US economy.

He warns that the consequences of relentless monetary expansion could be catastrophic, both in the United States and abroad:

And I kept saying, be careful what you wish for because you’re going to get a lot more inflation than you bargained for and there’s no way you’re going to be able to stop it. You’re not going to be able to turn this big thing around at all. And so, that’s where we are. This is going to be the most inflationary period of time that the United States, Europe, Japan have ever seen. 

Peter concludes the interview with cautious praise of the Trump administration’s moves towards purging corruption and waste. Hopefully it’ll be enough to stave off disaster:

We have a huge problem that we’re going to have to pay the piper. I’m glad we’re exposing some of the corruption. That’s a step in the right direction, but the real cuts are not going to happen. I think we’ve been in recession all year. That’s why Trump got elected. I think it’s going to get worse, and the media is going to blame Trump, unfortunately, for it, but you need to be prepared. You can hope for the best, but I think you better be prepared for the worst.