Schiff on Silver Bullion TV: It’s Time to Pick Our Poison
Peter recently appeared on the Silver Bullion TV youtube channel to discuss the national debt, inflation, and economics. His conversation with host Patrick Vierra also hits on the nation’s unemployment rate and the state of the housing market.
Our nation is predictably turning to the printing press rather than addressing out-of-control debt:
“We don’t have the ability to service a $35 trillion debt, let alone repay it. And so there needs to be a haircut here. We need to have a restructuring of debt so that it’s affordable. But that’s not going to happen. Because the government is going to say, why should we make any of those difficult choices? Why should we have to acknowledge how badly we screwed up? We have a printing press. We’ll just use that.”
The Fed’s likely September rate cuts are a step in the wrong direction. Rates need to increase to flush out malinvestment from decades of artificially low interest rates:
“The question is, are they gonna go 25 basis points? 50 basis points? That’s kind of where we are. But the broader point is that they shouldn’t be cutting rates at all. In fact, not only should they not be cutting rates— they should be raising rates. They stopped raising rates too soon. Monetary policy never really became restrictive the way they claim.”
Don’t let the Biden administration’s posturing mislead you. The economy is not healthy:
“We don’t have a low unemployment rate. We have a historically high unemployment rate. And it’s going to get a lot higher. Meanwhile, the jobs that have supposedly been created are a myth. The vast majority of the jobs that Biden takes credit for creating were jobs that existed before he was elected. It’s just that those jobs were on hold because of COVID.”
At some point, politicians will have to bite the bullet and take a recession. The only other option is more inflation:
“We have to pick our poison. So either we’re going to have a collapse, financial crisis, asset crisis plunge, recession, or we’re going to have high inflation, right? So it’s one or the other. There’s no way to get rid of both. We have to decide which one we want. Now I’d rather have the collapse and get it over with, but then get the government to clean up its act.”
Silver and gold have proved a strong hedge against the Fed’s inflationary policy:
“It’s not so much that silver’s getting more expensive. It’s that fiat currency is losing value. When the Federal Reserve was first created in 1913, you only needed $20 to buy an ounce of gold. Now you need $2,500 to buy an ounce of gold. The dollar has lost more than 99% of its value ever since we turned it over to the Fed.”
Prices falling over time is the hallmark of a developing economy, but policy dictates that this can’t happen:
“The government is doing everything it can to prevent assets from deflating, but it won’t work. Prices will deflate, just not in their fiat currencies. They can control that. They can make sure that prices always go up in the currency that they create, because that currency has no real value, and they can create as much of it as they want.”
This inflationary environment is pinching big banks too, who are taking larger and larger losses as the interest rate rises:
“The problem with the banks is not that people are defaulting, but that they’re staying in their homes. And keeping their mortgages because the banks are losing money on every mortgage they wrote. Because they loaned out the money at 3% or 4%. And now they have to borrow that money from the Fed at over 5%. So all these mortgages that were profitable for banks when rates were at zero are now unprofitable.”
September will provide useful data on the future of the economy. Will rate cuts delay a bust, or will mounting data finally convince Jerome Powell & company that a recession is inevitable?
