Schiff w/Jalinski: We Need Austerity, not Tariffs

On Tuesday, Peter joined Josh Jalinski on a live episode of the Financial Quarterback show. Taking questions from both Josh and listeners, Peter discusses several Bitcoin-related topics, Trump’s tariff proposals, and whether or not the government can ever be efficient.

Josh opens by asking Peter whether he’s changed his mind on Bitcoin. Peter remains unconvinced:

I haven’t changed my mind. I mean, obviously the scheme has gotten a lot bigger, right? I call it a blockchain letter. And there’s a lot more chain now than when I first talked about it. But no, I don’t see any real use case for it. I don’t see anything unique about it. You know, Michael Saylor was on TV today again saying that Bitcoin is the only asset where there’s a limited supply. That’s just not true. There are a bunch of other cryptocurrencies that have the exact same characteristic.

The big names in Bitcoin– Michael Saylor, Microstrategy, and Mara– are in trouble when the Bitcoin bubble pops. Their creditors will also take a haircut, as Peter explains:

And I think that the people who are doing that are overlooking the elephant in the room, which is if Bitcoin goes way down, MicroStrategy’s bankrupt. And so you don’t get your money back when the company that you loan the money to is broke and doesn’t have any money to pay you back. All they have is Bitcoin, and they’d have to sell it, and who knows what they would get for it. 

Pivoting to national politics, Peter laments the priority tariffs are being given over other, better policy choices:

Again, I don’t think the tariffs are the game changer. What we need is substantial deregulation. We had some under Trump’s first term, but not nearly enough. But the overlying problem is that interest rates are going to stay low and the debt is going to stay high. And so, the best thing that Trump is going to be able to do is blow more air into the bubble and keep it from popping before his term is over.

Fundamentally, the problem is government spending. Trump talks a big game, but his track record does not give Peter much hope that the country’s fiscal health will improve over the next four years:

We’ve got $36 trillion in debt. We’re spending $1.2 trillion a year just on interest on the debt, and that number goes up pretty much every day. By the end of Trump’s first year in his second term, we’ll be at about $2 trillion a year in interest on the national debt. So nothing has been done. And Donald Trump is not a libertarian. He’s not even a conservative.

The Federal Reserve isn’t helping either. Jerome Powell and the Fed continually cater to the interests of the government budget:

The key is, we need much higher interest rates. Interest rates in America and around the world, for that matter, have been much too low for too long. And this is screwing up the economy. It’s the source of a lot of the problems and the reason that Trump got elected. … We’re just borrowing and spending instead of doing that. And so we need higher interest rates, but we can’t have higher interest rates with all this debt.

Initiatives like the Department of Government Efficiency are likely to make modest improvements to the government, but it’s valuable to remember that public institutions never face the optimal incentives for prosperity:

But the problem is—and something I recognize—is that you’re never going to have efficiencies in government because you don’t have the incentives in government. The reason the private sector is efficient is because people are making decisions with their own money. And if they save money, then they get to keep the savings. And you have competition. If I’m a businessman and I’m not efficient, but my competitor is, he’s going to undercut me, and I’m going to lose market share.