Peter Schiff: It’s Time for Downward Revisions

On Saturday, Peter took to his podcast to cover last week’s economic news and political events. In this episode, he discusses rumors of large downward revisions in jobs numbers, the issues with and irony of a state Bitcoin reserve,  and the striking resemblance between the government’s spending situation and a Ponzi scheme.

Peter addresses the possibility that very large downward revisions in jobs numbers are going to be announced. Now that the election is over, there’s no need for government statisticians to manipulate the numbers:

On Wednesday of this week, the Department of Labor announced that it’s very close to another major downward revision in the non-farm payroll numbers. This will affect the numbers from June 2023 up until June 2024. An entire year’s worth of jobs reports is about to get significantly revised lower. … [The government] is now going to say, ‘Oops, we’re sorry, they weren’t created at all.’ …  I specifically said it would happen after the election, when there was no longer a reason to sugarcoat these numbers.

If this really is the case, there could be major ramifications in foreign exchange and the gold markets, which responded throughout the year to the relatively optimistic labor statistics:

It’s most likely that if you reduce any given month by about 100,000 jobs, you’re going to end up turning a job number that was a beat because it was above estimates into a miss because it was below estimates. So it means all of the headlines were wrong. The market reaction was wrong. If the dollar rallied, if gold sold off, if the market rallied based on a beat, it wasn’t a beat. It was a miss.

Peter turns to increased optimism about the creation of a government Bitcoin reserve. He points out the irony in this situation:

If they do that, it’s great for the people who own Bitcoin, who can sell their Bitcoin to the unwilling U.S. taxpayer who is being forced to buy Bitcoin at gunpoint. Because that’s the coercive power of the state, which is the ultimate irony, right? Because Bitcoin was supposed to be anti-government. It was a way to circumvent government, to get out of fiat currencies. This is a decentralized thing. It’s away from government. It’s voluntary. It’s the free market. But its salvation now is the government. It’s the government buying Bitcoin that everybody is now counting on to make the price go up.

With companies like Microstrategy and Mara Holdings dumping billions into Bitcoin, Peter worries that we’re foolishly misallocating capital in what amounts to a Bitcoin bubble.

But if capital is going into these ridiculous money-losing businesses that are just gambling on Bitcoin, where is it coming out of? We don’t have an unlimited supply of investment capital, right? So any capital that is directed to Bitcoin, blockchain, crypto, is capital that can’t go someplace else. It can’t go someplace where it’s actually needed to produce real goods, real things. Instead, it’s being squandered.

Peter speculates on what Treasury Secretary nominee Scott Bessent will do if confirmed by the Senate:

I know that Scott Bessent has reiterated his belief that the U.S. dollar should stay as the reserve currency. And of course, he’s not going to say the opposite. I mean, it’d be ridiculous to say the opposite. But I think the markets are probably going to take that to mean, ‘Oh, well, I guess we’re going to have the strong dollar policy, return to the strong dollar policy.’ But we never really had a strong dollar policy.

Peter wraps up by comparing the way the government uses debt and spending to a Ponzi scheme. The only difference? The government doesn’t try to hide it:

Every time that we get to the debt ceiling, what does the government say? If we don’t raise the debt ceiling, we’re going to default. If we can’t borrow more money, we’re not going to pay back any of the money we already owe. Well, that is an admission that you’re running a Ponzi scheme. You’re telling everybody that it’s a Ponzi scheme. I mean, Bernie Madoff would never do that. It’s Ponzi 101. You got to keep that quiet.

For more analysis of the week’s events, check out Friday’s episode of the SchiffGold Gold Wrap Podcast.