Peter Schiff: The Crypto Reserve is Just Another Bailout 

In Sunday’s podcast, Peter covers the Trump administration’s latest crypto scheme, devoting much of the episode to his announcement of a US strategic crypto reserve. He explains why the justification for such a reserve falls apart under scrutiny and argues crypto is a distraction from more pressing matters, like tariffs and entitlement programs.

Peter sums up the havoc that preceded Trump’s announcement. All crypto was sinking last week, not just Bitcoin:

But when I did the podcast on Tuesday, Bitcoin had just slipped into a technical bear market. It was down 20% from its 109,000 post-election peak, which happened, I think, in November last year. We were trading around 87,000. We had been below 86 earlier. By Friday morning, Bitcoin almost broke below 78,000. So it was close to a 30% decline from top to bottom at that point. But other tokens– Ethereum almost got below 2,000. It got below 2,100. So it was down 50%. I mean, MicroStrategy was getting obliterated, down over 50%. And that was after blowing another 2 billion, buying more Bitcoin just before the market tank. … All the altcoins, everything was getting smoked in crypto.

Trump’s play would be obviously illegal in other contexts. Peter argues that while traditional stock manipulation would be met with harsh penalties, crypto manipulation remains in a legal gray area:

If Trump was manipulating stocks, it’d be illegal. He could be impeached if he was giving his family members inside information. ‘Hey, I’m going to put a post out about this particular stock, so you should buy it now or you should short it because it’s going to be a negative post.’ And then they position themselves to profit. He comes out and he posts something and the market tanks or goes up and his kids sell out. It’d be totally illegal. But since he’s doing it with crypto, I guess it’s completely legal. You can manipulate the crypto market. I guess it’s not a crime. You can pump and dump all you want, even if you’re the president of the United States.

Peter questions the rationale behind the selective backing of Bitcoin over others coins. He points out the inherent absurdity of a government reserve that picks winners while ignoring equally viable alternatives:

And what is the argument for a ripple reserve or a solana reserve or any of these other cryptos that they want to put in there? And if you can say, well, we should have a reserve with solana or cardano. Well, you know, why not dogecoin? Why not throw it in there? What about fartcoin? …  I mean, think of all the valuable assets that are out there that we don’t have a reserve of. I mean, all we have, we have a gold reserve and an oil reserve. That’s it. I mean, we don’t have a wheat reserve– or corn or soybeans. We don’t have a copper reserve. We don’t have a reserve of stocks. 

The crypto reserve is a big distraction from other disastrous policy, namely tariffs, that threaten the US economy:

I just think our position is rapidly deteriorating. The industrial base of the United States is disintegrating. We are wasting our resources on crypto and other things. And while we’re doing that, we don’t have the production. We can’t produce the things that we need. And we are more and more dependent on the rest of the world, which means those tariffs are going to bite even harder because we have no choice. Most of these goods that the president wants to tariff, there are no domestic substitutes. So we can’t buy U.S. We have to buy foreign and we have to pay those tariffs or we just don’t buy at all. 

In his final salvo against unsustainable fiscal policy, Peter critiques the foundations of state retirement programs. He calls out Social Security as nothing more than a Ponzi scheme—a system that relies on new contributions to pay off old liabilities, rather than on genuine wealth creation:

The reason that Social Security is a Ponzi scheme, as opposed to a legitimate retirement plan, the people who get Social Security payments now, where’s the money come from? It comes from the workers who are being taxed, and where’s their money going to come from when they retire? From the younger workers who are still working. So the people who are working now are paying the benefits of the people who are retired and they hope that when they retire, a new group of workers is going to pay their benefits. That is a pure Ponzi scheme. That is exactly what a Ponzi scheme is. When you pay off the old investors with money from the new investors.

For more analysis of last week’s market slump, listen to last week’s episode of the SchiffGold Friday Gold Wrap!