Peter Schiff: This Crisis Won't Be Like 2008, It Will Be a U.S. Sovereign Debt Crisis
Summary
Market Outlook: Peter Schiff predicts a U.S. sovereign debt crisis, driven by the Federal Reserve's monetary policy errors, including premature rate cuts amidst rising inflation.
Gold and Silver Surge: Gold prices are nearing $3,700 an ounce, and silver is at its highest since 2011, as investors move away from the dollar and U.S. treasuries, favoring precious metals.
U.S. Dollar Weakness: The dollar is declining due to the Fed's anticipated rate cuts and the global shift away from holding U.S. debt, with central banks increasingly buying gold instead.
Federal Reserve Critique: Schiff criticizes the Fed's dual mandate and suggests a return to a gold standard or a system without a central bank to prevent inflation and economic instability.
Global Debt Repricing: Countries like China and Japan are reducing their U.S. Treasury holdings, signaling a global repricing of U.S. debt value amid record U.S. deficits.
Investment Opportunities: Schiff highlights undervalued gold mining stocks as a lucrative investment, noting their potential for significant gains as gold prices rise.
Future Economic Risks: Schiff warns of potential government interventions like capital controls if a banking crisis occurs, emphasizing the need for sound monetary policy.
Long-term Outlook: The podcast discusses the potential for a shift towards sound money policies or a deeper economic decline, with Schiff remaining critical of current fiscal and monetary strategies.
Transcript
[Music] Hey everyone, welcome back to Kicko News. I'm Jeremy Saffron. A great repricing appears to be underway across global markets and we're seeing it in real time. Gold is smashing fresh records, trading near $3,700 an ounce. Investors pric in lower real rates and a weaker dollar and silver. Look at that chart. It's at its highest level since 2011, above $42. And that that's a 14-year high, by the way. Now, the dollar is on the back foot into this week's Fed decision, nearing multi-week lows against major peers. And I got to say, do you remember 17 years ago today, September 16th, 2008, the FOMC held rates steady at 2% while the Federal Reserve's primary fund broke the buck. And that night, the Fed authorized up to $85 billion to rescue insurer AIG. Now, the New York Fed president missed the meeting because he had to deal with AIG. And history doesn't maybe repeat, but does it rhyme? The Fed's meeting today is under intense political pressure, and market is betting on a rate cut almost 100% according to CME Fed Watch tool. And our guest today has long called that a catastrophic mistake. Joining me now is Europacific's Peter Schiff. Uh Peter, welcome back. Good to see you. Thanks for joining us. Oh, thanks for having me on. You I guess I forgot to dress up. I forgot that you're so professional at Kiko. Thanks, mate. Well, we try to be and we try to get to the actual news. And you know, with that, I got to ask you, I mean, is the market finally being forced to price in the decades of policy errors that you've warned about here. Yeah. In fact, we're about to make another one. I mean, this may be the biggest error yet for the Fed. I mean, they're going to cut rates tomorrow. Uh, and not only should they not be cutting rates, they should be raising rates. I I I've said all along that a they waited too long to raise rates, which a lot of people now agree with. And of course, they they never should have cut them the way they did. That was an even bigger mistake. But they aborted the tightening too soon. And I think the reason they did it was because the banks started to fail. Uh that was really the catalyst. It wasn't because they they they won the battle over inflation. Uh they were just afraid to keep waging the war because of the collateral damage. And I think that's the reason they're about to cut in the face of worsening inflation data. And not only is the official rate well north of their 2% target and you know inflation is further above 2% now than it ever was below it. And when it was below target uh we had 0% interest rates, we had quantitative easing. It was this huge emergency that 1 and a.5% inflation is just too low. you know, we have a 2% target, so they had to do whatever it took uh to rid us of the menace of 1 and a.5%, right? We had to have two, but three and a half, no, no, that's fine. We can cut rates. We don't we don't need to fight 3 and 12% inflation with the same veracity that we fought 1 and a.5% inflation from the other direction. But the reason that the Fed is ignoring not only inflation above target but rising is because of the cracks uh in the the foundation of the economy and and the Fed has been able to kind of deny uh that based on bogus jobs numbers. Uh well, now that we've had a lot of revisions, uh the Fed can't pretend that the labor market is as strong as as they've been pretending. and uh and so now they're going to cut rates because of the weakness in the in the labor market and the economy, but the rate cuts are not going to deliver the expected relief. I believe that they will backfire in that they will cause long-term rates to rise, which is really what they want to reduce and that will ultimately usher in a return to quantitative easing. And and that's the nail in the dollar's coffin. And I think that's why you're seeing, you know, the dollar is weakening today. I think right now it's the second lowest level of the year if you look at the dollar index. Uh now we have a back at a 96 handle. Um and yeah, I mean gold almost crossed $3,700 an ounce uh this morning. It'll probably, you know, cross it either later today or by tomorrow. Uh I I think that you know the central banks are voting with their feet when it comes to their preference to own gold. Uh they're getting rid of their dollars. They're getting rid of their treasuries and lower interest rates are just going to accelerate that move. Yeah. Yeah. Well said. And we can start with that dollar reserve status kind of topic. I mean, the Treasury's TIC data shows China's Treasury is holding near the lowest since 2009. I think about 756 billion as of June. Japan's still the largest holder, roughly one.15 trillion. But I mean, Peter, is the world actively repricing the value of holding US debt? Yeah, absolutely. Plus, you can't just look at the raw numbers. Yeah. Because look at all the additional debt that, you know, we have, you know, issued over the years. So, if China still has the same dollar amount of treasuries it had 5 years ago in relationship to the outstanding treasury supply, it's really going down. And and so that is the problem because our deficits have never been larger than they are right now. You know, we took the problem that Trump inherited. And I say inherited because Trump was obviously president before. So he, you know, is partially to blame for the Biden deficits, but he took those deficits and he made them worse with the big beautiful bill. So the United States have to buy has to borrow more money than ever before. Plus, we have the problem of having to refinance almost $ 38 trillion. You know, the national debt is financed with short-term paper. So, the majority of the national debt will come to during Trump's term. So, not only does the US have to finance three trillion4 trillion of annual deficit spending, but we have to find buyers for, you know, 10 trillion a year of maturing debt or something like that. So it's it's enormous uh what we have to finance and the world just does not want to do it and they're diversifying out of dollars and of course we keep flooding the world with dollars because even though we have these tariffs we still have trillion dollar a year trade deficits. Uh and so what is the world going to do with all these dollars that it earns selling us all this stuff? Well, they used to buy treasuries. They used to buy US stocks. Now they're buying their own stocks and they're not buying treasuries. They're not buying dollar debt and the central banks aren't buying it either. Yeah. And the central banks are buying gold. Yeah. Yeah. And they continue to. I mean, we're seeing some of this data. Poland just came out with more figures. And I got to ask you, I mean, with the with the foreign buyers like China and Japan stepping away from our Treasury market. The US obviously has that massive funding gap. happened just yesterday. The Senate confirmed Steven Mirren to the Fed Board official who's been publicly highlighting the Fed's forgotten, as he calls it, the third mandate, right? To pursue moderate long-term interest rates. Is this the administration's new plan to use the third mandate as a political cover to kind of force the Fed into permanent QE? Well, there shouldn't even be a second mandate, let alone a third. the the only mandate and should be uh no inflation or price stability which should be defined as zero inflation. Although I don't think 0% inflation is necessarily better than than than falling prices. I I'd rather see the cost of living go down than stay the same. Uh but you know at a minimum they should target stability, not 2% inflation every year. That's a 2% decline in in in your standard of living if everything is 2% more expensive. Uh but the Fed can't really target interest rates by by monetizing debt because in order to do that it creates inflation which ultimately puts upward pressure on the very long-term interest rates they're trying to suppress. So really, the best way that the Fed could uh try to create an environment where we have a sound economy with low unemployment and low interest rates is to have sound money, is to fight inflation. But that's the one thing that that that the um Trump administration doesn't want the Fed to do. The last thing that Trump wants the Fed to do is fight inflation. Trump wants the Fed to blow air into the bubble so he can take credit for a phony economic boom. And what he doesn't want to have to accept responsibility for is a bust. Even if the bust is catharic in that, you know, we we fix the problems that underlying the economy and we lay a foundation for lasting economic growth in the future. Trump doesn't care about economic growth in the future because he won't be president in the future. He's president right now and so he wants to take credit for an economic boom and the only way we can have one is to have a phony one. All we can have is a bigger bubble. And so that's what Trump's fiscal policy is trying to achieve and that's what he wants the Fed to cooperate. He wants a massive bubble that he could put a big tea on. Uh and and everybody can think they're getting rich as you know they're going broke. Yeah. So, so I mean essentially printing money to finance the national debt at artificially lower rates and I mean we've seen a version of this in Japan for the last two decades. The result was an immediate hyperflation but economic stagnation and a collapse in their currency's value. I mean the US dollar is the world's reserve currency. If the Fed is seen to be openly monetizing the debt, doesn't that trigger an immediate or more of an acute global crisis of confidence far faster than what you've been predicting? Yeah. Well, I think it's already started. It's just going to accelerate. And I think there's a real danger right now that the Supreme Court in this Lisa Cook firing, they may actually rule that Trump does have the right to fire her because they may rule that an independent Fed is not constitutional. They may say that the Fed needs to be beholden to an elected official, that there's nothing in the Constitution that authorizes a third a fourth branch of government. You know, a lot of people say that, well, the Fed is the most powerful uh Fed chair is the most powerful person, you know, in in the country. Well, but there's nothing in the Constitution that that that gives the the Fed uh governor any power because there's nothing in the Constitution that even authorizes a Fed. So, I I think it's possible that they come out and say, "Look, you know, uh the FOMC members have to serve at the pleasure of the president. There needs to be accountability to an elected official. they can't sit there above, you know, the law or, you know, they can't be a government unto themselves that's not authorized by the Constitution. This, you know, uh and and so it could completely destroy Fed independence because what they're going to say is that the president can fire anybody from the FOMC for whatever reason he wants as long as he has a cause. You know, it's that's, you know, it could be cause, right? I I don't like that person, so get rid of him. And I think that will destroy uh what little confidence there is left in Fed independence. I mean, I've never really believed that the Fed was truly independent. I thought it was more of a of a pretense, but everybody kind of like accepted it, even though it was pretty clear that uh Treasury and the Fed worked together, especially in times of a crisis. Uh they were always kind of working at dual purposes. Uh instead of providing the checks and balances, I mean, the Fed should be independent. the Fed is supposed to take the punch bowl away uh you know before the party uh really gets going, not spike it and make sure that you know everybody's everybody stays at the party uh too long. Uh but I think if we drop the pretense of independence and let the world know that whoever we elect president is really the de facto chairman of the Fed. Uh, and you know, as bad a president as I think Trump has been with economically, he could be succeeded by by somebody far worse. Yeah. You know, I I think like if if AOC was president, I think she would even do more damage with the Fed than than Trump will do. Um, so you scared you scared our viewers there, Peter. You're scared bringing up AOC. I got to ask, I mean, because for years critics have argued that the Fed is, you know, unelected, unaccountable body with far too much power. Isn't this political clash, as messy as it is, a necessary and maybe even a healthy process? Do you think it's time for the Fed's power to be challenged and and for it to be brought under some form of democratic control, even if it's chaotic? Well, I mean, first of all, nobody has been a bigger Fed critic over the years than me. Yeah, I mean, I blamed them before the 2008 financial crisis before it happened because I knew the crisis was going to happen because I understood the monetary policy mistakes that the Fed was making. But be that as it may, the only thing worse than the Fed we got would be a Fed controlled by the president. Yeah. Uh I I think to the extent that there's any independence at all at the Fed, that's better than than no independence. Now, ideally, right, if it was up to me, there would be no Fed. But that doesn't mean that I would just hand the printing press to Congress or the president. I I think we should have the same monetary system that existed before the Fed. Interesting. And before we had a Federal Reserve, uh the only thing the US government did was coin gold and silver, which is all that's authorized uh in the Constitution. And to the extent that we had banknotes that circulated, they were all issued by private banks. Uh they were not issued by a central bank and they were never issued by the United States government. Now in theory, if we can go back to the original intent of the Federal Reserve in 1913, that's still not that bad. The problem was the camel's nose under the tent. The original Federal Reserve was a private banking syndicate. it, you know, that that that's why it's independent because it was never part of the the federal government because the federal government is not allowed to do what the Fed does. The federal government doesn't have the constitutional authority to print money. Only private banks can issue paper currency. Not there's no uh monetary authority in the constitution for the United States government to do that. So, they allowed the Fed to do it. But I I never liked the whole uh relationship between the government and and the Federal Reserve. But at least the way the Federal Reserve was originally conceived in the original Federal Reserve Act, it was illegal for the Federal Reserve to own any US government debt. It couldn't buy it and it couldn't own it. And they changed that. Um, and it still can't buy it. The Federal Reserve is not allowed to buy any treasuries directly from the US government. that that's still the case, but it is allowed to buy them in the secondary market and that's what it does through these primary dealers. But the way the original act was conceived and ratified, they weren't allowed to own them at all. And that's because the Congress that passed the Fed did not want the Fed to facilitate deficit spending. They didn't want the US government to be able to rely on the Federal Reserve to finance debt. And that was very smart. No, if they were even smarter, they never would have established a Fed because they would have realized that once that power was there, it would get abused. And it didn't even take long. They amended the Federal Reserve Act shortly after they passed it so that the government could use the Federal Reserve to finance World War I. Uh, and so, you know, it didn't take long to corrupt it. Uh, but I I my criticism of the Fed is not because of its independence. I just I criticize the entirety of the institution. But I recognize that if we gave the power of the printing press directly to the US government, they would abuse it even more than the Fed. And so it we'd have even more inflation uh than we do now. I just I'm going to bring you back to 2008. I mean, let's assume we kind of hit that tipping point because in two 2025 now, I mean, a bank run as we're talking about kind of seems digital. I mean, it's Silicon Valley Bank. They had 42 billion that tried to leave in about 8 hours. One institution because mobile banking and social media amplified the fear. I guess the question is can can the plumbing, you know, the AC, the Fed wire handle a rush across so many banks or does it just simply freeze in this situation? Well, you know, I think the overall banking um situation is worse now than it was back then. You know, I all of the too big to fail banks that we should have allowed to fail are now much bigger than they were. And the balance sheets of a lot of these banks are, I think, in a lot of trouble because they own a lot of long-term lowy yielding debt, whether it's treasury debt, mortgage back securities, mortgages, commercial loan, whatever it is. um they've got all this all this debt that they don't mark to market. You know, the the accounting says that as long as you claim that you're going to hold your securities to market, you don't have to take a haircut. You can pretend that your capital isn't impaired. And that's fine until there's a run. Yeah. Until depositors need their money. And I mean that's what you saw happening on a small scale with Signature Bank and Silicon Valley Bank. But that could happen on a bigger scale with Bank of America. Yeah. And Wells Fargo and JP Morgan and Morgan Stanley and all these big banks. Uh there could be uh a a a run uh that would would would collapse them. And of course the only the only way the only way to keep them propped up is for the US government to do it. Yeah. But you know then you destroy the currency. You see the the the crisis that I believe that we're headed to is is not going to be similar to '08 in that '08 was a loss of confidence in in mortgages and banks uh you know who were the counterparty to a lot of these trades uh in in the mortgage market. This is not going to be about a loss of confidence in in private credit but public credit. It's going to be about a loss of confidence in the US government. Not necessarily that the US government's going to default. Uh which is certainly not, you know, outside the realm of possibility. I think there is a possibility that there is an outright default on US treasuries. But I think that what the markets are more concerned about is not that the US government defaults, but that it pays with dollars that have very little value because the money uh to cover uh the principle and the interest is created out of thin air by the Fed. And because there's no real buyers for maturing treasuries, uh the Fed doesn't become the buyer of last resort. It becomes the buyer of only resort. and we destroy the currency and and and so I think this current coming crisis is a sovereign debt crisis and a US dollar crisis and and and that is also why the price of gold uh almost touched $3,700 this morning and is headed much higher. Yeah, it is. And I need to get your outlook on it. Uh before I do talk about gold, I mean in that scenario you were talking about a bank run or it could happen to a Bank of America, something bigger. I mean what does the government's panicked response look like? Is it capital controls, withdrawal limits, a banking holiday? I mean, there was the president, right? In 1933, Roosevelt declared a national banking holiday. Greece in 2015, they imposed these withdrawal caps. What do you think? Well, I think eventually there may be some foreign exchange controls when the dollar really is going into freefall, uh, which I think is going to happen at some point. And I think that the US government may try to stop the bleeding. Uh and that's going to be when US uh citizens try to get rid of their dollars. So as you know, the world is getting rid of their dollars. Uh you know, I was watching on television this morning and Scott Besset was on and he said US Treasury bonds are the best performing sovereign debt year to date and he's wrong about that because he's not factoring in foreign exchange. uh the world has seen significant losses on US treasuries this year due to the 10% decline in the value of the dollar which has more than wiped out the coupon uh and and so I think as with foreigners getting rid of their dollars uh that's not the concern but once American citizens come to the same conclusion that they don't want their dollars either and they want to convert them into some other currency to preserve the purchasing power and then you really start to see the decline in the dollar accelerating. Yeah. Uh then the government may try to put a stop to that with exchange controls. Uh that's kind of like price controls, right? The way the government will react, you know, you government creates a lot of inflation, prices go up and then the government responds by blaming uh the merchants or the labor unions. And so we have to control prices. because we have to control wages. The same thing will happen with the dollar in foreign exchange markets. They'll say, "Oh, it's the speculators. We have to stop all these foreign currency speculators from wrecking the dollar." It's not going to be the speculators that are wrecking the dollar. It's the government that's wrecking the dollar. It's the Federal Reserve. It's the US Congress, right? The speculators are simply reacting to what they're doing. Right? Just like when I raise my prices, if I'm a merchant, I'm raising my prices in response to inflation. I'm not causing inflation by raising my prices. It's the inflation that's causing me to raise my prices. And if people start dumping the dollar, it's because of the fundamentals, the inflation that's being created by the central banks that is forcing them to dump their dollars before their dollar loses any more value. I mean, people don't want to go down with a sinking ship. You want to jump off. Yeah. Yeah. Well said. Uh K, turn to gold for me. I mean, our time always goes so fast because on in April, we had you on my show here and you told our viewers not to chase physical at the highs, but buy dirt cheap miners. I mean, the miners have some of them at least have kind of been ripping. Has the easy money already been made or are we still early in the cycle? Well, the easiest money has been made and you're right. When I was on in April, I had just come out with a special report that I was, you know, circulating on the internet. People can get it on my website at europac.com. uh the best way to buy gold. And I I did that because, you know, gold was over $3,000 an ounce, yet the gold stocks were where they were when it was $2,000 an ounce. Yeah. And and so in my mind, you know, why go pay $3,000 an ounce for gold when I can buy gold in the ground that's still valued at less than 2,000. In fact, way less than that. I I thought that if you looked at what you were paying to buy these gold money, gold mining companies, that gold still in the ground had never been so cheap relative to gold above ground. So, it wasn't that I didn't think gold was going to keep going up. I just thought, why buy it when they're giving away these gold mining stocks uh and they're so cheap and the downside I thought was so minimal, it made a lot of sense. And you know, now I think year to date, gold's up what, almost 40%. Yeah, but gold stocks have more than doubled. So uh and so people have made a lot more money uh you know starting in April because even the first quarter the gold stocks didn't even move. It started in Q2 and the whole doubling was basically in the last maybe six months. Didn't even take a whole year to double. Yeah. and and so um but I don't even think gold stocks have caught up to $3,000 gold yet, let alone 3,700 and we could easily be at $4,000 by the end of the year. So, you know, I'm not telling people to stop buying physical gold and silver now because it's it's it's not that obvious, you know, but at that moment in time to me, these mining stocks were so ridiculously cheap that I couldn't see putting any money into physical gold when you could just buy these miners. It just I just did not see the downside risk and I thought there was huge upside potential. Now, we've we've realized some of that upside potential, but you know, I think in the scheme of things, these stocks are still very cheap. If you look at the pees of the big gold companies, they're very low uh compared to historic averages, compared to the market multiples that the investors are not in. I mean, they've still had net liquidations all year out of GDX and GDXJ, these gold mining ETFs. Nobody talks about these stocks. Nobody owns these stocks. Pneumont Mining is the best performing stock in the S&P 500. Uh yet it's probably the the stock that's least owned in the S&P 500. Yeah. And the margins I mean the margins are incredible here. Oh, look there. Look, they're going to make nothing but money uh for years to come. Uh they they they are producing a product that everybody needs whether they realize it or not. I mean, the central banks are huge committed buyers, right? they they're not going to stop buying gold because they're not going to stop divesting of dollars and they keep earning dollars, right? Because we're hemorrhaging dollars due to our trade deficit. So, not only do they have to get rid of the dollars they own, they have to get rid of the dollars that they they keep getting and and and so they're going to keep buying gold. And as the price of gold rises, it's just going to suck more central banks into it because the central banks that aren't buying gold are falling behind the ones that are. And gold is becoming increasingly more important as a reserve asset. Not just because central banks are buying more of it, but because the price of what they own keeps going up. And that means that the value of their gold as a percentage of total reserves keeps going up. And so, you know, there's going to be a FOMO in central banks to get into gold and and and they're just, you know, they're price agnostic. I mean, they're not going to stop buying because the price goes up because they're just trying to get rid of their dollars before the price goes down. But at some point, uh, the the investing public is going to join this party. I mean, I think to an extent some money is already coming in and that's why the gold stocks have had the move that they had, but this is just the tip of a of a huge iceberg that we've seen and so far the the the buyers have been patient and they've been buying on the pullbacks and there hasn't been any crazy updates. There's no real euphoria and I still see sharp corrections like what we're having today. You know, gold doesn't even go down, right? uh and all of a sudden these stocks are down three or four percent just because people are afraid. Oh no, this is it. You know, but the minute gold doesn't go down and goes back up, then the buyers come rushing in. The coast is clear. Uh but we we're going to get into a stage maybe next year, you know, with gold well north of 4,000, maybe 5,000. Maybe the gold stocks double again from here, but at some point they're going to get on the radar of the average portfolio manager and they're going to start buying. Yeah. And so long way to go. Where is that better riskreward? I mean, is it is it still with the big established producers or is it with these junior exploration companies, more speculative? Well, I mean, there's a lot of smaller companies that aren't as speculative as you think. I mean, if you're talking about a pure exploration type company, Yeah. because you don't know what they're going to find. Maybe they find nothing. But there are a lot of very small companies that have proven uh reserves that they just haven't raised the capital uh to to dig up yet, right? They're at the earlier stage. You're not at the exploration stage. Uh although they may be exploring for more, but they have provable assets. Uh and they just haven't developed them. So they're not, you know, in production. They're not generating any income. And I think there's some incredible value there because I think these companies are going to get bought up. I mean, a it'll be a much friendlier environment to raise capital uh in the future and they will be able to raise capital to build out these projects, but I don't think they'll have to because I think the bigger companies that really have not been investing much in exploration and development, they've just been paying down debt and now they're buying back stock. I think they're just gonna have so much cash that they're generating. Uh they're going to have to do stuff with it. And I think it's going to be cheaper to buy out other companies than spend money on exploration and development. I mean, because you you roll the dice on exploration, you don't even know what you're going to find. True. Why do that when you could just buy up these companies and get their whole book of business, right, on the cheap? So I I look there's just going to be so much money made I think in the consolidation of this industry which I think is going to happen before there's any really major increase in expiration and you know of new projects which is another reason you know the price is going to keep going up. Yeah because there's not going to be it's not like when gold is $5,000 an ounce there's suddenly going to be all this extra gold that's being mined. It's not going to be there. Yeah. there may be some more marginal supply. Maybe Americans will start selling off their their jewelry at $5,000 gold, you know, to pay the to pay the grocery bill, you know, but you know, that that's not going to make much of a difference uh in the scheme of things. Uh and so there's not going to be a lot of new production and you know, uh one of the sources of supply used to be central banks selling. Central banks are not selling again. They're buying and they're going to keep buying. especially these emerging market brick nations, they still have, you know, very small uh uh percentages of total reserves in gold. Even though they've been buying, they have a lot more to buy. You know, it's just that the major central banks like, you know, uh in Western Europe, United States, where we still have a lot of gold, but we're not we haven't been buying, right? The United States hasn't bought any gold. I mean, we're we're thinking about buying Bitcoin. That's how dumb we are. Bitcoin. Oh, we're going to get Well, we should probably get into that. But before we do, let's take on this. I got to stay on the miners because I mean, I've been following your tweets. I know when Intel and you know, the US struck that deal. It was interesting. I don't know if you heard about this new report out of Bloomberg this morning, but the US government is now in talks to launch a $5 billion mining fund with Orion Resource Partners via the DFC to secure, you know, supply chains and to counter uh China. Are policy makers about to fuel a a bubble in this sector we call a safe haven or what are your thoughts? Well, look, I don't like any of this stuff. I don't like centralized government planning. I don't like the governments taking an active role in the economy. I don't like the government picking winners and losers and buying into companies and and so the Trump administration is doing a lot of things that under normal circumstances Republicans would oppose. Yeah. I mean, almost everything Trump is doing, if Biden had done it, there'd be universal opposition to the exact same programs. Uh, so none of this stuff is going to work. It's all going to backfire. What it does is it leads to a less efficient allocation of capital and resources. It undermines productivity and economic growth and it leads to higher inflation uh and and a and a weaker dollar. So it all this stuff is bad, you know, and so from that respect, yeah, it's going to be good for gold and precious metals because inflation is good for hard assets, you know, especially especially gold and silver. So when when governments screw up, you know, gold does well. I mean, that's why it's almost a can't lose bet because there's no way the government's going to do the right thing. So if you want to sure bet, you bet the government's going to do the wrong thing. And you know, given the choice between doing the right thing and doing the wrong thing, they'll always choose the wrong thing. So that's why gold's been go going up for 25 years, we've just made a series of mistakes. They get bigger and bigger and bigger. Yeah. Do you ever get worried? I mean, this government control you're talking about in a crisis. A gold or a critical minerals mine isn't just a profitable comp company now. They're they're really making it a strategic asset. I mean, we've already seen that aggressive use of national security tools. CFI US scuttled that US Steel Nepon. Uh the Defense Production Act has been invoked repeatedly for minerals in extremists. I mean, why wouldn't a desperate government assert control over domestic mines? Well, that doesn't work out very well. Look at all the countries that have done that and they destroy the mining industry the more the government gets involved. You know that the free market will take care of all this stuff, right? You you need to have private uh companies seeking to maximize profits with the full and transparent uh price mechanism of a free market guiding their their decisions. You know, whenever the government steps in, you circumvent or short circuit free market signals and and and you don't get an opt optimal outcome. So, you know, either you believe in capitalism or you don't, right? and and and clearly the Trump administration doesn't believe in capitalism. Yeah, we were talking a little bit about M&A there and I mean the CEO of a major producer Agniko Eagles, Amaral Jundi, we've had him on this show and he he recently warned against irresponsible M&A just because the gold price is so high. I mean he's kind of praising capital discipline in the industry because they finally learned it is what he was saying. But now, you know, these companies face a potential flood of this new capital from investors chasing this rally. And then we got these $5 billion initiative from the government. I mean, does this new gold bull market corrupt the miners? I mean, will they abandon discipline and repeat the mistakes of the last cycle? What are your thoughts? Well, hopefully not. You know, I've I wrote out the last cycle, so I have a lot of wounds from those mistakes. Um, but but but hopefully. Look, you know, I remember when one of the big mistakes they had in the early rally, uh, you know, 20 years ago was too many hedgebooks out there. And so the price of gold was going up, but they the miners were hedged because it had been in, you know, down at 200, $300 for so many years. Uh, everybody assumed that it really couldn't get above 400. And so, uh, they had a lot of hedges, uh, in place. But look, I I think that it's going to make a lot of sense for these companies to invest in acquisitions because if you're a gold mining company and you have the expertise uh and you have the resources to build out and develop gold mines, but you don't have, you know, the the reserves, it makes sense to go and buy them, you know, and especially if a lot of these smaller companies have properties that are in proximity to the properties that they're already mining, you know, where the cost of developing those projects uh incrementally would not be that great. Uh so, you know, that that's what's going to happen. Those kind of acquisitions are going to make sense. I'm not talking about, you know, just paying a premium for another public company that's already high and just, you know, doing a, you know, deal. But, uh, these smaller companies, uh, it it makes it's going to make a lot of sense as long, you know, they do their homework and they go in there and, you know, they kick the tires and and see what they've got. Um, uh, but then, yeah, make a strategic move to acquire these assets to develop them uh, for future income opportunities because they have to replace the reserves that they deplete, right? There's only so much gold they have. Yeah. And if they run out of gold, then then we're out of business. So they either have to spend money uh you know exploring for gold or they can buy it if they can get a better deal. And I think there's a lot of better deals out there uh that are a a alternative to exploration. Yeah. Speaking of better deals, uh before I let you off here, I mean we got to talk about silver just hit that 14-year high. I know on your X feed you called it a kind of an express train to 100. I mean gold's move is often you know the central bank buying and its monetary role as we know I mean it's kicko but the case for silver seems more complex here what what what's the primary driver that takes silver from 42 to 100 is it monetary demand or is it a squeeze in the industrial demand I mean it could be both you know I mean there there there isn't a lot of silver out there relative to I the demand that I see for it in industry but silver is just cheap um you know and it's cheap relative to gold. And that's the best barometer of whether something is cheap or not is look at it priced in gold. And you can still get a lot of a lot of silver for an ounce of gold. And you know, even at $50 silver and $4,000 gold, that's still 80 to1. Yeah. You know, that's that's still pretty cheap. Yeah. if if you know if silver hits 50, when gold's at at at at 4,000. And I think that once silver gets above 50, I think it's going to take off. I think the move from 50 to 100 will be relatively quick. I mean, it'll be a lot quicker than the move from 30 to 50. It may even be quicker than the move from 40 to 50. Uh, but I think it's going to unleash a lot of pent-up demand. Um, you know, I mean, why shouldn't silver be double its 2000 or 1980 high? I mean, gold's 1980 high was 850 and well, we're quadruple that. Uh, so I mean, and silver is still below below its 1980 high. And and so, you know, there's not that many things that you could find that are cheaper than they were in 1980. Silver's one of them. Um, so, you know, I I I I think I think it's it's very cheap. Um, and you know, but you know, and other precious metals are cheap, too. Look at platinum. I mean, you know, uh, compared to the price of gold, and platinum has already had a big move this year, but it's still pretty cheap. So, I think we're getting we're styling finally starting to see some of the other precious metals moving. But silver has always had a stronger monetary correlation with gold. I mean, we sell, you know, a lot of gold and silver at Shift Gold. You know, we don't sell a lot of platinum. I mean, even though I actually started recommending it when it was under a,000 and gold was over 3,000. I said, "This is ridiculous that you could buy 3 ounces of I mean, one 3 ounces of platinum with a single ounce of gold." But even then, we didn't get that many people that that that want to buy platinum. Uh, but, you know, so silver is more what people buy, maybe the poor man's gold. Uh, and I think that's also part of what's been going on here is that the central bankers as the primary drivers have not been buying silver. They they don't want silver. They It's too bulky. They They want gold. But when the public wakes up to what the central banks are obviously already cognizant of, the public will buy silver. And and so when this becomes a retail driven bull market as opposed to a central bankdriven bull market uh then I think silver is going to respond and uh and you know and while I'm mentioning even shift gold and I I'm you know sure the same thing at Kiko you know we are not even close to the volume we had in 2020. I mean, 2020 was by far the best year we've had as far as, you know, sales and profits as well. There was a rush for a while. People wanted to buy gold and they wanted to buy silver. That has not been the case recently at all price. Is it just prices? Is it just, you know, 3,700 42? I mean, is it just prices or is it, you know, it's I think it's a number of things. I mean, the NASDAQ is at new highs, so people are making money on tech stocks, and so uh and they're not worried about buying gold. There was a lot of false optimism, I think, from the election of Trump. I think a lot of gold buyers are Republicans. And when Republicans are optimistic, they don't buy as much gold. It's when they're worried that they buy more gold. like when you know when there's a a radical left-wing uh president that might rile the feathers of Republicans and they they may start buying more gold and more ammunition and more canned food and stuff like that. But if they're optimistic because they think they got this conservative in Donald Trump, uh they're not buying. Even though Trump's not a conservative, he's, you know, he's pursuing the most reckless fiscal policy I've seen, you know, in modern memory. uh and and and and we're about to see the most reckless monetary policy uh as well. Uh so if if gold buyers understood this, they'd be buying. But I also think, and I know this from conversations that people at Shift Gold have had, people are worried about buying the highs. They're they're worried, you know, oh, I'm going to wait for a pullback. I I you know, because I think they've been so conditioned. We had a long period of time from 2011 to 2024 where gold didn't go up and every time it got near 2000 it came down and you know and so I think people are a little gunshy about buying these highs uh and they're waiting for pullbacks and I've been telling people not to wait for a pullback because I don't think there'll be any meaningful pullbacks. Not that there won't be any, but they won't be big enough uh to to wait for and you'll probably miss it because it'll be over so quickly. Uh so I've been saying, look, if you want to buy gold, if you want to buy silver, then you got to buy the highs because that's all we're going to get is is highs. And the problem is the longer you wait to buy the high, the higher the high you're going to buy. That's basically the mantra now. So, you just buy it. You know, don't worry about uh where the price is going to be because it's going to be higher. And if you get lucky and the price goes down, well, then the next time you buy, you'll get a better deal. Yeah. Especially with the central banks on auto buy. Uh, okay. Before I let you go, I mean, you've been early on this thesis, right? You've been years ahead. You've been criticized for it, but it is starting to play out. I'm curious. I mean, when when future historians look back on this period, what are they going to write, Peter? I mean, will will they see it as a moment America chose a path of of managed decline through inflation or is it going to be as painful but this necessary crisis that kind of forces to return to sound money? Well, you know, that that book isn't written yet. So, I don't know because we don't know if this is going to be a catalyst for a positive change or if it's going to be the opposite. uh you know are we going to go all in on socialism and completely destroy uh what's left of capitalism and have hyperinflation and a totalitarian society for you know I mean look look I mean look how long uh Argentina had a had a sweat it out before they finally elected Malay and you know we could be in for an even darker economic period than they live through. So, I don't know. Uh, you know, I can still be hopeful that we'll learn our lesson and we'll do the right thing, but there's no sign of that now. I mean, now we're doing everything wrong if, you know, that we could possibly be doing wrong. Um, but, you know, we haven't really been forced to do anything right because we've been able to kick the can down the road. uh we've been able to keep running these deficits, the budget deficits and the trade deficits to the point where, you know, Donald Trump actually thinks that the world depends on us, that we got them, you know, just where we want them because we consume so much and we borrow so much, that we're so important. Well, he's going to be in for a rude awakening when he finds out that it's the other way around. that that the world needs us like a hole in the head. That the world is perfectly capable of consuming what they produce and they're perfectly capable of investing their savings in their own economies. They don't have to loan their money to us. Uh the problem is Americans can't produce what we what we need and we don't save what we borrow. So we we're we're the nation that depends on the rest of the world. the rest of the world does not depend on us and and so when we realize that and and we get a monetary crisis and and a debt crisis then we'll see. But as you mentioned I do think one of the more interesting anecdotes whenever they write this history book that includes this period probably one of the most amusing parts will be Bitcoin and the crypto craze because that's going to be that's going to be the new uh tulip mania. So, they're not going to have to go back to to to to the the Dutch, you know, in whatever whatever the 1500s, wherever it was, to find a a a great example of mass delusion and the madness of crowds when it comes to a bubble. Uh uh they'll have they'll have Bitcoin. They'll have Bitcoin. So, that'll be a case study for for a long long time. Still not a fan, eh, Peter? All right, man. Listen, we've come up on about 50 minutes. Appreciate it. Of course. Uh quite interesting here. Sobering perspective as always. Peter Schiff, thanks for this. Thanks for joining us. My pleasure. I appreciate it. All right. A great repricing is underway. And the question isn't whether it's happening, it's how it ends. Don't forget to hit subscribe right here on Kitco News. I'm Jeremy Saver. See you next time. [Music] Heat. Heat. [Music]
Peter Schiff: This Crisis Won't Be Like 2008, It Will Be a U.S. Sovereign Debt Crisis
Summary
Transcript
[Music] Hey everyone, welcome back to Kicko News. I'm Jeremy Saffron. A great repricing appears to be underway across global markets and we're seeing it in real time. Gold is smashing fresh records, trading near $3,700 an ounce. Investors pric in lower real rates and a weaker dollar and silver. Look at that chart. It's at its highest level since 2011, above $42. And that that's a 14-year high, by the way. Now, the dollar is on the back foot into this week's Fed decision, nearing multi-week lows against major peers. And I got to say, do you remember 17 years ago today, September 16th, 2008, the FOMC held rates steady at 2% while the Federal Reserve's primary fund broke the buck. And that night, the Fed authorized up to $85 billion to rescue insurer AIG. Now, the New York Fed president missed the meeting because he had to deal with AIG. And history doesn't maybe repeat, but does it rhyme? The Fed's meeting today is under intense political pressure, and market is betting on a rate cut almost 100% according to CME Fed Watch tool. And our guest today has long called that a catastrophic mistake. Joining me now is Europacific's Peter Schiff. Uh Peter, welcome back. Good to see you. Thanks for joining us. Oh, thanks for having me on. You I guess I forgot to dress up. I forgot that you're so professional at Kiko. Thanks, mate. Well, we try to be and we try to get to the actual news. And you know, with that, I got to ask you, I mean, is the market finally being forced to price in the decades of policy errors that you've warned about here. Yeah. In fact, we're about to make another one. I mean, this may be the biggest error yet for the Fed. I mean, they're going to cut rates tomorrow. Uh, and not only should they not be cutting rates, they should be raising rates. I I I've said all along that a they waited too long to raise rates, which a lot of people now agree with. And of course, they they never should have cut them the way they did. That was an even bigger mistake. But they aborted the tightening too soon. And I think the reason they did it was because the banks started to fail. Uh that was really the catalyst. It wasn't because they they they won the battle over inflation. Uh they were just afraid to keep waging the war because of the collateral damage. And I think that's the reason they're about to cut in the face of worsening inflation data. And not only is the official rate well north of their 2% target and you know inflation is further above 2% now than it ever was below it. And when it was below target uh we had 0% interest rates, we had quantitative easing. It was this huge emergency that 1 and a.5% inflation is just too low. you know, we have a 2% target, so they had to do whatever it took uh to rid us of the menace of 1 and a.5%, right? We had to have two, but three and a half, no, no, that's fine. We can cut rates. We don't we don't need to fight 3 and 12% inflation with the same veracity that we fought 1 and a.5% inflation from the other direction. But the reason that the Fed is ignoring not only inflation above target but rising is because of the cracks uh in the the foundation of the economy and and the Fed has been able to kind of deny uh that based on bogus jobs numbers. Uh well, now that we've had a lot of revisions, uh the Fed can't pretend that the labor market is as strong as as they've been pretending. and uh and so now they're going to cut rates because of the weakness in the in the labor market and the economy, but the rate cuts are not going to deliver the expected relief. I believe that they will backfire in that they will cause long-term rates to rise, which is really what they want to reduce and that will ultimately usher in a return to quantitative easing. And and that's the nail in the dollar's coffin. And I think that's why you're seeing, you know, the dollar is weakening today. I think right now it's the second lowest level of the year if you look at the dollar index. Uh now we have a back at a 96 handle. Um and yeah, I mean gold almost crossed $3,700 an ounce uh this morning. It'll probably, you know, cross it either later today or by tomorrow. Uh I I think that you know the central banks are voting with their feet when it comes to their preference to own gold. Uh they're getting rid of their dollars. They're getting rid of their treasuries and lower interest rates are just going to accelerate that move. Yeah. Yeah. Well said. And we can start with that dollar reserve status kind of topic. I mean, the Treasury's TIC data shows China's Treasury is holding near the lowest since 2009. I think about 756 billion as of June. Japan's still the largest holder, roughly one.15 trillion. But I mean, Peter, is the world actively repricing the value of holding US debt? Yeah, absolutely. Plus, you can't just look at the raw numbers. Yeah. Because look at all the additional debt that, you know, we have, you know, issued over the years. So, if China still has the same dollar amount of treasuries it had 5 years ago in relationship to the outstanding treasury supply, it's really going down. And and so that is the problem because our deficits have never been larger than they are right now. You know, we took the problem that Trump inherited. And I say inherited because Trump was obviously president before. So he, you know, is partially to blame for the Biden deficits, but he took those deficits and he made them worse with the big beautiful bill. So the United States have to buy has to borrow more money than ever before. Plus, we have the problem of having to refinance almost $ 38 trillion. You know, the national debt is financed with short-term paper. So, the majority of the national debt will come to during Trump's term. So, not only does the US have to finance three trillion4 trillion of annual deficit spending, but we have to find buyers for, you know, 10 trillion a year of maturing debt or something like that. So it's it's enormous uh what we have to finance and the world just does not want to do it and they're diversifying out of dollars and of course we keep flooding the world with dollars because even though we have these tariffs we still have trillion dollar a year trade deficits. Uh and so what is the world going to do with all these dollars that it earns selling us all this stuff? Well, they used to buy treasuries. They used to buy US stocks. Now they're buying their own stocks and they're not buying treasuries. They're not buying dollar debt and the central banks aren't buying it either. Yeah. And the central banks are buying gold. Yeah. Yeah. And they continue to. I mean, we're seeing some of this data. Poland just came out with more figures. And I got to ask you, I mean, with the with the foreign buyers like China and Japan stepping away from our Treasury market. The US obviously has that massive funding gap. happened just yesterday. The Senate confirmed Steven Mirren to the Fed Board official who's been publicly highlighting the Fed's forgotten, as he calls it, the third mandate, right? To pursue moderate long-term interest rates. Is this the administration's new plan to use the third mandate as a political cover to kind of force the Fed into permanent QE? Well, there shouldn't even be a second mandate, let alone a third. the the only mandate and should be uh no inflation or price stability which should be defined as zero inflation. Although I don't think 0% inflation is necessarily better than than than falling prices. I I'd rather see the cost of living go down than stay the same. Uh but you know at a minimum they should target stability, not 2% inflation every year. That's a 2% decline in in in your standard of living if everything is 2% more expensive. Uh but the Fed can't really target interest rates by by monetizing debt because in order to do that it creates inflation which ultimately puts upward pressure on the very long-term interest rates they're trying to suppress. So really, the best way that the Fed could uh try to create an environment where we have a sound economy with low unemployment and low interest rates is to have sound money, is to fight inflation. But that's the one thing that that that the um Trump administration doesn't want the Fed to do. The last thing that Trump wants the Fed to do is fight inflation. Trump wants the Fed to blow air into the bubble so he can take credit for a phony economic boom. And what he doesn't want to have to accept responsibility for is a bust. Even if the bust is catharic in that, you know, we we fix the problems that underlying the economy and we lay a foundation for lasting economic growth in the future. Trump doesn't care about economic growth in the future because he won't be president in the future. He's president right now and so he wants to take credit for an economic boom and the only way we can have one is to have a phony one. All we can have is a bigger bubble. And so that's what Trump's fiscal policy is trying to achieve and that's what he wants the Fed to cooperate. He wants a massive bubble that he could put a big tea on. Uh and and everybody can think they're getting rich as you know they're going broke. Yeah. So, so I mean essentially printing money to finance the national debt at artificially lower rates and I mean we've seen a version of this in Japan for the last two decades. The result was an immediate hyperflation but economic stagnation and a collapse in their currency's value. I mean the US dollar is the world's reserve currency. If the Fed is seen to be openly monetizing the debt, doesn't that trigger an immediate or more of an acute global crisis of confidence far faster than what you've been predicting? Yeah. Well, I think it's already started. It's just going to accelerate. And I think there's a real danger right now that the Supreme Court in this Lisa Cook firing, they may actually rule that Trump does have the right to fire her because they may rule that an independent Fed is not constitutional. They may say that the Fed needs to be beholden to an elected official, that there's nothing in the Constitution that authorizes a third a fourth branch of government. You know, a lot of people say that, well, the Fed is the most powerful uh Fed chair is the most powerful person, you know, in in the country. Well, but there's nothing in the Constitution that that that gives the the Fed uh governor any power because there's nothing in the Constitution that even authorizes a Fed. So, I I think it's possible that they come out and say, "Look, you know, uh the FOMC members have to serve at the pleasure of the president. There needs to be accountability to an elected official. they can't sit there above, you know, the law or, you know, they can't be a government unto themselves that's not authorized by the Constitution. This, you know, uh and and so it could completely destroy Fed independence because what they're going to say is that the president can fire anybody from the FOMC for whatever reason he wants as long as he has a cause. You know, it's that's, you know, it could be cause, right? I I don't like that person, so get rid of him. And I think that will destroy uh what little confidence there is left in Fed independence. I mean, I've never really believed that the Fed was truly independent. I thought it was more of a of a pretense, but everybody kind of like accepted it, even though it was pretty clear that uh Treasury and the Fed worked together, especially in times of a crisis. Uh they were always kind of working at dual purposes. Uh instead of providing the checks and balances, I mean, the Fed should be independent. the Fed is supposed to take the punch bowl away uh you know before the party uh really gets going, not spike it and make sure that you know everybody's everybody stays at the party uh too long. Uh but I think if we drop the pretense of independence and let the world know that whoever we elect president is really the de facto chairman of the Fed. Uh, and you know, as bad a president as I think Trump has been with economically, he could be succeeded by by somebody far worse. Yeah. You know, I I think like if if AOC was president, I think she would even do more damage with the Fed than than Trump will do. Um, so you scared you scared our viewers there, Peter. You're scared bringing up AOC. I got to ask, I mean, because for years critics have argued that the Fed is, you know, unelected, unaccountable body with far too much power. Isn't this political clash, as messy as it is, a necessary and maybe even a healthy process? Do you think it's time for the Fed's power to be challenged and and for it to be brought under some form of democratic control, even if it's chaotic? Well, I mean, first of all, nobody has been a bigger Fed critic over the years than me. Yeah, I mean, I blamed them before the 2008 financial crisis before it happened because I knew the crisis was going to happen because I understood the monetary policy mistakes that the Fed was making. But be that as it may, the only thing worse than the Fed we got would be a Fed controlled by the president. Yeah. Uh I I think to the extent that there's any independence at all at the Fed, that's better than than no independence. Now, ideally, right, if it was up to me, there would be no Fed. But that doesn't mean that I would just hand the printing press to Congress or the president. I I think we should have the same monetary system that existed before the Fed. Interesting. And before we had a Federal Reserve, uh the only thing the US government did was coin gold and silver, which is all that's authorized uh in the Constitution. And to the extent that we had banknotes that circulated, they were all issued by private banks. Uh they were not issued by a central bank and they were never issued by the United States government. Now in theory, if we can go back to the original intent of the Federal Reserve in 1913, that's still not that bad. The problem was the camel's nose under the tent. The original Federal Reserve was a private banking syndicate. it, you know, that that that's why it's independent because it was never part of the the federal government because the federal government is not allowed to do what the Fed does. The federal government doesn't have the constitutional authority to print money. Only private banks can issue paper currency. Not there's no uh monetary authority in the constitution for the United States government to do that. So, they allowed the Fed to do it. But I I never liked the whole uh relationship between the government and and the Federal Reserve. But at least the way the Federal Reserve was originally conceived in the original Federal Reserve Act, it was illegal for the Federal Reserve to own any US government debt. It couldn't buy it and it couldn't own it. And they changed that. Um, and it still can't buy it. The Federal Reserve is not allowed to buy any treasuries directly from the US government. that that's still the case, but it is allowed to buy them in the secondary market and that's what it does through these primary dealers. But the way the original act was conceived and ratified, they weren't allowed to own them at all. And that's because the Congress that passed the Fed did not want the Fed to facilitate deficit spending. They didn't want the US government to be able to rely on the Federal Reserve to finance debt. And that was very smart. No, if they were even smarter, they never would have established a Fed because they would have realized that once that power was there, it would get abused. And it didn't even take long. They amended the Federal Reserve Act shortly after they passed it so that the government could use the Federal Reserve to finance World War I. Uh, and so, you know, it didn't take long to corrupt it. Uh, but I I my criticism of the Fed is not because of its independence. I just I criticize the entirety of the institution. But I recognize that if we gave the power of the printing press directly to the US government, they would abuse it even more than the Fed. And so it we'd have even more inflation uh than we do now. I just I'm going to bring you back to 2008. I mean, let's assume we kind of hit that tipping point because in two 2025 now, I mean, a bank run as we're talking about kind of seems digital. I mean, it's Silicon Valley Bank. They had 42 billion that tried to leave in about 8 hours. One institution because mobile banking and social media amplified the fear. I guess the question is can can the plumbing, you know, the AC, the Fed wire handle a rush across so many banks or does it just simply freeze in this situation? Well, you know, I think the overall banking um situation is worse now than it was back then. You know, I all of the too big to fail banks that we should have allowed to fail are now much bigger than they were. And the balance sheets of a lot of these banks are, I think, in a lot of trouble because they own a lot of long-term lowy yielding debt, whether it's treasury debt, mortgage back securities, mortgages, commercial loan, whatever it is. um they've got all this all this debt that they don't mark to market. You know, the the accounting says that as long as you claim that you're going to hold your securities to market, you don't have to take a haircut. You can pretend that your capital isn't impaired. And that's fine until there's a run. Yeah. Until depositors need their money. And I mean that's what you saw happening on a small scale with Signature Bank and Silicon Valley Bank. But that could happen on a bigger scale with Bank of America. Yeah. And Wells Fargo and JP Morgan and Morgan Stanley and all these big banks. Uh there could be uh a a a run uh that would would would collapse them. And of course the only the only way the only way to keep them propped up is for the US government to do it. Yeah. But you know then you destroy the currency. You see the the the crisis that I believe that we're headed to is is not going to be similar to '08 in that '08 was a loss of confidence in in mortgages and banks uh you know who were the counterparty to a lot of these trades uh in in the mortgage market. This is not going to be about a loss of confidence in in private credit but public credit. It's going to be about a loss of confidence in the US government. Not necessarily that the US government's going to default. Uh which is certainly not, you know, outside the realm of possibility. I think there is a possibility that there is an outright default on US treasuries. But I think that what the markets are more concerned about is not that the US government defaults, but that it pays with dollars that have very little value because the money uh to cover uh the principle and the interest is created out of thin air by the Fed. And because there's no real buyers for maturing treasuries, uh the Fed doesn't become the buyer of last resort. It becomes the buyer of only resort. and we destroy the currency and and and so I think this current coming crisis is a sovereign debt crisis and a US dollar crisis and and and that is also why the price of gold uh almost touched $3,700 this morning and is headed much higher. Yeah, it is. And I need to get your outlook on it. Uh before I do talk about gold, I mean in that scenario you were talking about a bank run or it could happen to a Bank of America, something bigger. I mean what does the government's panicked response look like? Is it capital controls, withdrawal limits, a banking holiday? I mean, there was the president, right? In 1933, Roosevelt declared a national banking holiday. Greece in 2015, they imposed these withdrawal caps. What do you think? Well, I think eventually there may be some foreign exchange controls when the dollar really is going into freefall, uh, which I think is going to happen at some point. And I think that the US government may try to stop the bleeding. Uh and that's going to be when US uh citizens try to get rid of their dollars. So as you know, the world is getting rid of their dollars. Uh you know, I was watching on television this morning and Scott Besset was on and he said US Treasury bonds are the best performing sovereign debt year to date and he's wrong about that because he's not factoring in foreign exchange. uh the world has seen significant losses on US treasuries this year due to the 10% decline in the value of the dollar which has more than wiped out the coupon uh and and so I think as with foreigners getting rid of their dollars uh that's not the concern but once American citizens come to the same conclusion that they don't want their dollars either and they want to convert them into some other currency to preserve the purchasing power and then you really start to see the decline in the dollar accelerating. Yeah. Uh then the government may try to put a stop to that with exchange controls. Uh that's kind of like price controls, right? The way the government will react, you know, you government creates a lot of inflation, prices go up and then the government responds by blaming uh the merchants or the labor unions. And so we have to control prices. because we have to control wages. The same thing will happen with the dollar in foreign exchange markets. They'll say, "Oh, it's the speculators. We have to stop all these foreign currency speculators from wrecking the dollar." It's not going to be the speculators that are wrecking the dollar. It's the government that's wrecking the dollar. It's the Federal Reserve. It's the US Congress, right? The speculators are simply reacting to what they're doing. Right? Just like when I raise my prices, if I'm a merchant, I'm raising my prices in response to inflation. I'm not causing inflation by raising my prices. It's the inflation that's causing me to raise my prices. And if people start dumping the dollar, it's because of the fundamentals, the inflation that's being created by the central banks that is forcing them to dump their dollars before their dollar loses any more value. I mean, people don't want to go down with a sinking ship. You want to jump off. Yeah. Yeah. Well said. Uh K, turn to gold for me. I mean, our time always goes so fast because on in April, we had you on my show here and you told our viewers not to chase physical at the highs, but buy dirt cheap miners. I mean, the miners have some of them at least have kind of been ripping. Has the easy money already been made or are we still early in the cycle? Well, the easiest money has been made and you're right. When I was on in April, I had just come out with a special report that I was, you know, circulating on the internet. People can get it on my website at europac.com. uh the best way to buy gold. And I I did that because, you know, gold was over $3,000 an ounce, yet the gold stocks were where they were when it was $2,000 an ounce. Yeah. And and so in my mind, you know, why go pay $3,000 an ounce for gold when I can buy gold in the ground that's still valued at less than 2,000. In fact, way less than that. I I thought that if you looked at what you were paying to buy these gold money, gold mining companies, that gold still in the ground had never been so cheap relative to gold above ground. So, it wasn't that I didn't think gold was going to keep going up. I just thought, why buy it when they're giving away these gold mining stocks uh and they're so cheap and the downside I thought was so minimal, it made a lot of sense. And you know, now I think year to date, gold's up what, almost 40%. Yeah, but gold stocks have more than doubled. So uh and so people have made a lot more money uh you know starting in April because even the first quarter the gold stocks didn't even move. It started in Q2 and the whole doubling was basically in the last maybe six months. Didn't even take a whole year to double. Yeah. and and so um but I don't even think gold stocks have caught up to $3,000 gold yet, let alone 3,700 and we could easily be at $4,000 by the end of the year. So, you know, I'm not telling people to stop buying physical gold and silver now because it's it's it's not that obvious, you know, but at that moment in time to me, these mining stocks were so ridiculously cheap that I couldn't see putting any money into physical gold when you could just buy these miners. It just I just did not see the downside risk and I thought there was huge upside potential. Now, we've we've realized some of that upside potential, but you know, I think in the scheme of things, these stocks are still very cheap. If you look at the pees of the big gold companies, they're very low uh compared to historic averages, compared to the market multiples that the investors are not in. I mean, they've still had net liquidations all year out of GDX and GDXJ, these gold mining ETFs. Nobody talks about these stocks. Nobody owns these stocks. Pneumont Mining is the best performing stock in the S&P 500. Uh yet it's probably the the stock that's least owned in the S&P 500. Yeah. And the margins I mean the margins are incredible here. Oh, look there. Look, they're going to make nothing but money uh for years to come. Uh they they they are producing a product that everybody needs whether they realize it or not. I mean, the central banks are huge committed buyers, right? they they're not going to stop buying gold because they're not going to stop divesting of dollars and they keep earning dollars, right? Because we're hemorrhaging dollars due to our trade deficit. So, not only do they have to get rid of the dollars they own, they have to get rid of the dollars that they they keep getting and and and so they're going to keep buying gold. And as the price of gold rises, it's just going to suck more central banks into it because the central banks that aren't buying gold are falling behind the ones that are. And gold is becoming increasingly more important as a reserve asset. Not just because central banks are buying more of it, but because the price of what they own keeps going up. And that means that the value of their gold as a percentage of total reserves keeps going up. And so, you know, there's going to be a FOMO in central banks to get into gold and and and they're just, you know, they're price agnostic. I mean, they're not going to stop buying because the price goes up because they're just trying to get rid of their dollars before the price goes down. But at some point, uh, the the investing public is going to join this party. I mean, I think to an extent some money is already coming in and that's why the gold stocks have had the move that they had, but this is just the tip of a of a huge iceberg that we've seen and so far the the the buyers have been patient and they've been buying on the pullbacks and there hasn't been any crazy updates. There's no real euphoria and I still see sharp corrections like what we're having today. You know, gold doesn't even go down, right? uh and all of a sudden these stocks are down three or four percent just because people are afraid. Oh no, this is it. You know, but the minute gold doesn't go down and goes back up, then the buyers come rushing in. The coast is clear. Uh but we we're going to get into a stage maybe next year, you know, with gold well north of 4,000, maybe 5,000. Maybe the gold stocks double again from here, but at some point they're going to get on the radar of the average portfolio manager and they're going to start buying. Yeah. And so long way to go. Where is that better riskreward? I mean, is it is it still with the big established producers or is it with these junior exploration companies, more speculative? Well, I mean, there's a lot of smaller companies that aren't as speculative as you think. I mean, if you're talking about a pure exploration type company, Yeah. because you don't know what they're going to find. Maybe they find nothing. But there are a lot of very small companies that have proven uh reserves that they just haven't raised the capital uh to to dig up yet, right? They're at the earlier stage. You're not at the exploration stage. Uh although they may be exploring for more, but they have provable assets. Uh and they just haven't developed them. So they're not, you know, in production. They're not generating any income. And I think there's some incredible value there because I think these companies are going to get bought up. I mean, a it'll be a much friendlier environment to raise capital uh in the future and they will be able to raise capital to build out these projects, but I don't think they'll have to because I think the bigger companies that really have not been investing much in exploration and development, they've just been paying down debt and now they're buying back stock. I think they're just gonna have so much cash that they're generating. Uh they're going to have to do stuff with it. And I think it's going to be cheaper to buy out other companies than spend money on exploration and development. I mean, because you you roll the dice on exploration, you don't even know what you're going to find. True. Why do that when you could just buy up these companies and get their whole book of business, right, on the cheap? So I I look there's just going to be so much money made I think in the consolidation of this industry which I think is going to happen before there's any really major increase in expiration and you know of new projects which is another reason you know the price is going to keep going up. Yeah because there's not going to be it's not like when gold is $5,000 an ounce there's suddenly going to be all this extra gold that's being mined. It's not going to be there. Yeah. there may be some more marginal supply. Maybe Americans will start selling off their their jewelry at $5,000 gold, you know, to pay the to pay the grocery bill, you know, but you know, that that's not going to make much of a difference uh in the scheme of things. Uh and so there's not going to be a lot of new production and you know, uh one of the sources of supply used to be central banks selling. Central banks are not selling again. They're buying and they're going to keep buying. especially these emerging market brick nations, they still have, you know, very small uh uh percentages of total reserves in gold. Even though they've been buying, they have a lot more to buy. You know, it's just that the major central banks like, you know, uh in Western Europe, United States, where we still have a lot of gold, but we're not we haven't been buying, right? The United States hasn't bought any gold. I mean, we're we're thinking about buying Bitcoin. That's how dumb we are. Bitcoin. Oh, we're going to get Well, we should probably get into that. But before we do, let's take on this. I got to stay on the miners because I mean, I've been following your tweets. I know when Intel and you know, the US struck that deal. It was interesting. I don't know if you heard about this new report out of Bloomberg this morning, but the US government is now in talks to launch a $5 billion mining fund with Orion Resource Partners via the DFC to secure, you know, supply chains and to counter uh China. Are policy makers about to fuel a a bubble in this sector we call a safe haven or what are your thoughts? Well, look, I don't like any of this stuff. I don't like centralized government planning. I don't like the governments taking an active role in the economy. I don't like the government picking winners and losers and buying into companies and and so the Trump administration is doing a lot of things that under normal circumstances Republicans would oppose. Yeah. I mean, almost everything Trump is doing, if Biden had done it, there'd be universal opposition to the exact same programs. Uh, so none of this stuff is going to work. It's all going to backfire. What it does is it leads to a less efficient allocation of capital and resources. It undermines productivity and economic growth and it leads to higher inflation uh and and a and a weaker dollar. So it all this stuff is bad, you know, and so from that respect, yeah, it's going to be good for gold and precious metals because inflation is good for hard assets, you know, especially especially gold and silver. So when when governments screw up, you know, gold does well. I mean, that's why it's almost a can't lose bet because there's no way the government's going to do the right thing. So if you want to sure bet, you bet the government's going to do the wrong thing. And you know, given the choice between doing the right thing and doing the wrong thing, they'll always choose the wrong thing. So that's why gold's been go going up for 25 years, we've just made a series of mistakes. They get bigger and bigger and bigger. Yeah. Do you ever get worried? I mean, this government control you're talking about in a crisis. A gold or a critical minerals mine isn't just a profitable comp company now. They're they're really making it a strategic asset. I mean, we've already seen that aggressive use of national security tools. CFI US scuttled that US Steel Nepon. Uh the Defense Production Act has been invoked repeatedly for minerals in extremists. I mean, why wouldn't a desperate government assert control over domestic mines? Well, that doesn't work out very well. Look at all the countries that have done that and they destroy the mining industry the more the government gets involved. You know that the free market will take care of all this stuff, right? You you need to have private uh companies seeking to maximize profits with the full and transparent uh price mechanism of a free market guiding their their decisions. You know, whenever the government steps in, you circumvent or short circuit free market signals and and and you don't get an opt optimal outcome. So, you know, either you believe in capitalism or you don't, right? and and and clearly the Trump administration doesn't believe in capitalism. Yeah, we were talking a little bit about M&A there and I mean the CEO of a major producer Agniko Eagles, Amaral Jundi, we've had him on this show and he he recently warned against irresponsible M&A just because the gold price is so high. I mean he's kind of praising capital discipline in the industry because they finally learned it is what he was saying. But now, you know, these companies face a potential flood of this new capital from investors chasing this rally. And then we got these $5 billion initiative from the government. I mean, does this new gold bull market corrupt the miners? I mean, will they abandon discipline and repeat the mistakes of the last cycle? What are your thoughts? Well, hopefully not. You know, I've I wrote out the last cycle, so I have a lot of wounds from those mistakes. Um, but but but hopefully. Look, you know, I remember when one of the big mistakes they had in the early rally, uh, you know, 20 years ago was too many hedgebooks out there. And so the price of gold was going up, but they the miners were hedged because it had been in, you know, down at 200, $300 for so many years. Uh, everybody assumed that it really couldn't get above 400. And so, uh, they had a lot of hedges, uh, in place. But look, I I think that it's going to make a lot of sense for these companies to invest in acquisitions because if you're a gold mining company and you have the expertise uh and you have the resources to build out and develop gold mines, but you don't have, you know, the the reserves, it makes sense to go and buy them, you know, and especially if a lot of these smaller companies have properties that are in proximity to the properties that they're already mining, you know, where the cost of developing those projects uh incrementally would not be that great. Uh so, you know, that that's what's going to happen. Those kind of acquisitions are going to make sense. I'm not talking about, you know, just paying a premium for another public company that's already high and just, you know, doing a, you know, deal. But, uh, these smaller companies, uh, it it makes it's going to make a lot of sense as long, you know, they do their homework and they go in there and, you know, they kick the tires and and see what they've got. Um, uh, but then, yeah, make a strategic move to acquire these assets to develop them uh, for future income opportunities because they have to replace the reserves that they deplete, right? There's only so much gold they have. Yeah. And if they run out of gold, then then we're out of business. So they either have to spend money uh you know exploring for gold or they can buy it if they can get a better deal. And I think there's a lot of better deals out there uh that are a a alternative to exploration. Yeah. Speaking of better deals, uh before I let you off here, I mean we got to talk about silver just hit that 14-year high. I know on your X feed you called it a kind of an express train to 100. I mean gold's move is often you know the central bank buying and its monetary role as we know I mean it's kicko but the case for silver seems more complex here what what what's the primary driver that takes silver from 42 to 100 is it monetary demand or is it a squeeze in the industrial demand I mean it could be both you know I mean there there there isn't a lot of silver out there relative to I the demand that I see for it in industry but silver is just cheap um you know and it's cheap relative to gold. And that's the best barometer of whether something is cheap or not is look at it priced in gold. And you can still get a lot of a lot of silver for an ounce of gold. And you know, even at $50 silver and $4,000 gold, that's still 80 to1. Yeah. You know, that's that's still pretty cheap. Yeah. if if you know if silver hits 50, when gold's at at at at 4,000. And I think that once silver gets above 50, I think it's going to take off. I think the move from 50 to 100 will be relatively quick. I mean, it'll be a lot quicker than the move from 30 to 50. It may even be quicker than the move from 40 to 50. Uh, but I think it's going to unleash a lot of pent-up demand. Um, you know, I mean, why shouldn't silver be double its 2000 or 1980 high? I mean, gold's 1980 high was 850 and well, we're quadruple that. Uh, so I mean, and silver is still below below its 1980 high. And and so, you know, there's not that many things that you could find that are cheaper than they were in 1980. Silver's one of them. Um, so, you know, I I I I think I think it's it's very cheap. Um, and you know, but you know, and other precious metals are cheap, too. Look at platinum. I mean, you know, uh, compared to the price of gold, and platinum has already had a big move this year, but it's still pretty cheap. So, I think we're getting we're styling finally starting to see some of the other precious metals moving. But silver has always had a stronger monetary correlation with gold. I mean, we sell, you know, a lot of gold and silver at Shift Gold. You know, we don't sell a lot of platinum. I mean, even though I actually started recommending it when it was under a,000 and gold was over 3,000. I said, "This is ridiculous that you could buy 3 ounces of I mean, one 3 ounces of platinum with a single ounce of gold." But even then, we didn't get that many people that that that want to buy platinum. Uh, but, you know, so silver is more what people buy, maybe the poor man's gold. Uh, and I think that's also part of what's been going on here is that the central bankers as the primary drivers have not been buying silver. They they don't want silver. They It's too bulky. They They want gold. But when the public wakes up to what the central banks are obviously already cognizant of, the public will buy silver. And and so when this becomes a retail driven bull market as opposed to a central bankdriven bull market uh then I think silver is going to respond and uh and you know and while I'm mentioning even shift gold and I I'm you know sure the same thing at Kiko you know we are not even close to the volume we had in 2020. I mean, 2020 was by far the best year we've had as far as, you know, sales and profits as well. There was a rush for a while. People wanted to buy gold and they wanted to buy silver. That has not been the case recently at all price. Is it just prices? Is it just, you know, 3,700 42? I mean, is it just prices or is it, you know, it's I think it's a number of things. I mean, the NASDAQ is at new highs, so people are making money on tech stocks, and so uh and they're not worried about buying gold. There was a lot of false optimism, I think, from the election of Trump. I think a lot of gold buyers are Republicans. And when Republicans are optimistic, they don't buy as much gold. It's when they're worried that they buy more gold. like when you know when there's a a radical left-wing uh president that might rile the feathers of Republicans and they they may start buying more gold and more ammunition and more canned food and stuff like that. But if they're optimistic because they think they got this conservative in Donald Trump, uh they're not buying. Even though Trump's not a conservative, he's, you know, he's pursuing the most reckless fiscal policy I've seen, you know, in modern memory. uh and and and and we're about to see the most reckless monetary policy uh as well. Uh so if if gold buyers understood this, they'd be buying. But I also think, and I know this from conversations that people at Shift Gold have had, people are worried about buying the highs. They're they're worried, you know, oh, I'm going to wait for a pullback. I I you know, because I think they've been so conditioned. We had a long period of time from 2011 to 2024 where gold didn't go up and every time it got near 2000 it came down and you know and so I think people are a little gunshy about buying these highs uh and they're waiting for pullbacks and I've been telling people not to wait for a pullback because I don't think there'll be any meaningful pullbacks. Not that there won't be any, but they won't be big enough uh to to wait for and you'll probably miss it because it'll be over so quickly. Uh so I've been saying, look, if you want to buy gold, if you want to buy silver, then you got to buy the highs because that's all we're going to get is is highs. And the problem is the longer you wait to buy the high, the higher the high you're going to buy. That's basically the mantra now. So, you just buy it. You know, don't worry about uh where the price is going to be because it's going to be higher. And if you get lucky and the price goes down, well, then the next time you buy, you'll get a better deal. Yeah. Especially with the central banks on auto buy. Uh, okay. Before I let you go, I mean, you've been early on this thesis, right? You've been years ahead. You've been criticized for it, but it is starting to play out. I'm curious. I mean, when when future historians look back on this period, what are they going to write, Peter? I mean, will will they see it as a moment America chose a path of of managed decline through inflation or is it going to be as painful but this necessary crisis that kind of forces to return to sound money? Well, you know, that that book isn't written yet. So, I don't know because we don't know if this is going to be a catalyst for a positive change or if it's going to be the opposite. uh you know are we going to go all in on socialism and completely destroy uh what's left of capitalism and have hyperinflation and a totalitarian society for you know I mean look look I mean look how long uh Argentina had a had a sweat it out before they finally elected Malay and you know we could be in for an even darker economic period than they live through. So, I don't know. Uh, you know, I can still be hopeful that we'll learn our lesson and we'll do the right thing, but there's no sign of that now. I mean, now we're doing everything wrong if, you know, that we could possibly be doing wrong. Um, but, you know, we haven't really been forced to do anything right because we've been able to kick the can down the road. uh we've been able to keep running these deficits, the budget deficits and the trade deficits to the point where, you know, Donald Trump actually thinks that the world depends on us, that we got them, you know, just where we want them because we consume so much and we borrow so much, that we're so important. Well, he's going to be in for a rude awakening when he finds out that it's the other way around. that that the world needs us like a hole in the head. That the world is perfectly capable of consuming what they produce and they're perfectly capable of investing their savings in their own economies. They don't have to loan their money to us. Uh the problem is Americans can't produce what we what we need and we don't save what we borrow. So we we're we're the nation that depends on the rest of the world. the rest of the world does not depend on us and and so when we realize that and and we get a monetary crisis and and a debt crisis then we'll see. But as you mentioned I do think one of the more interesting anecdotes whenever they write this history book that includes this period probably one of the most amusing parts will be Bitcoin and the crypto craze because that's going to be that's going to be the new uh tulip mania. So, they're not going to have to go back to to to to the the Dutch, you know, in whatever whatever the 1500s, wherever it was, to find a a a great example of mass delusion and the madness of crowds when it comes to a bubble. Uh uh they'll have they'll have Bitcoin. They'll have Bitcoin. So, that'll be a case study for for a long long time. Still not a fan, eh, Peter? All right, man. Listen, we've come up on about 50 minutes. Appreciate it. Of course. Uh quite interesting here. Sobering perspective as always. Peter Schiff, thanks for this. Thanks for joining us. My pleasure. I appreciate it. All right. A great repricing is underway. And the question isn't whether it's happening, it's how it ends. Don't forget to hit subscribe right here on Kitco News. I'm Jeremy Saver. See you next time. [Music] Heat. Heat. [Music]