Economic Storms are Gathering | Peter Schiff | EP 353

should accept yourself just the way you are  what does that say about who I should become   is that just now off the table because I'm  already good enough in every way so am I   done or something get the hell up get your  act together adopt some responsibility put   your life together develop a vision unfold  all those manifold possibilities that lurk   within be a force for good in the world and  that'll be the adventure of your life [Music]   prices go up all the time because the government  is so involved that's why it keeps getting more   expensive and the quality goes down the quality  of Education I mean a high school degree you   know 50 years ago is is way more valuable than a  college degree today even a master's degree the   governments have destroyed the value of degrees  while dramatically increasing the price to to get   one so government drives quality down and price  up the free market does the reverse government   let's say the post office right post office was  a problem and so then FedEx came along right and   okay we can avoid the post office or more recently  uh governments create monopolies in taxi cabs   well Uber comes along Lyft comes along  and and creates some competition to these   government monopolies so the same thing is going  to happen with money government money is is so bad   and it's going to get worse that the market is  going to offer Alternatives yes the government   is going to try to put up roadblocks to protect  its Monopoly but ultimately it won't work [Music]   hello everyone I am speaking today with Peter  Schiff The Economist and stock broker who   successfully predicted the 2008 housing  crisis today we will discuss the current   market hyperinflation fiat currency and  the value of gold in times of instability   looking forward to the conversation so thank you  very much for talking to me today and to everyone   who's watching and listening thank you for your  time and attention that's much appreciated so   the first thing I guess I might ask is what do  you think it is that the typical person who's   watching or listening should know on the financial  front practically for their own protection and   and incremental wisdom that they don't know I mean  people are aren't taught even the basics of how to   think financially in our education system and so  maybe you could walk through what you regard as   the as the basics of fun of financial literacy on  the Practical front uh well there's a lot there   but I think the the most pertinent thing that  people need to understand before they make any   Investments really particularly now is inflation  and the impact that inflation is going to have   on the decisions that they make on their  savings and their investment because inflation   is probably a bigger threat now than it's ever  been and therefore it's a even bigger Factor   in determining everything that we do and  ultimately uh what the rewards are going   to be or the returns from your Investments  and and the reason I think that inflation   is a bigger problem now then it's it's been in  the past is because of the fiscal predicament   that most of the major governments  have you know put themselves in   and the fact that all politicians unfortunately  and this is a a fatal flaw in democracy   is that politicians first and foremost care about  themselves and their own political career and   their own re-election that's what they do for  a living they are career politicians and so you   know like anybody else you know they're  they're they're you know concerned about   perpetuating their career and most people who are  in politics they really enjoy it I mean they they   like all the perks that come with it uh you  know you get a lot of uh you know respect if   you're you know United States or Congressman  you're a senator uh you know it it's it's a   it's a career that a lot of people would aspire  to and once you get there you know once you get   to Washington and I'm sure this is true and you  know every you know country in Europe and all   around the world that you know you like it right  you like the lifestyle you like The Prestige that   comes with being a government official so you  want to stay there right well how do you stay   in office well you got to keep getting elected  you know in the United States you know we get   elections every two years right so politicians  are are very concerned about you know the polls   and they're constantly got their finger in the  air seeing where the winds are blowing and they   don't want to say anything or do anything that  might jeopardize their re-election and of course   one of the most important things that you need to  get reelected is you need a lot of money you need   to spend money on advertising on television which  is expensive and so you tend to cater to donors   um whether it's a corporation or a a you know  a union anyone that can provide a lot of money   uh you need to do things that are in their  interest and so what is usually sacrificed by   these politicians is the national interest doing  what's right for the country is secondary to doing   what's right for themselves and also in order to  be as successful as a politician you have to be a   really good liar and that's probably why a lot of  lawyers go into politics because lawyers you know   they're paid to lie I mean you have to argue your  client's case even if you know they're wrong right   and you have to put on a defense or whatever it  is and and so lawyers are generally pretty good   liars and so they they they they be they become  politicians because if you're honest and you tell   the truth you're not going to have a career  in politics you're you're just not gonna even   if you manage to get elected telling the truth  you're not going to stay in office telling the   truth so you got to lie so here's the situation  so you've had Decades of politicians buying their   re-election by promising voters something for  nothing because unfortunately that's what a   lot of Voters want they want something from the  government so if you're running for office like   I ran for office in in 2010 I was in Connecticut  uh but you know all I promised was more freedom   I'm going to leave you alone I'm going to repeal  government laws regulations I'm gonna I'm Gonna   Leave You free to do what you want and I'm not  going to interfere with you some people like that   message but a lot of people that's not what they  want they don't want to be free they want to be   taken care of they want to know what are you going  to give me what stuff am I going to get if I vote   for you right what free stuff and so yeah well  that's attractive in the short term especially   if you're not paying attention right and lots  people don't pay that much attention to political   discounts and so if you offer something tangible  and immediate that's grip short-term attention   and that can be an effective strategy yeah and if  you and so it's this proclivity to gift in this   manner that to the drives inflation do you want  to define inflation yeah I will decide I know   exactly what we're talking about yeah yeah I will  I'm getting there but and it's even worse when it   comes to trying to take away something like if you  want to cut a program spending that's even worse   because once a voter has something nobody wants to  take it away in fact even some of the politicians   let's say Republicans United States that might  have opposed certain government welfare type   programs you know when they started once they're  in place even those people won't vote to take   them away that's how how a danger it is so the  situation is you've had all these politicians who   have promised so much stuff that the taxpayers  can't deliver and of course when politicians   want to give voters something they don't want them  to pay for it so they want to spend money but they   don't want to raise taxes because governments  don't have any money they only have the money   they take they have to take money from the people  in order to give money back to the people and and   so if the government's taking your money that you  don't like so with paper money which unfortunately   we have now fiat currency where the governments  don't need gold real money they could just create   paper money out of thin air right they could  just manufacture it digitally and there it is   that enables governments to spend without  collecting taxes they run these large deficits and   they're able to print the difference and hand out  that money so they can give people money without   also taking the money away and now they don't  mind taking money away from rich people because   you know there's not as many of those right so  they don't lose as many votes although certain   rich people can donate a lot to their campaigns  which often you know prevents the taxes from from   getting too high but inflation I asked for the  definition inflation is really just another tax   because governments create inflation and inflation  is also probably one of the most misunderstood   words in the English language and deliberately so  I think governments around the world kind of led   the campaign to redefine inflation so if you go  back to the origin of the word and if you if you   have a dictionary even from the 1980s a Webster's  dictionary you'll get the real definition of   inflation so inflation is an expansion of the  money supply that's all it is deflation is a   contraction of the money supply so if you even  think about the word inflate inflate is to expand   like a balloon if you if you fill a balloon with  air it expands so with inflation what's being   expanded is the money supply and who expands  the money supply governments you know or they   they do it generally now through a central bank  but it's the central banks of these governments   that are expanding the money supply now when  you expand the money supply you have more money   well if you have more money but you don't have  more stuff to buy well the price of everything   goes up that's just basic economic supply and  demand the more money there is the less each   individual monetary unit is worth and now prices  go up now what governments have done is they've   said price is going up that's inflation no it's  not that is the consequence of inflation because   prices don't expand prices go up and down as a  result of inflation now what happens is sometimes   prices don't go up but you still have inflation  and that's because without that inflation prices   would have gone down and if prices don't go down  because government creates inflation that still   represents a loss to the people because they lost  the benefit of lower prices because in capitalism   the tendency of capitalism is to reduce prices  that's why it's so good because you keep coming   up with better ways of producing more efficient  ways economies of scale if you look at the CPI for   example in the United States in in 1800 and then  you look at the same CPI in 1900 and they have the   data prices were cut in half you had a hundred  year period where you had deflation or you know   the money or prices falling for 100 years uh and  that was a good thing you know all the politicians   now tell us that we need prices to go up that we  must have inflation you know the way they Define   it of two percent a year why why do prices have  to go up every year why can't they go down every   year isn't that better if stuff gets cheaper you  know if the cost of living goes down of course it   is but these politicians are trying to sell this  lie to the public that Rising prices are somehow   necessary for Prosperity that if prices don't go  up okay so let me sum up let me sum up what you've   said so the first thing you said that I think  is worthy of note for people to remember is that   the price of something is a function of the ratio  of the money available to the goods available   and so if you make money twice as  available then things cost twice   as much and that's and then you Defined  inflation you Defined inflation in that   regard you said inflation isn't prices going  up inflation is the value of money going down   and so it isn't because things are becoming more  expensive it's because there's more money chasing   the same amount or fewer items now you could  imagine an inflation in a particular sector that   would emerge because that thing has become more  scarce but General inflation is a reflection of   the inflation of the money supply right then you  said well here's here's the let me just finish the   summary you said there's drivers of that inflation  of the money supply and the basic driver is that   because we have a fiat currency that isn't paid  to something um permanent let's say like gold   and because politicians can create money  by printing it they're incentivized to do   so because they can offer people who aren't  paying much attention cheap gifts for nothing   and the fastest way to pay for that because they  don't want to raise taxes is to increase the money   supply and then you might say and this is where  we could bring this home to land is well what's   so bad about that is that we defer our expenses  into the future people get more free stuff from   the government there's a bit of a tax that's  the inflation tax let's say but all in all the   system works pretty well but you started this  whole discussion by saying the biggest threat   to the financial Integrity of people individuals  over the long run is inflation and so why does   that pose the Cardinal danger to long-term  Financial Security and prosperity for people   yeah well first of all it's not it's not working  well that that is the problem it it worked much   better when we had honest money when we were on  a gold standard uh if governments wanted to spend   money they needed gold and where did they get it  they had to collect taxes because they couldn't   create the gold it needed to be mined and and  so it was an honest system um and it it was   discipline on politicians now the politicians  don't want to be disciplined any more than you   know teenagers want to chaperone at the prom right  so you know they want to they want to do a lot of   stuff that The Chaperone won't allow and so gold  uh was keeping politicians in check but to your   point about individual prices you can't confuse  prices individually will go up and down based on   the supply and demand but if the price of one  thing goes up it's going to necessitate the   price of something else to go down uh and so the  general level of prices won't change uh it's only   when you have the expansion of the money supply  that the price of everything goes up because the   value of money is going down and so now you need  more money to to buy stuff but the problem now is   because these governments have run such enormous  deficits uh and it you know inflated you know   the housing bubble that popped in 2008 the US and  then uh a decade or more of massive deficit spent   ending quantitative easing programs and by the way  quantitative easing is inflation they basically   get you know taken inflation and put a nice  sounding name to it because quantitative easing   is printing money and buying government bonds that  that's inflation but if the politicians said our   policy is inflation you know the public doesn't  like that so they said no we're doing quantitative   easing and somehow that sounds you know more  palatable than inflation but they've created   so much and and for years and years these Central  Bankers were telling us that inflation is too low   we don't have enough inflation because it's not  two percent and again we don't need prices to go   up you know and the reason they say that price  prices have to go up is they claim that we won't   buy stuff that if we think prices are going to go  down we'll just hold off on buying indefinitely   waiting for a cheaper price and the economy  is going to collapse and that's a bunch of BS   because you buy things when you need them and when  you can afford them I mean if if that was true   nobody would own a cell phone nobody would own  a laptop computer nobody would have a television   that because all those things get cheaper every  year yet we keep buying them so it's nonsense   that we won't buy if price is going down in fact  price is going down create demand if you can't   afford something the way to have to buy it is for  the price to go down and then you can afford it   and then you buy it but they've created so much  inflation when they said it was too low that   now it's exploded right you've got double-digit  inflation or high single digit inflation pretty   much in all the invest economies in the world and  no government anywhere in the world is willing   to actually do what it takes to reduce inflation  because a they have to accept responsibility for   creating it and then B they have to significantly  reduce government spending and or raise taxes on   on middle class uh voters and neither of  those choices are politically expedient   and so politicians now are under more pressure  than ever to continue to finance their spending   through inflation so the inflation tax is going  to get bigger and bigger and bigger uh every year   and the reason that that's such a problem is  it's really the worst possible tax because   it impacts the people the most who can afford it  the least it's the middle class the Working Poor   uh and the retirees who are living off of fixed  income uh they end up paying the inflation tax   the most uh they have some savings they have a  pension they have an annuity a cash value and   insurance policies all this stuff gets uh  destroyed wealthier people who tend to own   assets and who have more good debt right bad debt  is Consumer Debt you go out and you borrow money   and you spend it you buy a consumer good you  buy a TV with your credit card and that's bad   debt or you take a vacation and you pay for  it on a credit card but if you buy an asset   particularly an income producing asset a piece  of property uh if you a business a comp stock   if you borrow money and you buy an asset and  that asset is appreciating and generating income   inflation is your friend inflation helps  you out because it wipes out the value of   your debt and you still have the asset so  wealthy people very wealthy people if they   invest the right way will benefit from inflation  whereas Ordinary People are going to get hurt   have you ever read the fine print that appears  when you start browsing in incognito mode it   says that your activity might still be visible to  your employer your school or your internet service   provider to actually stop people from monitoring  your online activity you need expressvpn think   about all the times you've used Wi-Fi at a coffee  shop 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lose half the value   of their investment in like four percent  a year would be something like 10 years   yeah and so unfortunately it's going to be a  lot higher than than four percent yeah let's   talk about that for a second so two things  two questions about that that are that come   along with what you've already laid out the first  question is how is the inflation rate calculated   that's mysterious right because yeah that's it  Consumer Price Index that's another big part of   the fraud because certainly in America and I know  a lot more about the U.S CPI let's say than I do   about cpis in other countries but my assumption is  that you know the politicians are being dishonest   everywhere because you know the inflation rate  it's like a report card and if our kids were   responsible for grading their own report cards it  wouldn't be as shocker if they came home with all   A's right so that this is the problem that we've  hired the government to grade its own you know   is its own Pro success you know in the economy  because High inflation would would be would be bad   um so the government again when they're measuring  inflation and they're looking at prices they're   looking at an effect they're not looking at  the thing itself but over the years governments   have changed the methodology for measuring  price increases so the CPI that we use today   is nothing like the one that we use say in the  1970s yeah that's exactly what I want to focus on   because so the CPI for everyone listing that's the  Consumer Price Index and it's in principle please   correct me if I've got any of this wrong it's the  average cost of something like a standard basket   of goods that's what a question then is which  Goods yeah okay so let's go into that it used to   be there was the basket didn't change they picked  a basket and they just measured the same basket   year after year and so you could see the changes  now the basket changes the politicians decide what   to put in the basket and when to take out and  generally they take out stuff that's gone up   and they put in stuff that hasn't gone up as  much there's all this substitution there's a   lot of other indexes that they use where they  have hedonics or it is CPI there's hedonics   and so what hedonics is is the statisticians who  compute the CPI they look at a product and they   don't use the actual price they subjectively  decide if they think that product got better   and if they think it got better they adjust  the price down now maybe it did get better   and a lot of times stuff gets worse and  they don't they don't adjust for that   um like let's say they're looking at airline  prices and they just look at the ticket price   and they say wait a minute but you're charged  extra for luggage you're charged extra for a   blanket you're charged extra for food oh you  know they just look at the price you know a lot   of quality has gone down and a lot of things  that hasn't been captured and you know I did   this exercise I did this a long time ago in 2013  and I made a YouTube video about it but I just   did this for kicks I looked at the CPI in 2013.  and according to the CPI over the prior 10 years   um the the price of newspapers and magazines had  gone up about 30 percent according to the CPI in   2013 magazines and newspapers were 30 percent  more expensive than they were in 2003. well I   decided to check because it's easy to do you know  you could just go on the internet and you could   see a picture of those magazines because they put  the price right on the cover so I took about 20 I   took like 20 of the most circulated newspapers and  magazines in the country and I just looked at what   the price was in 2003 and then I took the exact  same magazines and I looked at the price on the   cover and I just compared it over the the 10 years  and what I found was that the actual increase   in price wasn't 30 it was a hundred and thirty  percent so the question is where did that extra   100 go because you know that those are the prices  so obviously the CPI is rigged in such a way as to   have a a number it's not that people lie when they  calculate like they get a certain number and they   say oh no that's too high the methodology that is  used has been engineered to mask the real degree   to which prices are rising you also pointed to  something else that's a fundamental flaw if your   reasoning is correct which is that if inflation is  best construed as ratio of money to Goods merely   calculating inflation as a consequence of price  increase doesn't capture the essential element   of the inflation because that's a huge problem  too because let's say prices should have gone   down by three percent and instead they go up by  two percent that's five percent inflation in that   my cost of living is five percent higher than it  would have been um had you not had the inflation   and again if you think about inflation as a tax  when the government taxes you legitimately let's   say through a sales tax or an income tax whatever  the government takes your money money that you had   goes to the government and then the government  takes that money and gives it to somebody else   right you lose your money but when they tax you  through inflation they don't take any of your   money you get to keep your money but they print  new money and they give that money to somebody   else now when that's somebody else spends that  money that he didn't earn it drives up your prices   so now you pay more so the government didn't  take your money they took your purchasing power   so it's the same thing and you know another  thing about our CPI that they how they changed   is Once Upon a Time back in the 70s housing  prices were in the CPI and and so were rents   and and that's about a third of the CPI which is  shelter but somewhere along the way they decided   to use something called owner's equivalent  rent instead of actual rent or actual home   prices now what is owner's equivalent  rent well it's a fiction that they made   up that nobody actually pays apparently  uh the government calls people at random   and asks them if they own their home how much do  they think they could rent it for if they were to   rent it and they keep track of those numbers now  I don't know like you know who they're asking I   mean I've owned homes for a long time I've never  gotten a call from a government guy wanting to   know what I think I could rent my house for but if  you're not a landlord and you're not in the rental   market how the hell do you know what you could  rent in your house for it's such a ridiculous way   to try to measure the cost of Shelter by using  a number okay so let me okay so let me ask you   a question about that because I've really been  curious about that because it's obvious the K the   case in Canada in particular like housing and rent  prices have skyrocketed in the last eight years   and that's not reflected in the inflation  statistics and that seems to be a major oversight   at least according to one line of argumentation  because that's one-third of what people spend   their money on now you could argue this is where  it gets complicated as far as I can tell that   if what you've bought is an asset that generates  income and its value goes up that's actually not   a cost to you it's an advantage you already  made reference well only if you if you own the   asset yes if you own it if you want to buy it and  the price has gone up it's a disadvantage right   because now the assets that you want to buy  are more more costly right so does that imply   that a proper CPI that would include the cost of  shelter would be calculated on the basis of those   who want to buy rather than those who already  own yeah because I'm trying to figure out how   to measure inflation properly here right you're  very complicated problem if you already own a home   then the cost of buying another one is not as  important to you of course a lot of people that   own homes they may want to buy bigger homes as  their families grow and and so it would be but   for those people what's important are uh your  maintenance costs your insurance costs your   property taxes uh there are a lot of other factors  that would be significant to you if you don't own   if you're a renter then obviously rent is of  primary importance to you you're you're paying   rent there's all sorts of valid ways that the  government could measure shelter as a component   of the cost of living but in the United States  they don't choose any of those valid ways they   choose another way and they're doing that because  they want the number to be lower they don't want   to report High inflation and they even do this as  part of the GNP because when they deport report   GDP they don't even do GNP anymore it's GDP  now that they report gross domestic product   in order to get the number they have to deflate it  every there's a deflator which adjusts the GDP for   prices and the government always underestimates  that deflator so the GDP looks bigger than it   really is because in many cases economies are  actually Contracting in real terms but because   the government is dishonest in the way it reports  it it reports economic growth even though there   is no real growth it's inflation which creates  the illusion of growth that's another reason   that politicians like inflation and of course when  inflation drives up the stock market and the real   estate market people think they're richer right  because oh my house has gone way up my stock but   it hasn't gone up your money has gone down right  but people don't necessarily connect those dots   uh you know they they think they're they think  they're wealthier but also if you think about   as I said earlier inflation benefits debtors  it's a transfer of wealth from creditors to   debtors who are the biggest debtors in the world  governments and the biggest most highly indebted   government is the United States government we  have 32 trillion dollars of funded debt almost   and our unfunded liabilities commitments that have  been made where they didn't borrow the money but   they're on the hook like guaranteed student loans  or a guaranteed pensions Social Security Medicare   all that stuff that's like a hundred trillion  so when the government creates inflation they   repudiate enormous amounts of their debt and so  the governments have massive incentives to create   inflation but then they have massive incentives to  lie about it and pretend it's not as bad as it is   and blame other people which is the main reason  that they redefine inflation from the expansion   of the money supply to Rising prices because  when you know inflation is an expansion of the   money supply then you know who causes it it's the  government you can't blame greedy corporations for   it you can't blame Putin for it Putin doesn't  print our money we do the Federal Reserve does   and so when politicians can redefine inflation  they can they can blame everybody but themselves   okay so so let me ask you a kind of a modified  Ponzi scheme question because this is something   that's bedeviled me so I understand that so I  have two questions I understand that getting   the measurements of something as fundamental  as inflation correct is absolutely necessary   so one of the things I've wondered is like why  aren't there independent teams of economists who   generate various true estimates of inflation make  them public so that the public itself could gather   a basket of independent estimates and know for  themselves what the inflation rate is very curious   about that well they have one other well I mean  there's a website who's reliable who's reliable   yeah you know well I think the least  reliable would be the government   right yeah yeah you don't want their statistics  because they're completely biased right you know   it's like you know the mafia is not going to give  you accurate statistics on crime right so um you   got to look to Independent sources but um I think  it's kind of obvious though if you understand what   inflation is and you see the enormity I mean the  United States is running two trillion dollar a   year plus deficits now uh and technically we're  not even in a recession the deficits are going to   get even bigger uh when this next recession starts  but how are we financing those deficits it's it's   inflation there's just no other way they'll look  at the the Federal Reserves balance sheet so we   know that inflation is going to be a significant  threat it's going to reduce the value of money and   so that has to be the single most important factor  in driving your decisions on savings on investing   um you know and and even for in this day and  age if you don't have a lot of money to invest   you know I I've been saying this for years to  people I started talking about it several years   ago people have to stock up on things you know  you know buy things that you're going to use in   a year or two buy it now because it's going to be  a lot more expensive if you wait why hold on to   the cash if the cash is going to lose value  uh just buy the things that you're actually   going to need because those things will retain  their value if you're planning on using them   so here's the Ponzi scheme question so because  of the efficiencies of the capitalist system   free market system let's say we are generally able  to produce more for less and in some instances we   seem to be doing that faster and faster so  consumer electronics are a good example and   price of computation and so forth and so what  that means is that independent of inflation   because of technological progress things will get  cheaper in the future the future will be richer   than the present so then you might say if you're  a politician you say well if that's the case and   if that's invariably the the case then why not  defer our debt to the Future like essentially   why not borrow from the future because the  future is going to be wealthier than the   present and then I wonder like if we had a three  percent increment in actual productivity per year   then maybe we could tolerate a two percent  inflation rate because fundamentally   the tendency for things to get cheaper because of  enhanced productivity would be balanced by that   inflationary proclivity so are the politicians  could you make a case that the politicians are   making a good bet because they're throwing the  debt into the future when we're going to be   richer no well they they are making a politically  opportunistic decision yeah fair enough because   they're they're telling the voters hey don't worry  about it your grandkids will pay for it right or   whatever uh and and right of course not all voters  have kids right some voters you know don't have   kids and so what do they care if somebody else's  grandchildren uh pay for their for their program   but the only time you could justify borrowing from  the future is if you are creating something that   future uh people will benefit from let's say  a capital investment let's say the government   is going to build a bridge and that bridge is  going to be there for 100 years right uh and   and people who aren't even born yet are going  to benefit from that bridge okay maybe they can   sell bonds to finance the construction of that  bridge that future people will end up paying   because they're going to have the benefit  of that bridge so you can make an argument   for debt to support that but if we're going to  borrow money just to pay for welfare benefits or   Social Security benefits where we're leaving our  children and grandchildren with nothing but a bill   right they don't have a bridge or a capital asset  uh the money's been spent I see so your argument   basically is is that if you're borrowing from  the future isn't designed specifically to drive   productivity let's say then it's a degenerating  bet yeah I don't think it's borrowing from the   future I think it's stealing from the future  you're trying yeah okay fair enough and and   yeah but you know a lot of this stuff is going to  backfire because I think the current generation   is going to pay for a lot of this stuff because  the dollar is going to collapse you know we could   have hyperinflation and and because the future  Generations are not going to pay this they're   you know they're they're they're going to leave  that you know they'll leave the countries that   because they're not going to want to be subjected  to the confiscatory tax rates when they can't get   commensurate benefits from government they're  going to leave uh the the currency is going   to collapse in value and we're already there I  mean we're already at that point because you're   talking about this intergenerational Ponzi  scheme that's really what Social Security is   I mean it wasn't created that way in the 1930s  when Roosevelt uh first uh concocted this social   security and it was totally unconstitutional and  unfortunate that that we haven't but the idea was   that it was like Insurance the government was  going to take the money and invest it and then   when everybody was older you would get paid  your benefits and they even called the taxes   premiums but the whole thing was a con because it  never was Insurance because the government never   invested the money they spent the money and now  they gave themselves an IOU they created these   things called trust funds and so what would happen  is the government would collect the money from   Social Security then they would take the Social  Security money and spend it on whatever military   or whatever they're doing but then they would  put an IOU in the government trust fund in the   form of a bond and then they would say oh we have  an asset in this trust fund we have a bond that's   not an asset it's it's your own debt it's like  if I write myself a check for a million dollars   I can't take that uncashed check and claim I've  got a million dollar asset no I mean it's also a   million dollar liability so there never was any  money in Social Security they spent it all their   the system is broke and now they have to keep  raising taxes on the workers but now they won't   even raise taxes on the workers so they just keep  they create inflation to pay for Social Security we'll be right back first we wanted to give you   a sneak peek at Jordan's new  documentary logos and literacy I was very much struck by how the translation  of the biblical writings jump started the   development of literacy across the entire  world illiteracy was the norm the pastor's   home was the first school and every morning  into a begin with singing the Christian faith   is a singing religion probably 80 percent  of scripture memorization today exists only   because of what is sung this is amazing here  we have a Gutenberg Bible printed on the Press   of Johan goodberg science and religion are  opposing forces in the world but historically   that has not been the case now the book is  available to everyone from Shakespeare to   modern education and medicine and science to to  civilization itself it is the most influential   book in all history and hopefully people  can walk away with at least a sense of that okay so let me let me offer another Rosy scenario  sort of like the boring from the future scenario   so I've been thinking about this issue of fiat  currency and the fact that the currency is on   moored but we have a situation in the world  now where every currency is unmoored right   and so you might say no matter what form  of money you use you're making a bad bet   you're relying on something unreliable but if  you're going to rely on something unreliable   you should rely on the least unreliable currency   right and so then you might say well the least  unreliable currency becomes by default the   standard and the US has managed that for 50 years  60 years and so why isn't it the case because you   said for example well people who are subject to  unfair tax because of future deferral of debt   will leave but I could say yeah but there won't be  anywhere better to go I know there will be and so   the the whole world doesn't doesn't you know there  have those tax rates of a certain country you know   um Saddles it's yeah future generations with  too big a debt burden um those you know that   they could leave and go to a country that doesn't  have that demographic problem that big um of a   dead burden and and and and of course so you think  there'll still be enough call even if everyone's   on fiat currency and if all the currencies  are corrupt you still think there'll be enough   variability oh yeah corruption so that people  will vote with their feet like they are in the   U.S moving from correct Democrats correct Republic  and states and the idea that you know it's the you   have to settle for the least bad uh currency and  again currency isn't even really money money is   a commodity gold was money silver you know it  would be money uh legitimate currency which is   backed by real money is currency what we have now  is fiat currency and and both fiat currency and   and legitimate currency are substitutes for money  they're not actual money but they substitute and   they can function as money but they're not really  money in the real sense of how you define money as   the most marketable commodity which is would be  money but people have been saying well you know   the dollar is the cleanest shirt in the hamper  and but I I think the dollar only appears clean   because of its status as the reserve currency and  I think that status is in Jeopardy and when it's   lost then the dollar is going to be the the by far  the dirtiest shirt in in in in that hamper so so   and okay so two questions from that so first  of all maybe you could walk everybody through   why the government is the biggest debtor because  people aren't really clear even for example about   the difference between the deficit and the debt  and they don't know what the debt means to them   in real terms because it's always expressed in  these huge numbers like 132 trillion it's like   no one knows what that means but they could  figure that out if they knew how much of that   debt they were responsible for or their family  so you've got you've got two first of all why is   the government the big debtor well you've got the  national debt which is the accumulation of every   Year's budget deficit and then you've got the the  annual budget deficit which adds to the total debt   um but what I'm talking about creditors versus  debtors Nations can either be a creditor Nation   or a debtor Nation a creditor nation is a nation  in which the world owes it money more money that   it owes the world a debtor Nation owes the  world more than it's owed so prior to the   US going off the gold standard in 1971 and in  fact all the way up to probably the early 1980s   the United States was the world's biggest creditor  Nation right we we generated tremendous amounts   of wealth um under a Freer economy than the  one we have today and one that was governed   by the disciplines of a gold standard so we  became the world's wealthiest creditor Nation   today after 50 years of Fiat money America  is not only the world's biggest debtor Nation   America owes more money than all the  other debtor nations of the world combined   right that's how uh much our financial position  has eroded now when the dollar became the reserve   currency it became the reserve currency because  of America's Financial and Industrial might we   were the world's biggest creditor Nation we also  had huge trade surpluses now we have massive trade   deficits I mean over a trillion dollars a year  but when the dollar became the reserve currency   we made everything you know all the Consumer  Electronics that are now made in Japan or Korea   or China all that stuff was made in America I mean  if you wanted anything we made it in this country   in America and so since everybody wanted American  Products everybody needed American dollars to buy   them and the American dollar was as good as gold  because if you had dollars you had gold if you   had 35 dollars you could get an ounce of gold  from the government it was convertible and so   under those conditions the US dollar became the  reserve currency but today the the dollar would   never be the reserve currency today if it wasn't  already there right nobody would pick the dollar   given our financial position our trade-in  balances but you know it's been the reserve   currency because you know for the tradition of  the fact that it's been but in order for the world   to to maintain this status it's very expensive for  the world it's a huge benefit for America I said   we have a trillion dollar a year trade deficit  that means the world has to supply America with   a million dollars worth of merchandise for which  it doesn't get paid right it doesn't it doesn't   get products you know most countries in order to  export have to I mean in order to import have to   export you have to export something in order  to pay for your Imports well we don't have to   export anything we just print money and Export  that well that costs nothing but the rest of the   world has to produce real stuff and and use  resources land labor and capital to produce   products so Americans get to live beyond their  means because of the dollar status but the rest   of the world collectively lives beneath its means  and of course it's not um uh consistent because   some countries uh have to live even further below  their means depending on how big a trade Surplus   they have with the United States that's how much  they're subsidizing the US economy so a lot of the   Emerging Markets uh bearing even uh bigger uh uh  uh burden of preserving the dollar status and and   so I think the world is starting to move away from  the dollar not only because of the economic cost   of maintaining it but now we have raised the  political risks if you look at what the Biden   Administration did with Russia the unprecedented  sanctions on Russia this has really highlighted   the tremendous risk that every Sovereign  Nation assumes by being beholden to the dollar   because it puts tremendous power in the hands of  the United States it's like putting a noose around   your neck and then throwing throwing it over a  tree to America who's holding the other end then   you're hoping that they don't pull I mean nobody  wants to really be in that position especially if   you're a country like China where you know we've  kind of made China our enemy but in reality China   provides America with the largest annual subsidy  they're our biggest uh uh uh trade deficit is with   China so they Supply us with more merchandise than  anybody else and they're our largest creditor now   some people say it's Japan uh but no it's actually  China because you have to take Hong Kong because   Hong Kong is part of China so if you take all the  treasuries that Hong Kong owns and the treasuries   that China owns that's more than Japan so they're  our biggest Banker they Supply us with credit they   Supply us with merchandise right that's all going  to end right China is going to wean itself of that   okay so well so let's let's go after that so you  said and let me see if I got the reasons right   you said well the American dollar could stand as  the um fundamental currency because it had come   off the gold standard but had still benefited from  that it was extraordinarily productive it ran huge   trade surpluses it was a dynamic expanding rich  country with a very stable currency so it could   run on that for a long time and and you said  however now if people looked at the American   economic situation the American dollar without  that historical context there's no way the US   dollar would be the reserve currency but then  we're back to the dirty shirt in hamper problem   and I know the Russians and the and the Chinese  and the Brazilians Etc are wrestling with that   they're trying to move people away to some degree  from the dollar as a reserve currency but like   nobody in the right mind is going to trust the  Chinese currency so where so where do people   go if it's not the American dollar that's going  to be the standard for all the reasons you laid   out well you know the Euro doesn't look better  really and certainly you have to be insane to   use Chinese currency I think see that that is  the false choice that everybody thinks we have   to make one of the reasons that people are  so arrogant particularly in America that the   dollar status is not in jeopardy and so that we  can keep on running these huge deficits we can   create keep on creating inflation and the world's  got no choice right but the state with a dollar   because are they going to go to the euro are they  going to go to the Yen you know the pound I mean   they're winning B I agree all of those currencies  also have problems and so do you really want to   switch from one flawed fiat currency to another  even if those other Fiat currencies may be less   flawed than the dollar right do you really  want to make that shift I don't think that   that's what's going to happen what everybody  is missing is that there is an alternative   to the dollar that doesn't involve another fiat  currency and that's gold that is real money   everybody forgets that for thousands of years gold  was money it was money because it worked now over   the course of time we had paper currencies that  would arise and fall I mean hundreds of years ago   they were paper currencies that are now worthless  and you don't even know their names you know they   come and go but gold has has stayed you know  gold works as money and so I think what these   central banks are going to do is as they get out  of dollars they will just increase their Holdings   of gold gold will be the monetary anchor gold will  be the reserve monetary asset just the way it was   before the dollar it wasn't the British pound I  mean the British pound was a dominant currency but   gold was what everybody owned the British back the  pound do you see any do you see any evidence that   some of these alternate currencies are starting  to back their currency claims with gold oh yeah   you can what's happening on the central banks are  now buying more gold than they've bought in in in   decades especially a lot of the uh you know the  Emerging Market countries not even maybe so much   the United States isn't buying any gold and maybe  you know some of the more mature uh countries but   a lot of other countries that had predominantly  held dollars and then to a lower degree Euros or   Yen or pounds these countries are increasingly  buying gold that's why gold is at a record high   it goes around two thousand dollars an ounce but  in terms of just about every other currency on   the planet gold has been hitting all-time record  highs uh and again that's not really gold going up   that's all these Fiat currencies going down but  what are the reasons that countries would want   gold as opposed to the dollar is the US government  doesn't have any control over it you know gold is   an asset that's not also somebody else's liability  and nobody could create it you have to mine it no   one country you know has the advantage so  you know why would you want to take away   uh that that privilege that the United States has  and just bestow it on somebody else who is going   to abuse it the same way I mean the United States  abused that privilege that we had and we we we   exported all this inflation to the world we took  advantage of the this the position that we were   in uh so why would you want to put another nation  in in a position to similarly take advantage of   the world it's much better to go back to to  honest money and again even when we were on   Bretton Woods before you know 1971 and we were on  the dollar standard it was because the dollar was   backed by gold again if you held dollars you held  gold that's where the saying came from the dollar   is as good as gold in fact the legal definition  of a dollar is a is a weight of gold that's what   a dollar is dollars are gold the the the paper  currency that circulated Federal Reserve notes   are not dollars they are notes of the Federal  Reserve initially the those Federal Reserve notes   were payable in dollars the dollars were the gold  that the Federal Reserve notes paid because if you   think about what a note is a note is a promise to  pay something a Federal Reserve Note is supposed   to pay something well what did it pay it paid gold  it paid dollars today Federal Reserve notes pay   nothing their ious nothing the Federal Reserve  is not obligated to give you anything I mean   if you have a ten dollar bill okay so people  people might object and they and they have   that well gold is just another arbitrary standard  of value it has some intrinsic worth it's useful   for jewelry it's useful for certain industrial  applications but it's just another psychologically   valuable currency without any intrinsic value  and so it shouldn't be a repository of value in   principle that's any more stable than let's say a  well-managed or even a badly managed fiat currency   and so what do you what do you why is it that  gold has proved itself let's say over centuries   or Millennia as a storehouse of value what is it  about gold intrinsically let's say that seems to   have given it that edge the idea that gold doesn't  have any intrinsic value is just pure nonsense   it's obviously politicians have a vested interest  in in trying to diminish gold as a monetary   alternative to the Fiat system and even now you  have a lot out of cryptocurrency enthusiasts   who say the same thing well you know gold has no  value because they want to justify something like   Bitcoin which also has no value and say well gold  worked as money and it has no value so so Bitcoin   could work well it's not true that gold has no  value gold is the most valuable the most useful   metal on the periodic table gold became money  because it was such a valuable commodity but gold   has a lot of properties that make it uniquely  qualified to be money more so than than other   Commodities that's why gold was so successful over  the centuries as money because people preferred to   use it as money it wasn't governments that decided  gold is going to be money the people decided that   gold was going to be money and once the people  decided that gold was going to be money if you   were a king you know well you would tax people in  Gold because if you wanted to pay your soldiers   to protect you your soldiers wanted gold right  so it was the money created in the free market   and it beat out all other forms of money because  gold you know a gold coin uh all they're all all   the same you could melt gold down and you can make  it into coins uh it's fungible it's portable it's   divisible but the other aspect of goal that is  the key you can save gold because if I have an   ounce of gold in 100 years in a thousand years  it's exactly the same it doesn't lose any of its   properties and in fact even if I take my gold and  I make you know I make a ring out of it or I I use   it to make a watch right you can melt this ring  down and you get your gold back and it's exactly   the way it was you could do something else with it  there's really no other metal you can keep using   it over and over and over again I mean they fill  teeth with gold if you find somebody buried in   the ground you know you could take their fillings  and you know the Gold's still there you know there   treasure ships from the 1400s 1500s they sink if  they recover the wreckage the only thing that's   still there is the goal it's an it looks exactly  the way it looked when the sink when the ship sank   500 years ago so from a point of savings because  money has to satisfy three primary conditions   two of them are a unit of account an immediate  exchange but the third one is the store of value   and that's important because it's also makes it  possible to do loans that I can borrow money you   can lend money and you can be repaid and you know  that the money that you're going to get repaid is   going to retain its value and so that's something  that gold that gold does better than than other   metals but the the value of gold even if I'm  not using my gold today as a metal let's say   I have gold stored in a safe and you say well you  know you're not using it for anything that's true   but I'm preserving the future use of that gold  somebody in the future is going to need that gold   and so I'm storing it right now because you know  there are more uses for gold that are discovered   all the time because of its very unique properties  I'm sure in a hundred years or a thousand years   there will be more uses for gold than there  are now and and so okay so let me where are   they push you on the crypto front for a second  so so you know I've been contemplating permanent   storage storehouses of value concerned about  such phenomenon that we've been discussing   as inflation and potentially hyperinflation Which  is far from rare even among developed countries I   think you have a one percent chance if you live in  a developed country of uh hyperinflation incident   at some point in your life it's something like  that but anyways the cryptocurrency people and   I think the Bitcoin people have made this case the  best is that they've managed to duplicate gold in   its important elements in that they've produced  a storehouse of value that can't be corrupted   because it's blockchained and distributed and  that's a nice argument that also gets more   scarce with time which was quite the brilliant  um technological innovation that requires work to   obtain and so that's the Bitcoin mining but  that is also easily distributable digitally and   so it's out of the hands of governments it's  an uncorruptable store of value it's widely   distributed and it's easily moved and so you know  that's not that that accounts for a fair number of   the properties that you described a money a moment  a monetary unit had to possess so what do you   think of crypto in general but more specifically  about Bitcoin because I think it's king of the   cryptos and do you think there's a case to be  made that gold has an advantage that crypto   cannot duplicate and then we might ask well what  if you had a gold-backed crypto because maybe then   you could have the best of both worlds so so what  are your thoughts about the I mean bitcoin's done   pretty well for a currency that doesn't exist you  know that's not government mandated Etc it's it's   stored its value there's a lot of well variability  oh first of all but Bitcoin isn't a store value   because you can't store something that you don't  have right first you have to have the value so as   I said Gold's value is its use as a metal right  that's what you're storing is the future use of   gold and metal whether you're going to use it in  jewelry or as a conductor in electronics or in   medicine whatever it is you're you're storing that  uh Bitcoin only has a price doesn't have value   price is something that you pay right value is  something that you get when you buy Bitcoin you   pay a price but you get no real value um and now  I agree the price of Bitcoin has gone way up from   when it was first started where you know you could  get multiple Bitcoins for a fraction of a penny   or a dollar whatever they started next to nothing  and at one point people were paying almost seventy   thousand dollars for for a Bitcoin um currently  it's around 27 000 as we're recording this   um so depending on when you bought you you  potentially made a lot of money if you sold   if you bought during the Mania hysteria of 2021  you know you you've lost a lot of your money if   you if you get out um but looking at Bitcoin look  Bitcoin did an excellent job of replicating the   qualities that gold has that made it better money  than you know cattle you know or salt or you know   other Commodities that have been money right gold  did has certain properties and Bitcoin you know   captured those properties but the most  important property at all of all is Gold's   metallic properties gold as a commodity Bitcoin  has none of that and and so Bitcoin just like a   fiat currency what what gives a fiat currency  its value just confidence people just believe   that it has value they believe that people will  accept it now part of that belief is driven by   governments which declare it legal tender and  which require it for payment of taxes and so   there is some real demand for dollars if you live  in America there's a demand for euros if you're in   Europe because you have to pay taxes and if you  don't pay taxes they could put you in jail and   so in order to avoid jail you need the currency  that the the government demands uh but Bitcoin   is similar to Fiat in that all of its value comes  from faith and confidence people just believe that   people in the future will want it and they'll pay  a higher price for it except there is no legal   currency status there is no government really  maybe other than El Salvador I don't know what's   going on over there but there's no government  that is accepting tax payments in Bitcoin   um so there's no natural demand  other than the speculative demand   from people who think they're going to get rich I  mean people who buy Bitcoin are buying it because   they expect the price to go up and the people who  buy it from them thinks their the price is going   to go up so it's just greater full theory that the  price is going to go up and that's what's driving   people to buy it uh it's very cumbersome if you  want to use it as a medium exchange or a unit of   account it's too volatile to be a unit of account  it's too expensive to be a medium of exchange and   it can't be a store of value uh so it's it's  it's not gold it's you know digital Fool's Gold   but you you hit the nail on the head when  you talked about a crypto that's actually   backed by gold that works that solves  all the problems that bitcoiners claim   gold has it well you know I can't send my  gold around the world I can't use my gold   to buy a cup of coffee well yes you can it's a  lot better than Bitcoin if I have gold stored   with any third party it could be a government it  could be a private company it could be anybody   you could tokenize that goal and  have a Bitcoin similar cryptocurrency   that is a digital representation of that actual  goal it's like a warehouse receipt an IOU for gold   and then if I wanted to give you some of my gold  I wouldn't have to ship you my bar I could just   send you my tokens you know over the internet  and and now the ownership goes from me to you   um you know it's it's an improvement on paper  money because again initially paper money came   as a substitute for gold I had my gold stored with  a blacksmith and instead of lugging my gold around   my blacksmith gave me an IOU and then I could  circulate that IOU because everybody knows the   gold is there and instead of having to get it they  just circulate uh the IOU in in the paper terms   well it's much more efficient to do it uh crypto  digitally and you can take an ounce of gold or a   gram of gold and divide it you know to tiny little  pieces so that I could buy a cup of coffee and pay   the Barista with my gold uh using the token uh  and it would be faster and cheaper than Bitcoin   and the difference is when I'm paying with gold  I'm paying with something real I'm getting one   commodity for another I'm getting coffee and  the guy that sold me coffee is getting gold   um and you can actually denominate the price  in Gold because gold is stable I mean it could   function much better as a monetary instrument  the only thing that you have you have to trust   you have to trust the third party but I mean  capitalism is all about trusting third parties   I mean private third parties we we buy an  insurance policy people buy life insurance   fire Insurance health insurance it's all a third  party that's selling you that policy the policy is   only as good as the third party's ability to to  pay you know how do you you know we have rating   agencies we have capitalism we have competition  for reputation there is no reason that you can't   have third parties to store your gold and then you  could use it you don't have to store all of your   gold that way you can keep a lot of your gold  yourself but the goal that you want to use as a   media of exchange uh you can use that uh digitally  and that works much better uh than Bitcoin you   have real value you have real well I've talked  I've talked to people who have attempted to   produce gold-backed cryptocurrencies and they've  run into from my understanding a variety of   legal impediments on that front do you know of  anybody who's doing that successfully and if so   why aren't they uh Prime competitors let's say  in the international market for Bitcoin I mean   the argument you laid out seems to make sense  and so you'd think well you'd think two things   you'd think given that governments are rushing  to digital currencies and that some governments   would like to displace the U.S dollar as  the reserve currency that the logical thing   to do for some enterprising country would be to  produce a digital currency that was gold backed   and so what's happening on that front  okay so there's two things first of all   the demand that is mainly coming in  cryptocurrencies including Bitcoin   is to get rich right people want to buy Bitcoin  because they think it's going to go to the Moon   and so that's really the demand for  cryptocurrencies it's not to have an   alternative as a medium of exchange and as a unit  of account most people that are buying Bitcoin   they still use dollars or Euros or Pounds in their  transactions they just hoard their Bitcoin because   they think they're going to get rich and and so  there's no real Demand yet for a cryptocurrency   that's backed by gold to be used as a medium  exchange people are still content to use their   Fiat currencies for that role um but I think  that once this crypto bubble really pops and   the losses you know stack up and and people  get burned and they're no longer interested   in these get rich quick schemes and they  really start to focus on an alternative   not to get rich but to preserve what they have  right because that's what gold is Right physical   gold is not about getting rich it's about  avoiding becoming poor it's about avoiding the   inflation tax and and so I think as the inflation  rates get worse throughout you know the world   there will be more of a demand for an alternative  medium of exchange to these Fiat currencies that   can also store value you said you said some of  that is happening already you said that many   countries around the world the central banks are  buying gold the central banks right seems to be a   right right so and and many of those central banks  are also starting to experiment with the idea of   an imposed digital currency well there there's  there's flirting on the market what they're   talking about is a digital fiat currency that  just gives them more yes I know they just want   they and if they want to eliminate cash it's just  inherently a very oppressive monetary system that   concentrates even more power in government  and diminishes uh individual liberty and   makes it easier for governments to become more  tyrannical so that's a whole different a topic   but staying on a gold back crypto so one reason  is that there's not a lot of demand for it yet   the other problem though is that to the extent  that there is some demand there is such a huge   regulatory impediment and I think it's deliberate  on the part of governments governments don't want   to have to compete with gold and and so the  barrier that a lot of companies face because   it's very easy to tokenize Gold this is not a hard  process it's the regulatory environment it's the   money laundering laws uh you know that are there  uh that make it very expensive to get into this   um business uh because you have to comply with all  these rules and regulations and also you have the   potential for governments to declare these tokens  Securities which they're not but some government   can say oh it's a it's a security and now it's got  to be registered and you've got to comply with all   these other rules and regulations so government  makes it very expensive to compete with their Fiat   currencies so what has to happen is the advantage  of a goal back crypto has to be so large that it   could absorb those costs and that's going to  happen because the inflation is going to be so   high but also you're going to have Sovereign  Nations potentially coming out with goldback   cryptos in the United States you may have state  governments coming out with their own official   uh gold back uh cryptos uh there it's I mean  all of this is going to happen the market is   going to find solutions to this problem you  know whenever the government you know has some   type of service that it provides and of course  all government services are going to be flawed   you know we talked about how capitalism lowers  prices governments raise prices whenever whenever   you look at an industry that that's heavily  regulated education right prices go up all   the time because the government is so involved  that's why it keeps getting more expensive and   the quality goes down the quality of Education  I mean a high school degree you know 50 years   ago is is way more valuable than a college degree  today even a master's degree so governments have   destroyed especially a master's degree yeah the  governments have destroyed the value of degrees   while dramatically increasing the price to to get  one so government drives quality down and price up   the free market does the reverse it drives quite  quality up and and and and and and price down   government let's say the post office right post  office was a problem and so then FedEx came along   right and okay we can avoid the post office or  more recently uh governments create monopolies   in taxi cabs well Uber comes along Lyft comes  along and and creates some competition to these   government monopolies so the same thing is going  to happen with money government money is is so bad   and it's going to get worse that the market is  going to offer Alternatives and yes the government   is going to try to put up roadblocks to protect  its Monopoly But ultimately it won't work and you   know the people will find ways around it okay  okay so well let's turn on the recommendation   front now so and we can talk a little bit  about your particular business as well so   I would say that one of the threads running  through our conversation is well first of all   you're cautioning people against the immense  danger not only of inflation but of potential   hyperinflation and you're making the case that  Fiat currencies including the American dollar   are intrinsically weak and getting weaker for a  variety of reasons and that's true systemically   not only in the US and that that's going to  inevitably increase inflationary pressure   now we've seen a fair bit of that in the last two  years let's say and it's certainly I think evident   to anyone who's thinking that the actual inflation  rate is much higher than the pronounced inflation   rate okay so now hypothetically people are going  to want to know how to protect themselves against   inflation if they're trying to store wealth in  the long run um trying to maintain their savings   at minimum let's say and you make a strong case  that gold is the proper medium in which to invest   savings that you wish to maintain now you broker  gold purchasing Services we can walk through that   a little bit and so someone could say well you  know you have an iron in the fire you have a   stake and the outcome here it's not surprising  that you're putting forward the pro gold Vision   but I presume the reason you're doing that is  because you actually believe it and are invested   that way yourself so what would you recommend to  people who are listening and these would be people   of a moderate income let's say or perhaps on the  Lower Side what would you recommend to them to be   doing in order to protect themselves against the  threat of inflation as the future rules forward   yeah well first of all absolutely right I don't  I don't promote gold because I have a bunch of   gold I'm looking to unload I mean I I went into  that business because I believe that people need   to own it I mean in fact I started shift gold uh  I had I was I owned a broker dealer and a lot of   my customers wanted gold because I promoted gold  I talked about it but I didn't I didn't sell it   at the time I was was just you know I was stock  broker and I was helping people with their stock   portfolios but I also recommended that they go  and buy some gold and they would go and buy it   from other companies but what was happening is  people were getting ripped off a lot of these   gold Merchants were uh overpricing their products  they were you know pushing them into numismatics   or these Collectibles and I didn't like what  was going on and so in order to make sure that   my customers didn't get ripped off I started my  own business to so that they could buy gold from   me and I could make sure that they they weren't  pushed into these other products and that they   bought bullion and they they paid a low price  for it so that's how I got into the business   um because I believed in it now I don't look  at gold though as an investment I look at gold   as money so to the extent that you want to keep  liquidity you don't want to make an investment   right you don't want to buy real estate you don't  want to buy stocks you don't want to buy bonds   you just want to keep some cash that's where I  see gold as a place in the portfolio right and   not the cash that you might need I mean at least  now I mean when we're starting to use gold back   crypto then you could keep everything in Gold but  for now you want to pay your rent your landlord   isn't taking gold yet I mean he probably will  in the future but right now he wants you know   dollars or Euros so you got to keep some cash to  pay your bills but if you're talking about cash   that you're going to hold on to that you might use  in a few years maybe to make an investment maybe   you think real estate's going to go down maybe you  think stocks are going to go down and so you want   to you want to have some dry powder to buy that's  where you want to keep gold instead of currency   because currency could lose so much value that  you know stocks can go down in value but still   go up in price you know so let's say uh stocks  could go down 10 or 20 percent in terms of gold   but they can go up in terms of dollars or or or  Euros so it's better to hold your dry powder in in   honest money and especially now because if you  look around the world interest rates in almost   every country are still below the official  inflation rates which means rates are negative   and of course the the real inflation rates are  much higher than the official rates so you're   losing a lot in cash maybe 10 20 years ago that  wasn't the case you could get an interest rate   that exceeded the rate of inflation and so you  were paid for the loss of uh purchasing power   and people would say hey you don't want to own  gold because you're giving up that interest well   now there is no interest there's negative  interest gold actually lets you avoid that   negative interest because negative interest is a  loss that's imposed On You by holding a currency   so you avoid that loss by owning gold so gold  uh is a substitute for money but you want to   make investments you don't want to just leave all  your money in gold gold is a metal it's not doing   anything it's not producing anything uh you're  gonna do better over time investing in productive   assets and that's what I do if you can identify  them yes and if you don't overpay for them I   mean that's a mistake that a lot of people make  they look at a company that has a good product   and they think oh it let me buy that stock  well the stock could be way overpriced so   it's not just buying a good company it's paying  the right price and because that's what's going   to determine your long-term return if you overpay  for an asset you're probably going to lose money   eventually now you can so how would you how do  you view how do you view let's say the relative   importance of something like a good so there  are these funds which I'll just outline this   for people who are listening that allow you  to purchase a basket of stocks essentially   and often those stocks are weighted to the index  is used to assess stock market performance and so   you can buy uh shares in a mutual fund in a fund  let's say that owns a basket of stocks a large   basket of stocks and so then you average your risk  across many companies and you benefit in principle   from the average increase in productivity across  that basket of Stellar companies and so those   those index portfolios have proved to be a pretty  good alternative to actively managed money and how   do you see investing in gold in relationship to  something like investing in an index fund well I   mean they're very different so first of all the  the idea of just indexing and just say look I'm   just going to buy the market I'm going to buy  all these stocks you know in certain periods   of time that could work out right because if a  lot of money is flowing into those indexes it's   going to push up the price of the stocks that  are included in those indexes but right now   because so many people have indexed the stocks  in those indexes by and large are overpriced   and if you you buy if you overpay for an asset as  I said you're going to lose eventually now you can   overpay for an asset and you can make money  if you can sell it to somebody who overpays   by an even greater amount and so you could trade  overpriced assets if you're Nimble and make money   but if you're a long-term investor the way to make  money is to buy something cheap buy it when it's   undervalued especially if it pays a good dividend  because now you can collect your dividends while   you're waiting for the asset that you bought  cheap to become expensive and I don't like passive   investing you know what I do for my clients  and what I do personally is I actively invest   um and over the long run that is much better  than indexing over certain periods of time   indexing can do better and then it becomes a  self-fulfilling prophecy because the money gets   sucked in chasing and performance how how do you  know that you're how do you know that your active   investing is allowing you to I accurately identify  stocks that are properly or under underpriced I   mean that's the million dollar question well there  are some basic you know truths to assessing value   of a business right you could look at a a business  because that's what a stock is when you're buying   a stock you're buying a piece of a business so  you look at the business and you can look at the   the revenues the profits the debt you know you  could look at all these metrics and you can tell   you know is it cheap am I buying the income  potential of this business am I getting a good   price you can look at ratios historically that  show you that something is cheap or expensive   now the problem that a lot of people have is  their time Horizons are so short because yes an   asset can stay cheap for a while before the price  goes up and usually when you get something cheap   it's because there's a problem something's got  to be going wrong that's causing people to sell   so what you have to be able to do is do your  homework and decide is this problem that is   hurting the price of this stock is it fixable is  it long term can we see beyond this problem to the   solution and is the market getting something  wrong and I'm getting a good price conversely   when stocks are expensive it's because they're  doing great and everybody loves them and then   what you have to decide is well are people being  too optimistic about this company that's doing   really well are there problems that the market  is not paying attention to that are likely to   come up in several years so there are ways to  do this and if you're smart and you st you have   basic principles over the long run I think you're  going to outperform just a static basket of stocks   where you're just going to pay whatever price the  market is demanding I mean people say well you're   saying that's partly because these index stocks  they also tend to be somewhat inflated in value   because so many people have dumped money into  them exactly that's artificially inflating the   price of the entire basket right right because  then that counter purposes to the idea of random   sampling it's no longer random if you're buying a  preferentially priced basket and then it's going   to work in Reverse when a lot of people want to  get out of the indexes all these stocks are going   to get sold because a lot of these stocks don't  even pay dividends I mean the problem is let's say   you're buying a bunch of stocks they don't pay  dividends if you retire and you have all these   stocks and now you need money to pay your bills  because you don't have a job you got to start   selling your stocks and that puts downward  pressure so by by placing those stocks in an   index they're no longer independent either right  you bundle them together and so the presumption   of Independence that was there to begin with  is violated by the bundling of the stocks in   the index but the other point I'm trying to make  is if I'm building a portfolio for my clients of   companies that I'm buying cheap and because I'm  buying them cheap I'm getting a high dividend I'm   getting a lot of income on my stock because see if  you're just buying a stock because you think the   price is going to go up that's just speculating  you could be wrong the price could go down I'm   buying stocks that even if the price never goes up  I still make a good return because I'm getting a   dividend right now regardless of what happens to  the stock price so if you build a big portfolio   of good dividend-paying stocks while you're still  working and you don't need the income you can take   those dividends and buy more stocks and build  up your portfolio but then when you retire you   don't have to sell your stocks you just take your  checks your dividends and you start spending those   you stop reinvesting and so that's not a Ponzi  mentality that's legitimate investing in the   market uh by buying companies that throw the most  important thing though that I think people can do   now is recognize though if I'm right about what's  going to happen to the dollar and the US economy   the companies I'm buying are international and  their customers are outside the United States   and these are the customers that are going to  benefit when the dollar declines and the U.S loses   that Reserve status and Americans can no longer  live above above their means that means a lot of   other people who are living beneath their means  they're going to get a reward from the dollars   a loss of status and those consumers in those  other countries are now going to be in better   shape I want to own businesses that have those  customers I want businesses whose customers are   going to get richer not whose customers are going  to get poor and I want customers who have a lot   of savings not a lot of debt so I own businesses  that are going to be able to thrive in an econ you   know where the US economy is in a lot of trouble  where it's in stagflation and I also own companies   that sell products and provide services that  people need and they're going to continue to   buy those goods and services even if they have to  cut back on other things to afford it you don't   want to have a portfolio where consumers  can easily do without what you're selling   or if you're not even selling anything a lot of  these tech companies you know all their income   is from advertising they give away the products  and they and they have advertisers but if the   consumers can't afford to buy products that  the advertisers are advertising then all that   ad Revenue goes away and a lot of these uh tech  companies that have these really high multiples   you know they're going to come crashing down okay  so if you were we're starting to come to near the   end of the time for our discussion if you were  giving people advice who are beginning to invest   let's say these are people who might say have a  hundred to five thousand dollars a month to invest what would you recommend when do you think people  should start doing that when should at what level   of income should you start to consider putting  away some of your money how much should you put   away and then what concrete steps could you  take to start doing this it's broken down in   a very simple manner because lots of people have  no idea how to start doing this when it comes to   investing I mean the earlier you start the better  because you get the compounding effects of that uh   now if you allow inflation to destroy the value of  what you've invested then you know that's no good   but if somebody only has you know 500 a thousand  dollars a month to invest I mean what I would   recommend is that they use my mutual funds I mean  you could go to uh my my uh website europac.com   now I think the minimum is twenty five hundred  dollars to get your account going right so you   have to have at least that amount that's not a  lot but you can go on my website and just buy   my funds now my funds are also available at all  the discount brokers so if you have an account   at Schwab or Fidelity or Ameritrade or yeah all  these you know my funds are on their platforms   but um but then the I think the the incremental  investment you can invest a hundred dollars or   500 at a time you know you can you can have  small Investments once you've established uh   the portfolio but then you do get the benefit  of professional management and diversification   you get a a big portfolio of stocks that are  actively managed by by me and my team where   we are you know looking for good opportunities  buying stocks when they're cheap selling them   if they get too expensive um you know constantly  you know you know evaluating our Holdings making   sure that the stocks that we thought were cheap  um because they had a problem that those problems   are being solved and that we're right on our  research and if something comes up and we think   we've made a mistake we can sell a stock and and  redeploy the money or if we find an opportunity   that we like better than one that we have we  can you know we can make the changes that's   something that you can't do when you're just  in a in a in a static model you know and and   that's why my my funds the performance has been  so fantastic recently uh in the last you know   one three and five years relative our to our  peers is because we've done such a good job of   um stock picking and sector allocation I mean  not only are we way ahead of our benchmarks which   would be an index but we're way ahead of everybody  else who's trying to beat the indexes uh but I   think the the time period where my funds are going  to do the best and I have a value fund a dividend   payer fund an emerging market fund a gold fund and  an international bond fund it's going to be in the   future years when the dollar is really weakening  I mean the dollar hasn't weakened dramatically yet   I mean in terms of purchasing power it has I mean  that's clear I mean you need more dollars to buy   everything but in terms of Euros or Yen or pounds  that's not the case but that's coming I think   we're going to see a substantial decline in the  dollar relative these other currencies and that   is the environment where my funds are going to do  the best and as inflation rates pick up and we see   a bigger increases in commodity prices uh that's  going to really benefit my investment strategy   so okay so let's let's close with this perhaps so  the devil to some degree is always in time frame   you know and you've made a case for the inevitable  weakening of the American dollar as a reserve   currency and of its value as a fiat currency and  that's in keeping the latter part in particular in   keeping with its gradual dissent into comparative  lack of value against gold since 1971. but so   the devil is always timing and so over what  period of time do you think this unfolding   into a more inflationary period is going to occur  and and what makes you reasonably convinced let's   say of your timing well timing is is always  difficult I um I mean I know what's going   to happen I've known what's going to happen for a  long time right that that might be the problem but   where we are right now is exactly where I've been  forecasting we would be even going back to you   know my predictions of the 2008 financial crisis  you know I knew that crisis was coming because I   understood the mistakes that the Federal Reserve  made to create that housing bubble and I knew the   consequences for the financial set system when it  popped but even before the bubble popped I knew   the mistakes the government was going to make I  I predicted QE before I even knew the word I knew   they would do this and I knew they would inflate  an even bigger bubble uh that has finally popped   because I knew that eventually the FED would be  in a position at other central banks where the   they would have created so much inflation that  they would now be under pressure to do something   about the inflation problem but they couldn't  do that without creating a worse financial   crisis than the one that they used inflation to  mitigate in 2008 and that financial crisis has   already started we saw that with the failure of  Silicon Valley Bank and Signature Bank and a lot   more Banks would have already failed had they not  been bailed out the government Pat you know came   in and propped them up and printed more money and  and came to the rescue which is another mistake   but we're at a point now where inflation is going  to start to run out of control because the FED   has started to return to inflationary monetary  policies when inflation is already you know triple   it's two percent Target uh we're starting another  recession uh from the weakest you know financial   position that we've ever been in and all the stuff  that's been happening is stuff that I predicted in   fact even when covet first started and everybody  was saying oh this is very deflationary I said no   it's not it's massively inflationary because we're  people are not working they're not producing and   we're printing even more money than ever we're  we're we're actually paying people more to stay   home than they earned when they actually were  productive I said this is you know creating even   more inflation and so we're at this taking point  you know and in fact when the central banks had to   keep interest rates at zero for so long they did  that for a reason that was because they didn't   want the whole thing imploding so they kept it  on life support until they couldn't do it anymore   because of the the outbreaks of consumer prices  but I I think we've passed that point and and so   this is happening this is the time frame where the  air is coming out of this bubble it's still early   if you remember in 2007 when the subprime market  blew up and I was very you know active there we   had shorted a subprime market I mean you know they  they you know they made wrote a book they made a   movie about that trade well I lived that trade  we did that trade so I I was predicting you know   subprime I mean you can go one of my videos on  YouTube is mortgage Banker speech I gave in 2006   in front of 3 000 Mortgage Bankers I went there to  promote this hedge fund that was shorting subprime   but you could still watch my my talk with what  you don't have on the Internet is the smaller   talk that I gave later specifically on that fund  right this was the larger talk I had about maybe   50 people that came to the smaller presentation  about about the fun um but I knew at at that time   that the the bursting of that bubble but you  know we we would create this crisis but when   the subprime problem initially reared its head  everybody said don't worry about it the Federal   Reserve said it was contained Ben Bernanke said  don't worry about subprime it's contained well I   was on television at that time all the time I  used to be on cable news every week back then   I said no it's not contained this is the tip of  an iceberg this is a huge problem in the entire   mortgage Market we're headed for a financial  crisis you know it's anything but contained   well the government got that wrong then when  inflation really burst out as far as high prices   in 2021 what did they say oh don't worry about  it it's transitory right well I said no it's not   transitory it's permanent it's here to stay they  were wrong again well they're ignoring the warning   signs again just like they ignored uh the subprime  problem just like they ignored the outbreak of the   CPI they're ignoring all the early warning signs  of the of the financial crisis that we're in   now and the Great Recession that's beginning  that is much worse than the last one and so   that the significant thing is going to be the  difference because I think this time we're headed   for a currency crisis that's going to be the end  result of this next collapse is going to be the   end of the dollar status in a currency crisis and  so you have to have a very different Investment   Portfolio than the one you had in the prior decade  just hiding out in tech stocks isn't going to work   those stocks are going to go down you have to have  the international value the dividend paying the   commodity exposure old-fashioned type investing  gold and and that's what I'm doing and again   for for wealthier people you don't necessarily  have to buy my funds you can buy my funds but we   have separately managed accounts so if you contact  your Pacific Asset Management we manage portfolios   individual portfolios of stocks uh that I think  will perform extremely well during the economic   environment that we're in and that we're going to  continue to be in most people unfortunately are   going to get wiped out people are going to lose  lot in this environment but there's going to be   a small percentage of people there always are who  will make money during this time period And I I   just prefer to be among those people right just  like you know not everybody made money off the   subprime collapse there were a a number of people  who understood the problem and bet against the   conventional wisdom and and and they made money  and the conventional wisdom is generally wrong   and it's wrong right now they expect things to  happen and aren't going to happen they have a lot   of confidence and faith in central banks and the  fed and and they're wrong this is not going to end   the way they believe there is a huge mispricing  of Assets Now just like there was for mortgages   back then a lot of people don't understand  this and they're going to suffer but the   people who understand it are going to are going  to profit and and I'm hoping that as many people   as possible I can help them profit by by getting  them properly positioned with their portfolios   all right well that's an excellent place to stop  I would say we're pretty much right on time there   and so for everybody who's watching and listening  thank you very much for your time and attention   and Peter Schiff thank you very much for talking  to me today and walking me through a lot of this   somewhat Elementary material but it's very  good for people to hear exactly how these   things work right because we're not well taught  on the financial front and many of the terms   that are bandied about inflation debt deficit  investment for that matter gold standard Fiat   people don't understand these things and to  be to provide people with that information is   extremely helpful we will link to all of the  um opportunities that Peter described in the   description of the video so you can check that  out if you want and I'm going to switch over to   the Daily wire plus side now and talk to Peter  for another half an hour I do that with all my   guests to get a little bit more biographical  information to find out how we got where he   is and uh maybe to delve a bit more deeply into  his ability to have prognosticated accurately   regarding the 2008 financial crisis which was  quite the interesting catastrophe in which he   seemed to get right when very few people did so  for all of you who are watching and listening   um maybe you can direct your interest to the  Daily wire plus side and offer them some support   in doing so they make these podcasts for example  possible and at least at the Quality that they're   now being broadcast and Peter thank you very much  for agreeing to talk to me today and for sharing   what you know with everybody who's listening  and uh will well we'll talk again right away   and hopefully we'll have a chance to meet at some  point in the future Jordan has been my pleasure   to be here I really appreciate the opportunity to  speak with your audience and hopefully I can come   back and we can expand on these principles and  uh yeah if you're ever out here in Puerto Rico   or Connecticut I'm there once in a  while but happy to happy to meet you   yeah well hopefully that'll happen in the not too  distant future and once again oh and to everybody   here I'm in uh I'm in Monastery at the moment  heligan Croy is just outside of Vienna taping   this podcast and to the crew here thank you very  much for your help to the Daily wire plus people   for setting this up that's always much appreciated  and Peter thanks again everyone watching ciao you   thanks for participating and  we'll see you on the next podcast hello everyone I would encourage  you to continue listening to my   conversation with my guest on dailywireplus.com

Channel: Jordan B Peterson

Views: 1,480,149

Keywords: Jordan Peterson, Jordan B Peterson, psychology, psychoanalysis, existentialism, maps of meaning, free speech, freedom of speech, personality lectures, personality and transformations, Jordan perterson, Dr Peterson

Id: Bbi-_nn4zaw

Length: 102min 40sec (6160 seconds)

Published: Mon May 01 2023

Reddit Comments

[u/CevicheCabbage]

Great interview. Schiff throws down.