Peter Schiff: Economic Meltdown & Dollar Collapse

Welcome back. We are joined today by Peter Schiff, the CEO of Euro Pacific Asset Management and host of the very popular Peter Schiff Show podcast. So I will leave a link in the description and also for his business. And thank you for coming on. You initially became very famous for predicting the crash of the housing bubble. However, you did it all the way back in 2006 already. And I remember back then it was met with mockery by many as the housing market was considered safe. And in 2012, I think you made the prediction that gold would go over $5,000, also mocked by some before. Of course, now last week, it did cross into $5,000 before now slightly dropping down. But it's important to note back in 2012, I think gold was about 1600. So, you know, you don't have a crystal ball, but obviously you're reading the market quite well. But you're saying that we're heading into a huge economic crisis now, how do you think this will play out compared to 2008? Well, first of all, you know, when I made that prediction back then, I didn't think it would take this long for gold to get to 5,000. I thought it would have happened sooner. So it was a little bit premature. But at this point, though, I think gold is going a lot higher than 5,000. And that's because between then and now, the problems that led me to believe that we'd have 5,000 are gold are much bigger. And we were able to kick the can down the road for over a decade. But in doing that, all of the problems got much worse. So unfortunately, now I think it's going to be a much bigger economic crisis. I think we're going to have a dollar and a sovereign debt crisis. And I think gold is pretty much a warning that that's what's going to happen. You know, back in 2007, when the subprime market blew up, that was something that I had been forecasting would happen for years. And I knew that was going to be part of a broader financial crisis. And so when that happened, I became more convinced that, you know, the financial crisis was going to happen soon. And I was, you know, warning about it. But, you know, most people just believe that what happened with subprime was an isolated event, that it was contained to subprime. And I knew that wasn't the case. And I think what we're seeing now in the gold market is a similar warning. And I think it's also going unheeded. But I think that the crisis that's coming now will be a lot worse than what we had back then. It's not just a mortgage crisis. This is sovereign debt we're talking about. This is, you know, the United States government treasuries that are falling into question, and the value of our currency. Yeah, well, back in 2008, I think the debt was 9 or 10 trillion. Now it's 38 and a half. So a lot of the situation, much of the situation is worse. But at least in 2008, there weren't that many good alternatives. They said whatever flaws the US dollar had, it was still the cleanest shirt in the hamper, it was said. And people tended to flock to US bond. But what do you see happening now with the bond market and the US dollar? You think it's gonna be less of a safety net as opposed to what it was back in 2008? Yeah, I mean, I think the world is trying to move away from the US dollar. That's pretty clear, with foreign central banks being major buyers of US dollars. And I think that, you know, the United States has alienated a lot of countries and, you know, created a situation where they have an added incentive to move away from the US dollar as a reserve currency. And so I think they're accelerating that move. And I think that gold is going to be the primary reserve asset to replace the US dollar and US treasuries in reserve for foreign central banks. And I think that, you know, the world is going to move away from the US and this is going to be a big problem because now the world depends, the US rather, depends on the world. The world supplies us with the goods that we don't produce. And they loan us the money that we don't save. And without, you know, the world doing that the US economy does not function. It's not viable unless we have the world propping it up. Do you think the upcoming economic crisis though will prick another housing bubble? Because I saw that Trump, he was arguing for driving house prices up in order to make homeowners wealthy. Well, I guess, what do you make of this sort of wealth creation, if it is? And how can this impact the stability of the housing market? Well, it's not true wealth. If you're talking about overpriced homes that nobody can sell because nobody can afford to buy them, then the homes are not worth what people pretend they're worth. You know, real estate is only worth, you know, what the market will bear. If people can't afford to buy the properties, the property prices have to come down. And I think it's interesting that Donald Trump's goal is to not only sustain a housing bubble, but to make the bubble bigger, just so people can pretend that they're richer than they really are by owning homes that they can't sell. But the only way that Trump could do this is to create inflation. Although he's also promising to get rid of inflation, or he's claiming he's already done that. But the only way to keep home prices from falling is with a lot more inflation. What are the real inflation levels now though? Because if one looks at education, healthcare, all of these things, the price, but of course food as well, the prices are increasing. This is not just an American problem, by the way. Across Europe, the inflation levels are starting to look kind of awful as well. But how do you assess the inflation levels now? Well, I mean, I think inflation is a big problem, you know, because remember, inflation is the expansion of money supply and credit. And, you know, we're still undergoing a major expansion in, you know, money supply is growing, you know, the government is trying to provide more credit. And all of that is inflation. Ultimately, it's going to bid prices much higher. And I think that when the dollar really starts to crack, and we just recently hit new four-year lows in the dollar index, and the US dollar hit an all-time record low against the Swiss franc, I think we're going to see substantial US dollar depreciation in the years ahead. And all of that, of course, is going to result in much higher consumer prices here in the United States. Do you have any timeline you see for the economic crisis, which is now looming? I spoke recently to Jim Rogers, and he is very reluctant to give any prediction in terms of timing. But, you know, he says what he knows will come, but he's not sure when it's going to happen. But nonetheless, how can we expect to, well, I guess, experience this financial crisis coming our way? I mean, is 2008 still a good model to follow in terms of how it might unravel? No, I think it's going to be very different than 2008, because, again, 2008 was about private credit. It was about mortgage credit. And the US government was able to bail everybody out by substituting its own credit. This is very different. This is where the US government is really going to be the epicenter of the crisis. It's the fact that there's been a loss of confidence in the United States' ability to honestly repay its debt and to get control of the deficits and inflation. And so it's very different. There's no way for the US government to bail itself out. And during the financial crisis, the dollar strengthened. When we entered the financial crisis, the dollar was at a multi-year low, and it actually got stronger during the crisis, which actually helped mitigate the harm. But this time, I think the dollar is going to be at the epicenter of the crisis. The dollar is going to be tanking, and that's going to add to the problem, because it's going to fuel higher interest rates and higher consumer prices. So we're going to have a protracted economic downturn, but with high inflation and higher interest rates. And it could be very high, very high interest rates. But if people are fleeing the dollar, where will they go? Is it just the metals or crypto? Well, I don't think much of it will go into crypto. I think a lot of it is just going back into their local currencies or stronger currencies, and then gold. I think central banks will be more likely to hold gold as a reserve. But I think it's just going to be on balance, not wanting to hold US dollars. It's not like you have to get into anything, you just don't hold dollars. Well, in the dollar crisis, what exactly would this look like? Are we talking hyperinflation? If so, I mean, it's hard to picture, because the United States has been the financial and economic center of the world for so long. Hyperinflation or collapse of currency in a country like the US, it's very difficult to, I guess, model it after anything we've seen before. Well, I mean, nothing lasts forever. And we have a tremendous amount of debt in the United States. And a crisis was pretty much inevitable. You hear this, Powell said at his most recent press conference, again, that our debt is on an unsustainable trajectory, but that the level of debt is not unsustainable. And I think he's wrong. I think the level is unsustainable, and we're going to find that out. Because the reason that they have to keep interest rates so low is because if interest rates normalize, we couldn't afford to service the debt, let alone repay the debt. But whether we end up having hyperinflation in Weimar Republic style, I don't know if it's going to get that bad. It could. But I think there's going to be a considerable devaluation of the dollar. And that means prices in the United States will rise substantially. I mean, a lot more than what we've seen in recent years. I could see the general price level in the United States doubling or tripling. And that would result in a very substantial decline in the standard of living of Americans. But it would also result in an increase in the standard of living of non-Americans. Because as everything got more expensive here, it would get cheaper every place else. So the world has a lot to gain from this. So where do you think the good money is going? That is, if there's a lot of money in the United States and around the world, where do you think the money will be invested? Because a lot of money has been reinvested simply in the United States over decades and decades. If all this money is going somewhere else due to a lack of trust, or like yourself, where do people put their money then? Yeah, well, I think money is going to flow out of U.S. dollar denominated assets, U.S. stocks, U.S. bonds, and people are going to bring their money home and invest locally. Or in other countries, just not the United States. You can already see that. Last year, the returns on foreign stocks greatly exceeded the returns in the U.S., and the same is happening this year. So I think that this trend has already started, and I think it will persist for many, many years as a lot of the capital that came into the U.S. leaves the U.S. I see that because of some of the political turmoil, though, that even some allied countries like Germany are now considering repatriating their gold because they want to make sure it's safe. But in this wider, I guess, more aggressive economic policies being used, especially this economic coercion, how does that play into it? And then especially Trump's tariffs, because I, to be honest, initially thought they would be used more as cautiously in part of some industrial policy focused on a specific sector to develop international competitiveness or some industrial maturity. But instead, the last threats, I think, was countries in Europe who opposed the U.S. from taking Greenland, that they would also have tariffs. So again, it's not how I had hoped it would be used. But how does this play into, I guess, undermining or triggering a dollar crisis or a debt crisis? Yeah, I think all of this is adding to the problem. I mean, certainly the threats of invading Greenland, I think, were a real wake-up call as to the real risks to the world of continuing to finance U.S. military buildup. I mean, without the world loaning us money, we could not afford the military that we have. And the fact that we then threatened to invade a peaceful country simply because we wanted its territory, because we thought it was somehow strategic to the United States, I think was a huge mistake on the part of Trump, as are the tariffs. Because Donald Trump is vilifying the entire world, claiming that the world is ripping off America, taking advantage of America, when it's actually the reverse that's true. And the tariffs that he's imposing are, of course, on Americans. But it is disruptive to global trade. It's disruptive to companies operating in other countries, because it makes their goods less affordable to Americans by raising prices. And so it shows that the United States is an unreliable trading partner. And the United States should not have the reserve currency, because the only reason or the reason we have these huge trade deficits is because we have the reserve currency. I mean, that's kind of like the deal, because the only way that you can earn dollars is to have a surplus with the United States. But that benefits the United States because we don't have to produce all this stuff. We get to consume it, but without having to do the hard work of making it. Also, we get to borrow a lot of money without having to save it. So, you know, we've got the better half of the bargain. And I think we're about to lose that privilege. I think the world recognizes finally that this relationship is not advantageous to the rest of the world, and they need to move on. How do you see over time, when you have this much interference into the markets, it's reasonable to expect that the markets become distorted? I mean, we keep referring to this as Keynesianism, but even Keynes, I don't think, would have expected or condoned the kind of policies we're seeing today, especially in terms of keeping the interest artificially low and, you know, fueling all these asset markets. No, I mean, even Keynes, and I'm not a Keynesian by any stretch, but even Keynes believed that you ran deficits during a recession or hard times, but that you ran surpluses during good times, so that you would pay off the debt that you accumulated during bad times. He never advocated perpetual debt. So we don't even have Keynesian policies anymore. We have something even worse. How about other distortions in the economy? It's often pointed out that our GDP is measured in a very poor way. The British example, I think, is interesting. That is, in 2014, the UK's Office of National Statistics began including prostitution and illegal drugs, I think, into the measurement of GDP. I guess, in all fairness, they're supposed to measure all market activity, but there's always this incentive to make the economy look bigger than it actually is to, I guess, boost confidence. I've never thought that GDP was the best measure of an economy because, yeah, there's a lot of things in there. Legal expenses are part of the GDP, but most people would rather not have legal bills. When there's a disaster, when there's a hurricane that destroys houses, that adds to the GDP, but we'd rather not have a hurricane destroy our houses. I think medical spending. I mean, most people would rather not have to go to the doctor. If I have to spend a lot of money on healthcare, I'd rather be healthy. I'd rather have no medical bill. So you have a lot of things. I mean, let's say there's a lot of crime and now you have to spend money on burglar alarms and fences. I mean, I'd rather have a safe community where I didn't have to spend that money. So you're measuring a lot of things that people would rather not do. And then there are a lot of things in there like leisure that don't even count in the GDP. If I have a lot of free time, which most people value free time, there's nothing in the GDP that measures that. So, yeah, I mean, it really doesn't show the standard of living that a society has just because you measure GDP, but that's what everybody uses. Wouldn't there be growing pressure now in the US to restore some fiscal responsibility? Because just from a practical perspective, that is, if one spends more on servicing debt levels than on the entire military, this is becoming a real national security problem. How is the climate in the US now? Is there any push towards just starting to reduce the debt levels or has that ship sailed? No, I mean, none whatsoever. I mean, if you remember during the campaign, the most recent presidential campaign, there was a lot of talk about cutting government spending, reducing the debt. Elon Musk was going to lead the Department of Government Efficiency, DOGE, and initially he came to Washington with the intent of cutting spending and he ran out of town. So there is no appetite at all in the Republican Party for cutting government spending. And I think that's a big part of the problem now because I think our creditors are finally coming to terms with the fact that there will never be any kind of deficit reduction in the United States, that so long as the world is willing to loan us money, we will keep borrowing it. And so the real solution is for the world to stop lending, stop buying our treasuries, in fact, start selling the treasuries they already own. And I think that's what's going to happen. I think it's already happening. Yeah, that was my question. To what extent is this happening? I know that China and Russia began dropping a lot of the investments, but that was kind of out of necessity because the political and security competition intensifies. But the Japanese, the Europeans, do you see them also scaling back their investments in the US treasuries? I think so. I mean, I think Japan is in a particularly difficult spot right now with the rising yields in Japan and the amount of Japanese government debt outstanding. And so I think that one of the things that Japan could do to lessen its problem would be to pay down a substantial portion of its debt. And the only real way to do that would be to liquidate US treasuries. They're the largest holder of US treasuries, but if they sell their US treasuries, they could repay their own debt and shrink the size of the debt that they have. So I think that's a real risk to the United States that the Japanese do that, because that would be great for Japan, but it would be bad for the United States because it would put significant upward pressure on interest rates here. Given that your other predictions have all come true, if this economic crisis now plays out, it becomes a massive dollar crisis. How will this affect the rest of the world? Because again, the US isn't an isolated island. There's a lot of investments that has been done, a lot of dependencies on the United States. So how are some regions safer than others, or how are you assessing this? Well, again, I think a dollar crisis is bad for the United States. I don't think it's bad for the rest of the world. In fact, I think it's a net positive for the rest of the world, because the dollar going down, it just means that other currencies go up. And so what happens is there's a realignment of purchasing power. Things get more expensive in America, but they get cheaper every place else. So Americans end up consuming less, but the rest of the world consumes more. And that's a win for the rest of the world. Everybody competes. There's only a certain amount of goods that are produced every year, and they get allocated based on who could pay the most. And Americans have been at an advantage because of our currency. It's been the exchange rate that allows Americans to outbid other people for the goods that everybody wants. But if the dollar goes down substantially, and other currencies go up, all that happens is now Americans get outbid, and people in other countries get to enjoy the products that they may not have been able to afford before. Whereas Americans no longer have access to those products just because we can't afford them. So I see it as a win. And especially too, I mean, America, we've sucked up a lot of capital. A lot of savings around the world have been invested in the US. Now, to the extent that world stops doing that, where are they going to invest their savings? Well, they'll invest it in their own country. So I think the rest of the world will see an increase in investment capital, which can only benefit the rest of the world. The United States is the loser because all of a sudden we no longer have those investments because we don't have the savings. Americans just spend everything. We rely on the rest of the world to do all the savings. My last question is, do you have any predictions for 2026, or at least almost falling in under 2026? For the elections? Oh, no, in general, for the economy and the election as well. Well, I think the economy gets worse throughout the course of the year. I think the economy is already pretty weak. I think the reports of this strong economy, I don't think are accurate. I think the GDP numbers have been skewed by the massive investment in AI and the build out of AI. But a lot of debt has been accumulated too, which they don't count that. If you goose your GDP by taking on a lot of debt, they don't look at how much debt you accumulate. They just look at the numbers. But I think beneath the surface, things are difficult. I think the cost of living continues to rise. I think the job market continues to be very soft. And more and more Americans are struggling to make ends meet. And I think those problems are going to worsen as the year progresses, which is why I think that the Republicans are going to lose probably the House, but maybe also the Senate too, in the midterm elections later this year. Okay, well, thank you. And where can people find you, by the way? Yeah, well, you know, I do my own podcast once or twice a week at the Computer Shift Show on shiftradio.com or on my YouTube channel. You can follow me on social media. I post a lot on X. And I'm also on YouTube and Facebook and Instagram and TikTok and all those. You can look for me on all those platforms. But I think most importantly too, is people need to be prepared for what's going to happen financially in the US. People should get a hold of my representatives at Europacific Asset Management to talk about the ways that we can incorporate my investment strategies into your portfolios. I do have mutual funds too that people can buy on their own. They can get the information on all the funds at the Europact.com website. But my mutual funds and strategies are specifically designed to benefit from the economic events that are going to be unfolding over the next few years. And it's also important that people buy gold and silver. We've had a pullback recently. Gold got up to almost $5,600. It's now back down a little bit below $5,000. Silver got up to $121. And it's now back below $90. And I think people should be buying this dip. I think we've got a long way to go higher in precious metals. And so Shift Gold is my company. And I've recommended everybody go there and buy some physical precious metals, especially the silver, while it's still available. I can already see that the supplies are running low. And a lot of the products that we would typically stock are no longer available because of the short supply of silver. SL. We could add your books to that list. Because I initially began buying gold and silver when I first read your book about 20 years ago. My most recent book, The Real Crash, America's Coming Bankruptcy, How to Save Yourself and Your Country was from 2013. But I would suggest that people read that book now because it's actually a lot more relevant today than it was then. Because I think the events that I was forecasting in my book back then are much closer to happening now than they were at the time. Well, I'll leave a link to that as well. So thank you very much for taking time. DT. All right. Take care.