Editor's note: This podcast revolves around Peter Schiff's views on Bitcoin. Schiff is a well-known gold supporter who has argued for years that gold is the real currency, and Bitcoin does not have this attribute. Bitcoin is popular because it attracts investors as an emerging technology, but its value has no real basis and may eventually be replaced. Although cryptocurrency may be superior to gold in some ways, it should not be considered a real currency. But at the same time, Schiff emphasizes that Bitcoin should not be subject to strict government regulation because he believes that individuals have the right to use their own funds, even for risky investments.
In this podcast, we discuss the following core issues:
1. Why does Schiff think Bitcoin is a scam?
2. What is the value of gold relative to Bitcoin?
3. What is the current trend of the stock market?
4. Schiff’s view on real value investing
TL;DR
Gold's monetary status: Gold is the most powerful currency in history, and its practicality and scarcity make it a long-term store of value.
Bitcoin's flaws: He believes that Bitcoin lacks intrinsic value and cannot be compared with gold. Although it has certain technical advantages, it may collapse in the future.
The combination of the Internet and gold: Schiff believes that the Internet and blockchain technology can enhance the liquidity of gold, but will not change the fundamental value of gold.
The Federal Reserve and the Economic Outlook: Schiff advocates for abolishing the Federal Reserve and warns of a possible future economic crisis, calling on investors to shift some of their wealth into gold.
Wealth Growth Advice: He recommends wealth accumulation through entrepreneurship and prudent investing, emphasizing the importance of gold and other traditional assets.
The following is the original text of the conversation (the original content has been deleted and reorganized for easier reading and understanding):
Ryan: Today we are not exploring the frontier, but returning to the world of gold. Bankless invited Peter Schiff as a guest, who was spoofed in the crypto industry as a person who is always bearish on Bitcoin.
David: Peter's love for gold may be even stronger than Michael Saylor's love for Bitcoin.
Ryan: Peter is a financial commentator and economist who has outspoken views on many things, such as the global economy, financial markets, government policy flaws, and the inadequacy of the fiat currency system. However, Peter is firmly bullish on gold and skeptical of cryptocurrencies. We have some consensus with Peter Schiff, such as the value of hard currency and the depreciation of fiat currency, but we have very different positions on Bitcoin and cryptocurrencies.
We talked about the comparison between Bitcoin and gold, but also touched on his views on US fiscal policy, such as whether the Federal Reserve should be abolished, what he would do if Schiff became president, and other interesting questions. The question I care about most in this episode is actually for David - how does Peter store his gold?
Peter Schiff: Yes, gold is real money. For those who, like me, are concerned about fiat currencies, central banks, inflation, and debt, if they are looking for a real store of value that can also serve as a medium of exchange and a unit of account, there is no need to reinvent the wheel. Gold can do it.
“Gold is the real currency”
About Currency
Ryan: How do you define currency?
Peter Schiff: I refer to the classic definition and think that money is the most marketable commodity. Looking back at history to understand the origin of money, we have not always had money. Before the emergence of money, humans traded through barter, but this method was very inconvenient because it required the needs of both parties to coincide. Eventually, people found that they could choose a commodity that everyone was willing to accept as a medium of exchange. Even if you don't need this commodity, you can use it to exchange for other things you want.
People begin to accept a commodity not because they need it themselves, but because they know that others may need it. This is the process of money invention. But to be a currency, it must have many characteristics, which also excludes most commodities from being viable currencies. Many different commodities have been tried as currencies over the centuries, but in the end, the most successful one was gold.
Gold has the properties of portability, divisibility, immutability, and non-corrosion, which are all necessary for money. Bitcoin attempts to replicate the monetary properties of gold, but they miss the most important point, which is the intrinsic value of the commodity itself - money must be a real commodity and must have its own value.
Although Bitcoin has these characteristics, it is difficult to become a real means of storing value due to the lack of actual value behind it, because it itself has nothing to store. In this respect, Bitcoin has many similarities with legal tender. Legal tender is usually backed by real assets, which is also the basis for the formation of the earliest monetary system: currency is backed by real assets (such as gold) because no one wants to accept just a piece of paper. However, since the paper money is backed by gold as a guarantee, it is actually a warehouse receipt for gold. People are willing to accept paper money because they know that they can use paper money to exchange for gold in the warehouse. Paper money is essentially an IOU, that is, proof of ownership of gold.
Later, governments invented ways to create fiat money, which is no longer backed by any real assets. The government made fiat money legal tender, and people started using it and paying taxes with it, which was like a tribute to the government. However, the real source of value of fiat money does not rely solely on government orders, but on confidence and trust. People have to believe that this currency will be as widely accepted in the future as it is now. In fact, it is this trust system that gives fiat money its value. Governments have in some ways contributed to the formation of this belief that money is valuable. However, many governments have also devalued their currencies by losing the trust of the public and making them worthless.
So Bitcoin is similar to fiat currencies in that it derives its value from trust. Unlike gold, its value comes not only from trust, but also from actual demand. Gold is not only used to make jewelry, but also widely used in electronics, dentistry, and aerospace. In fact, gold has many more potential uses, but it is too expensive. There are many other tasks that gold can perform better. However, because gold is extremely scarce, people only use it when necessary.
However, Bitcoin lacks the necessary practical use. It is just a token that people buy because they hope someone will take it over in the future at a higher price. There are already thousands of similar tokens, and there will be endless creations in the future. They may have different names, or even be better in some aspects, such as cheaper or faster. In fact, there are already some cryptocurrencies that surpass Bitcoin in technology. But to me, these are worthless. The future of blockchain should be backed by real money.
Just like fiat currencies are backed by real money, there could theoretically be a cryptocurrency backed by real money. You can tokenize gold, but the token itself is not gold, but rather represents ownership of gold. Digitally, I can transfer ownership of gold to you quickly and at almost no cost, which is more efficient than transferring Bitcoin. The key difference is that when I transfer ownership of gold, I give you a physical asset, while when I transfer Bitcoin, I give you nothing but the expectation that I can resell it at a higher price in the future. That's the fundamental difference.
Many people call Bitcoin "digital gold," but that's as ridiculous as calling a picture of a hamburger "digital food." You can't survive on "digital food." Similarly, the value of gold lies in its physical properties, and only physical gold can be used to make jewelry or conduct electricity. "Digital gold" cannot replace these practical uses.
Some things can be digitized, such as music and books. We can listen to digital music and read e-books without physical presence. But things like food and gold that rely on physical properties cannot be digitized.
Ryan: Why has gold become the end point in the competition of currency evolution, and no better currency will emerge in the future that surpasses gold?
Peter Schiff: Gold has been the best form of money for hundreds of years. Nothing is better than it. Of course you can use other things as money. It doesn't have to be gold. If people are willing to use other commodities as money, I have no objection. But other commodities can't do it. In prison, cigarettes are currency, but not all prisoners smoke.
Bitcoin has no practical use and is not an evolution of currency, but a regression. Historically, alchemists tried to create gold, and Bitcoin is just a modern version of this attempt, known as "fool's gold." Its essence has not changed because of the blockchain, but it has just packaged an old scam in a new way - a pyramid or Ponzi scheme.
I admit that Bitcoin may be one of the most successful Ponzi or pyramid schemes ever, and it may continue for a while, but it may have peaked. The price of Bitcoin is down more than 30% (in gold terms) from its peak three years ago. Despite a lot of hype, such as El Salvador adopting Bitcoin as legal tender, Michael Saylor's advocacy, various ETFs, NFTs, Super Bowl ads, Wall Street's entry, and even the Republican Convention, Bitcoin has not hit new highs. This shows that a lot of money has been selling Bitcoin in the past few years, and the people selling are obviously smarter than those buying.
Those who succeeded may have bought Bitcoin in the early days, knowing that it would be hyped up, but to realize their wealth, they must eventually sell Bitcoin and turn “paper wealth” into “real wealth.” This is exactly what is happening now.
I feel sorry for those who bought Bitcoin in recent years, they will lose a lot. These people became the "buyers" in the pyramid scheme, allowing those who entered the market early to profit. Bitcoin does not create any real wealth, but only transfers wealth from buyers to sellers. And it is a negative-sum game because in addition to the transfer between buyers and sellers, there are also miner fees and the cost of hype around Bitcoin. Just like a casino, the commission is huge, and in the end even some "winners" may become losers.
Ryan: Some people think that gold has a history of 10,000 years, while Bitcoin has only been around for 15 years, and its market value has reached 1.2 trillion US dollars, accounting for about 15% of gold. Isn’t this a success?
Peter Schiff: You just proved my point, Bitcoin has only been around for 15 years, come back to me in 1,000 years and see if it still exists.
Ryan: If Bitcoin is used to pay for online transactions, can it also be considered a tool of exchange, similar to the commodity properties of gold?
Peter Schiff: Yes, I can send you my Bitcoin, but that depends a lot on the existence of a future market for Bitcoin, which may not exist in the future.
Ryan: This is indeed a bit circular, there are other blockchains that can do the same thing with their tokens, such as Ethereum, so this is not unique to Bitcoin.
Peter Schiff: Indeed, gold has unique properties that other metals cannot replace, which is why it is widely used. If other metals can perform similar tasks, but not as well as gold, people will choose other metals because gold is too expensive. However, Bitcoin lacks this uniqueness. By analogy, when you search, do you still use Spyglass? I don’t even remember the name of the early search engine. I mainly use ChatGPT now, not Google.
Ryan: I agree with you, I have started using ChatGPT instead of Google for many things.
Peter Schiff: Yeah, are you still using MySpace? Facebook replaced it, and then Instagram came along, and TikTok came along, and there's always something better.
It is completely absurd to think that Bitcoin, invented by Satoshi, will always be the greatest cryptocurrency and will not be improved upon. Anything invented by humans can be improved upon. Gold is different. It was not invented by humans, but is naturally occurring. It originated from supernova explosions and existed at the beginning of time.
About Value Storage
Ryan: Do you think Bitcoin has the potential to become a store of value like gold?
Peter Schiff: Actually, tokenized gold works better on other blockchains because the fees on these blockchains are much lower than Bitcoin. Therefore, I don't necessarily need the Ethereum blockchain to support gold tokens, I can choose other more competitive blockchains. Although the blockchain itself has its value, the value of these native tokens is questionable.
Ryan: Do you think Bitcoin is worth more than zero?
Peter Schiff: Indeed, while Bitcoin may have some value, it is not worth $60,000. For example, I made an Ordinals and put it on the Bitcoin blockchain. When it was first sold, I also included an autographed original print with the Ordinals. So not only did you have a physical object, you could hang it on your wall, and it was very scarce because I only made 100 of them and never made them again.
Ryan: You mentioned that the value of fiat currency comes from people’s trust. Isn’t the value of all currencies based on trust?
Peter Schiff: No, because you don’t need to “believe” in an actual commodity like gold. Gold’s value comes from its widespread demand for practical applications. Its value is almost unquestionable. That’s its “bottom line” value. The market value of gold is somewhere between $1 trillion and $1.2 trillion.
Bitcoin supporters often say that 10% of gold's market value comes from its metallic properties, and the rest from its role as money. But in reality, almost no one uses gold as money, except central banks. People store gold because of practical demand for it in the future, not because of its monetary properties. We are constantly discovering new uses for gold, and demand today is far greater than at any time in the past.
So the price of gold reflects its value for long-term future use, and no other commodity lasts as long as gold. This is one of the reasons why I think the price of gold is still low. The current price of gold is almost no premium because it is not widely used as money yet. I think the world will re-monetize gold and return to the gold standard. Once this day comes, the price of gold will inevitably rise significantly.
Ryan: When talking about gold and its benefits, how do you recommend people actually hold gold? Is it by directly keeping gold bars, buying tokenized gold, or through financial instruments such as gold ETFs? Which method is the best option?
Peter Schiff: I have a platform called ShiftGold.com that deals with this problem. Shift Gold sells actual shipments of gold, and you can store physical gold bars directly.
Ryan: You mean the actual gold bars and nuggets?
Peter Schiff: Yes. Some gold coins must be minted by the government to be legally called "coins". A private mint can make gold into round objects, but it cannot be called a "coin" unless it is legal tender. For example, the United States, Canada, Australia and other places have legal tender gold coins, but private mints can also mint round gold products, but they cannot be called coins, but "round gold". We sell gold bars, gold coins and silver coins directly. I recommend people to hold physical gold and silver, especially if you are preparing for some kind of doomsday scenario, such as hyperinflation.
Ryan：But how much can I hold? For example, if I want to buy $250,000 worth of gold coins, how much gold can I store?
Peter Schiff: It could fit in a shoe box and still have plenty of room to spare.
Ryan: You're going to send $250,000 worth of gold to my house in a mail package or something?
Peter Schiff: Yes, and the packaging is very concealed, and there will be no sign that "there is gold inside". We have been selling gold at Shift Gold for more than ten years, and there has never been a case of loss or theft. The gold is always delivered safely. But silver is large and very heavy. For example, a customer bought $300,000 worth of silver during the epidemic, which took up a lot of space. Gold can be easily put into a shoe box and is more convenient to store. This is also one of the reasons why gold is better as a currency, because it is easier to store than metals such as silver, not to mention copper. Imagine how much space it takes to store copper.
Ryan: If I want to buy $300,000 of gold, how can I ensure its safety?
Peter Schiff: You can hide it somewhere at home, as long as you don't forget where you put it. Or you can use a safe deposit box, don't lose the combination, don't lose the key. But if you want to have a third party to keep it, Shift Gold can help you arrange storage services in Switzerland, Dubai or Singapore.
You can also choose Wall Street products, such as buying gold ETFs. However, in this case, you do not own gold directly, but own shares of a public company that holds gold, which is very similar to the way some people deal with Bitcoin. Interestingly, the initial selling point of Bitcoin was self-custody and no third party involvement, but now all the demand seems to come from third-party custody, and they also charge storage fees.
Has the Bitcoin bubble finally burst?
Compared with gold, Bitcoin "no longer has an advantage"
Ryan: Would you concede that Bitcoin or cryptocurrency is superior to gold in some ways, like it's easier to transfer over the internet?
Peter Schiff: Yes, but the thing is, the reason why Bitcoin is so easy to transfer is because you're not actually transferring anything, and when I send "nothing", of course it's much easier than transferring "something".
Ryan: I think you might be too hung up on this "physical" element, which doesn't seem to be that important to a lot of listeners, especially the younger generation. We think that "physicality and weight" is not that critical on the digital Internet. Even the physical nature of gold in the real world is a bit of a negative factor to me, which means it can be stolen.
Peter Schiff: No, that's exactly why it's a currency. Remember our discussion at the beginning, it has to be a commodity because Bitcoin could collapse at any time. The reason it hasn't collapsed yet is that there are more people who want to buy Bitcoin than want to sell it, and there is enough buying overall to maintain the market.
Ryan: Bitcoin is indeed a relatively new asset, but the same is true for gold - you have to have interested buyers to keep the entire market going. However, I admit that gold has an advantage, which is that it has thousands of years of history to back it up.
Peter Schiff: Not only is there thousands of years of history, there are now many industries that actually need gold and are buying it all the time, and it's an actual, real-world demand.
I just showed you my gold jewelry, it's a huge industry, and although there are a lot of people online who have digital girlfriends, maybe you can give them digital gold, but if you want to have a girlfriend in the real world, you'll buy her real jewelry, and you can't do that with Bitcoin. The only reason people want Bitcoin is because the price is going up. When the price stops going up, everyone will want to get rid of it.
Ryan: Since we are talking about exchanging IOUs instead of physical assets, tokenized gold is not ideal compared to actually holding gold. So how exactly does the Internet improve the way gold is held?
Peter Schiff: Paper money initially made gold more accessible, especially in legal circulation. Direct delivery of large gold bars was inconvenient and difficult to process for small transactions. Therefore, smaller forms of currency such as gold and silver coins were invented.
Later, private enterprises introduced the concept of paper money, initially issued by goldsmiths as warehouse receipts or IOUs for gold. This is similar to the small ticket you receive when you deposit your coat, proving that your coat has been deposited. In this way, paper money replaced physical gold and facilitated circulation and transactions.
The value of paper money comes from gold. Although paper money itself has no intrinsic value, it has become a better form of currency because it is backed by gold. In economics, it is called a "currency substitute."
The internet has improved this further, and now banks can replace physical banknotes with digital tokens, which can exist on a blockchain (public or private) or not rely on a blockchain.
This makes gold more effective as a medium of exchange than ever before, becoming faster, more divisible, and less expensive. However, many people believe that blockchain technology makes gold obsolete and that Bitcoin can replace gold, which is a misunderstanding. Even if Bitcoin dies, gold will still exist and may continue to run on the blockchain.
Ryan: However, even tokenized gold still requires trust that the issuer really has enough gold to back it up. You must trust that the entire legal system will protect your property rights, which is incomparable to actually owning physical gold and keeping it yourself.
Peter Schiff: Yes, and that's why you shouldn't hold all of your gold in this way.
But you can store your gold with a very trusted third party who may also offer insurance in case the gold is lost or stolen and is backed by a reputable insurance company and possibly even a reinsurance company.
I understand that one of the arguments for Bitcoin is that if you custody Bitcoin yourself, rather than through an ETF, you don't need to rely on a third party. But even then, you still need to trust that the market will continue to accept Bitcoin. You have to trust that the system will continue to work, and I'm not willing to do that. I'd rather hold gold, even if I have to rely on a custodian to keep it, than worry about whether Bitcoin will lose value.
A lot of it depends on market perception. Even if Bitcoin has a certain value, say $1,000 per token, I'm skeptical about its actual value. When I say "value," I mean actual value, not just market price. Market price reflects what buyers are willing to pay, and if someone is willing to pay $58,000 for a Bitcoin, but it's actually worth only $1,000, you could lose a lot of money. If you buy Bitcoin at $58,000 and it ends up at $1,000, which is almost zero, losing 99% of the rest of your money is almost insignificant.
David: If the reason you value gold is its use in productive companies and its inherent demand, why not invest directly in these productive companies that generate cash flow, dividends or earnings instead of investing in gold?
Peter Schiff: I do invest in gold mining companies. I am very interested in gold mining stocks and think they are very cheap relative to the historical valuation of gold and have a lot of room for future growth. But at the same time, these stocks are much more risky than holding gold directly. Wall Street's investment in mining stocks is currently low, so I think this is a real opportunity, although there are risks.
I recommend investing in these stocks because I expect gold to rise sharply, which will drive gains in mining stocks. Although gold may experience a short-term correction, the long-term trend is still upward. Compared with other assets, gold has greater return potential and relatively less risk. Investing in gold mining company stocks may bring higher returns than directly holding gold.
For Bitcoin investors, if you are looking for high returns, gold mining stocks may be a better choice. The best investment strategy is to diversify, and my Euro Pacific Gold Fund is managed by industry expert Adrian Day, who has extensive experience. If you have a discount brokerage account, you can consider investing in this fund. In short, if you are uneasy about Bitcoin, gold mining stocks may be a more promising choice.
Alternatives to GenZ
Ryan: Given that millennials and Gen Z are more inclined to use digital technology and cryptocurrencies rather than traditional gold, are you concerned that this will affect the future of gold as a store of value?
Peter Schiff: I am not worried. First, I think that over time, young people will mature and understand the value of gold. As they accumulate wealth and face economic realities, they may realize the reliability of gold as a store of value. In addition, despite the interest of young people in digital currencies, Bitcoin is not backed by real intrinsic value, unlike gold, which has historically been a stable store of value. Moreover, when inflationary pressures increase and fiat currencies depreciate, the true value of gold will become more apparent.
Bitcoin’s current popularity is because it’s a new, trendy technology, but the craze will likely wane over time, and eventually, investors will return to assets that have stood the test of time.
Even if young people don't wear gold jewelry, they have gold in their phones or other electronic devices, and they may not realize that they actually have gold. I think the demographic structure is actually in my favor because all these young people will gradually get older, and as they get older, they will become wiser and learn from their mistakes. So these young people in their twenties may be enthusiastic about Bitcoin now, but when they are in their forties, they will turn to gold.
Everyone thinks they know better when they are young, but they are actually naive and don't know the truth. But these things come and go, nothing new. As I said, it is just a repackaged scam that falls apart every time it is tried, no matter how you repackage it, the essence is still the same.
Ryan: If technological advances allow us to find cheaper materials to replace gold, and the price of gold increases 10 times, would that likely prompt us to look for alternatives or reduce our use of gold?
Peter Schiff: Don't forget that other metals are also rising in price, and gold's unique properties make it difficult to replace in many industrial applications, and even if other metals are found, they may not have the stability and reliability of gold. The price of gold would need to rise to very high levels to have a substantial impact on these applications.
Ryan: Do you think the free market should determine the outcomes of these monetary experiments, or should governments make Bitcoin and cryptocurrencies illegal to prevent them from becoming Ponzi schemes?
Peter Schiff: I think people have the right to do what they want with their money, including taking losses or gambling. I support that freedom, and I would not support banning sports betting, blackjack, or poker. But if someone loses money due to false propaganda, I think they have the right to seek legal recourse, especially from financial media that promote Bitcoin, and ultimately, many people may seek compensation for these false promises.
While I oppose current anti-money laundering (AML) regulations, believing they infringe on privacy and could lead to totalitarianism, my opposition to these rules extends beyond Bitcoin, which I do not consider to be a security, though that may change in the future. Some tokens do meet the definition of a security, including the government’s Howey test.
Increasing regulation of Bitcoin has eroded its original advantages, which initially allowed anonymous transactions, decentralization, self-custody, and low transaction costs. But now, these advantages are no longer apparent.
When Bitcoin went up to $1,000 in 2017, I started to pay attention to it, but I didn’t buy it in the end because I thought the upside potential of Bitcoin was gone, and even if it could go up to $200,000, the risk of it crashing was not attractive to me. I would rather put my money into gold mining stocks, which have greater upside potential.
About Wealth and Investment
Ryan: I want to get back to the basic question that we all agree on, should we abolish the Federal Reserve? If so, why?
Peter Schiff: Depends on what we replace it with. If we abolish the Fed and don't introduce any replacement institutions, and go back to the system before the Fed was established, I'm all for it. Before the Fed was established, we had a lot of regional banks, which were privately owned banks that issued paper money backed by gold. At that time, no bank was given special privileges over other banks. It was completely free market competition. If we can go back to the system before the Fed was established, we should absolutely abolish the Fed. The problem is that if we abolish the Fed and just give the printing press to Congress and let them print their own money, the situation may be worse.
Ryan: If you were president, what would your economic policy be?
Peter Schiff: My goal is to undo existing policies. I once ran for the Senate, and of course I didn't win. But I said at the time that my goal is not to do anything new, but to undo everything. Because every time I repeal a law, I restore some of the freedoms that were taken away by the law.
I want to reduce government as much as possible, abolishing agencies and departments that should never have been created. I will work to restore the Constitution and its original ideas - a very limited federal government with few and very clear powers, and I want the government to operate within the framework of the Constitution.
At the same time, I will be honest with the American public about the various social welfare programs, such as Social Security, Medicare, Medicaid, etc. We will eliminate these programs. The Social Security system is a Ponzi scheme run by the government, which makes it worse than a private sector Ponzi scheme because people are forced to participate in this scam, and more people will suffer in the end.
Of course, I will look for ways to help those who are in trouble because of the Social Security system. Without Social Security, they may not be in such a difficult financial situation. If the government did not tax and promise Social Security, they may save for retirement on their own. So, while Social Security cannot be eliminated immediately, we can set standards and introduce new benefit programs, such as annuities, to protect their lives.
But for wealthy people, I don't want social security to be determined based on income. People who have wealth, such as real estate and stock portfolios, should not receive social security because they have enough wealth to be self-sufficient.
I am not willing to use the poor's money to subsidize the rich's inheritance, nor do I intend for the poor to pay for the rich's inheritance. We need to be honest with the public, eliminate these benefits, and get the government out of banking, education, and health. I want the free market to manage health and education, just like the government is out of the tech industry. The tech industry thrives in the absence of government, while health and education suffer from government intervention.
In addition, I would default on the national debt because we cannot pay it back. I would be honest with the creditors and tell them that we are bankrupt and cannot pay it back. Abolish the Fed and interest rates would rise dramatically, assuming interest rates reach 10%. We cannot pay 10% annual interest on a $35 trillion debt.
I would tell the creditors that they will not get full pensions or 100 cents on the dollar because the American public does not have that much money. There will be losses but they will be much greater if we continue on the current path. I would rather lose half of my money than have it stay the same but lose 90% of its purchasing power.
So whenever I see a discussion about the debt ceiling, I find it ridiculous. Some people say, "The United States will always pay its debts, and we need to raise the debt ceiling." In fact, we need to raise the debt ceiling because we have never paid our debts and want to continue living without paying them. The truly responsible thing to do is to maintain the current debt ceiling. The debt ceiling was originally established to prevent the government from issuing too much debt, but Congress can raise the ceiling at will, and this "ceiling" is actually just in name only.
David: Let’s talk about the stock market. Is the stock market overvalued, undervalued, or fairly priced now?
Peter Schiff: The stock market is currently overvalued, but that doesn't mean it will fall sharply. The nominal price of the stock market may rise due to excessive money issuance. If the real value of the stock market is measured in gold, the price will be significantly lower. Over the past 23 years, the Dow Jones Index has risen fourfold, while gold has risen eightfold. In terms of gold, the Dow Jones Index has fallen 50%. This trend is likely to continue and accelerate.
I think the market still has a long way to go down, especially technology stocks may experience a big correction. Although I am optimistic about the future of technology, the high valuations of technology stocks have been priced in by the market. Now a lot of funds are concentrated in the so-called "Big Seven Technology", which is a crowded trade, and eventually the market will be reshuffled.
The Fed will continue to print money, and the stock market may look higher in this case, but this is just a change in the way it is measured, not an increase in actual value. The value of gold is stable and unchanged, and the economy is currently seriously dysfunctional. The national savings rate is at an all-time low, consumer debt, credit card debt, corporate debt, and government debt are all at record highs, the real estate market, especially commercial real estate, is also collapsing, and the banking system is facing debt problems.
We are running the largest merchandise trade deficit in history, and the trade deficit and national debt are climbing. The national debt is approaching $35.3 trillion, growing by more than $3 trillion a year, and interest payments have become the third largest expense item in the federal budget. It is expected that in the next year or two, interest payments will surpass Social Security and Medicare as the largest government expense item. This situation is unsustainable and we are facing a collapse.
The trend of de-dollarization has begun, with BRIC countries and others reducing their dollar holdings and buying gold instead. Retail investors lack confidence in gold, resulting in net redemptions of gold ETFs. As a result, gold is now cheap, while stocks are expensive, and the financial crisis will be more serious. The "real collapse" I mentioned in my 2013 book has not yet happened, and now all signs indicate that it is coming and will be more serious than it was a decade ago.
Although I correctly predicted the housing market collapse and financial crisis, this was just the beginning. The real collapse has not yet come, and the current problem is more serious than ever before, the debt and bubble are bigger, and the chaos and crisis facing the market will be more serious. I believe my strategy will allow me to make a profit in the end, and I hope to keep this wealth. After all, I now live in Puerto Rico, which is exempt from federal income tax and capital gains tax.
Ryan: What principles do you follow to grow your wealth?
Peter Schiff: The best way to grow wealth is to start a successful business. Although starting a business is difficult, entrepreneurs play a key role in capitalism. They need to decide what everyone does, provide tools, take risks, and hope for success. In contrast, employees will get paid even if the company is not profitable, while entrepreneurs can only benefit when the company is profitable. If the company loses money, the entrepreneur has to pay out of his own pocket to fill the deficit. Therefore, starting a business is much more complicated than working.
Although starting a business requires mortgaging a property or raising funds, successful entrepreneurs often earn more. As an employee, your income is limited because you are a cost to the business. Although positions such as sales commissions can increase with performance, overall income is still limited. Successful business owners often get higher returns after working hard in the early stages, and may work fewer hours.
Additionally, it is crucial to choose an industry that you are passionate about and spend a lot of time in your area of interest so that you can truly enjoy your work. Giving your all to overcome difficulties and learning from your mistakes will help you achieve your goals.
When it comes to investing, make smart decisions, avoid blindly following the crowd, and be patient. A strategy like Warren Buffett's - investing in growth businesses rather than metals - makes sense under normal circumstances. However, the stock market is currently overpriced and Buffett is selling stocks rather than buying them. I think gold is very cheap right now, and if Buffett thinks stocks are overpriced, he should move his money into gold rather than dollars because gold offers a better store of value and a discount.
Ryan: If you were to present a compelling case for Bitcoin and cryptocurrencies, presenting their most compelling advantages and promise, how would you present it?
Peter Schiff: The only strong argument is that there could be another wave of buying in the future. Today, ETFs are pressuring the US government to buy Bitcoin. If Trump is re-elected president, is it possible that the government will buy Bitcoin?
I personally hope that the government doesn't buy Bitcoin, and we don't need to print more money to buy it. But if certain situations arise, such as high inflation or a dollar crisis, people may turn to Bitcoin as a safe haven. Considering the limited total supply of Bitcoin, if funds flood into the market, the price may rise to $100,000, $200,000, or even $300,000. However, most long-term holders may not sell, they will hold on.
In contrast, I think other assets with real underlying value have greater upside potential and less risk of collapse. Although Bitcoin may usher in a wave of enthusiasm in the event of inflation or a dollar crisis, I don't think it's worth investing in Bitcoin.
Also, why hasn’t this happened yet? When the Bitcoin ETF was launched, expectations were high, but now Bitcoin’s price has only risen slightly and has fallen by about 10% so far this year, while gold has risen by 22%-23%. This suggests that the market’s enthusiasm for Bitcoin may have cooled.
I worry about what might happen when ETF buyers turn into sellers. Many people invest in Bitcoin through ETFs purely to speculate on the price. When they start selling, it could cause a market crash because there isn’t enough real buying in the market to take over those Bitcoins. ETFs must be paid in US dollars, not Tether, which exacerbates the risk of a crash in the Bitcoin market.
After a massive sell-off, the price of Bitcoin may drop to $10,000 or $5,000, then it may rebound, but in the long run, it may fall again. The recent Bitcoin conferences remind me of the peak of the real estate bubble, when the extravagant scenes foreshadowed the bursting of the bubble. I think the future of Bitcoin may develop in this direction.
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