If you're interested in the future of the economy, this is a must-read.
Peter Schiff and I discuss the most commented topics of the year: The Covid-19 pandemic and how it affects the U.S. economy, the future of the American currency, and why producing is key.
Maybe you've listened to Peter Schiff's Show podcast but in this interview, we go deeper into the nuance of Peter's arguments.
The national debt just passed $24 trillion, up $4 trillion since @realDonaldTrump took office. He will add more debt in 4 years than Bush did in 8. If reelected he will add more debt in 8 years than Bush & Obama did in 16. Instead of draining the swamp, he is draining the nation.
— Peter Schiff (@PeterSchiff) April 8, 2020
You'll be able to enjoy the answers of an economics expert to many questions you've never heard before.
Why currency doesn't equal purchasing power
George Gammon: It gives me a great deal of pleasure to bring someone to The Rebel Capitalist Show that I have a tremendous amount of respect for.
He's been hugely influential on my thinking since 2012, and he needs no introduction. His name is Peter Schiff. Peter, welcome to The Rebel Capitalist Show.
Peter Schiff: Oh, it's my pleasure to be here.
George Gammon: Before we get into the interview, I want to mention something.
A lot of my viewers know that I'm kind of hard on Dave Ramsey, but they don't really know why.
Back in 2012 when I started studying macro and economics and got into your podcast and Jim Roger's and other people, I was also listening to Dave Ramsey.
I won't go into what he said, but he really was hard on your father, and he called him…
Peter Schiff: Yeah. Well, I remember. He said I was a kook, I was the son of a kook. He said, “Get out of stocks.”
George Gammon: Exactly.
Peter Schiff: The funny part about that Dave Ramsey's interview is he said, “Look, if this guy, Schiff, is right, all of these different companies would have to go under.”
He just mentioned the companies, and said, “Many of them did go bankrupt.” But they ended up getting bailed out by the government, like General Motors.
I forgot some of the other ones he mentioned.
But yeah, and every stock he mentioned, even if they didn't go bankrupt was down like 80%, 90%.
Somebody said, “Well, I read Peter Schiff's book, and I'm thinking about getting out of the market.” It was like 2008, early ‘8 or late ‘7.
“Oh, That'd be crazy. This guy doesn't know what he's talking about.”
Of course, everything that woman was worried about happened, so-
George Gammon: Yeah.
My point is ever since he said that about your father, I've had a chip on my shoulder towards Dave Ramsey because all of my viewers are very appreciative of what you do and have a ton of respect for you.
But they should have just as much respect, if not more, for your late father, he was really an American hero.
Peter Schiff: Yeah. But he's still pretty popular now. (Referring to Dave Ramsey)
If you look at the podcasts in business, he's always number one. So he's got a popular podcast, and I guess he's got a radio show too, I suppose. (Referring to Dave Ramsey)
George Gammon: Okay. So let's dive into it. I've got my questions written down because I wanted to be prepared.
The first thing I'd really like you to explain to my viewers is something the average Joe has a tough time understanding.
Why Currency Doesn't Equal Purchasing Power But Consumption, Production, And Productivity Does?
They see the Fed, as an example, printing money and depositing that currency into a bank account, and they think, consequently, they can buy more stuff.
Doesn't that equal purchasing power?
As you've explained so many times, it doesn't.
Could you break it down to a third-grade level as to why it's all about production?
Peter Schiff: Yeah. Because that's probably the level at which most US high school graduates are probably reading.
Your audience might be a little bit better educated than the third grade.
But if you look at what's happening right now, in particular with the relief plans announced regarding the coronavirus, and what everybody is saying, including the Sunday night debates, the government's going to make everybody whole.
The government's going to pay your mortgage, your rent, give you healthcare, and make sure you don't lose any money.
Everybody is like, “Yeah, that's great.”
The government could just give money to everyone because they all know the government creates money or the Federal Reserve does.
For some reason, sometimes they're stingy with it, they don't want to share it.
Peter Schiff: But during times of emergency, all of a sudden, they're going to give everybody some money.
Minutian was saying today: “Well, it's no fault of Americans that this happened, and so, therefore, we want to make sure that nobody suffers, so we're going to give everybody money.”
The government is sitting on this pile of money.
But people don't want money per se, they want the things they can buy with money.
The money is the cart. The stuff is the horse. You need to produce things. For money to have any purchasing power, there must be goods and services to purchase.
In the absence of goods and services, money has no value, right?
If you're stranded on a desert island, and you're really thirsty and hungry and someone gives you a bunch of money, what good is it?
If there's no food and there's no water, there's nothing that you could do with that money.
Peter Schiff: So for money to have value, paper money anyway, you have to exchange it for something.
I mean, gold, real money has intrinsic value all by itself because you could do something with gold, you could use it.
But you can't do anything with paper. You have to exchange it for something, that means something has to exist.
So it has to be produced into existence or somebody has to expend labor to provide you with a service.
The government can print money, but they can't create products. They don't provide the services that you want.
The marketplace has to do that.
Peter Schiff: So when the government just creates money and nobody is doing any work to add products or services into the economy, all they're doing is destroying the value of the money you already have.
Because of the new money, the existing goods and services become more expensive.
Expensive to the point where there's no real purchasing power created by the government printing money and giving it to the populace, which is really what they're doing now.
So people have to understand that money is simply a claim to production.
But if there's no production, then it's really not a claim on anything.
All it does is reduce the value of the claims that already exist.
Money in the real economy
George Gammon: Right.
So a couple of things there. I want people to understand how the transfer mechanism works from the starting point.
Let's say the Fed prints money, and it goes into the reserve accounts for the primary dealers.
From that standpoint, the primary dealers, let's say, have to do something with it, so they create another deposit, or the government spends it and then has to borrow the money, so that creates another deposit.
How does it get into the real economy to where it can circulate and chase those goods?
Peter Schiff: Well, basically, all that happens is the government itself borrows money, separate from the Fed because they're not part of the government even though they function as if they were.
They just announced today another $850 billion in stimulus for whatever plan they have to send checks to Americans
So the US government has to sell a treasury bond, and the dealers go out into the market to buy them with the money they get from the Fed.
Those dealers then, take the bonds and sell them back to the Fed.
So these assets go on the Fed's balance sheet, and they create a deposit that goes from the primary dealer to the checking account of the US government so when the money is sent out to the taxpayer, he gets a check that he can cash.
Basically, the government is borrowing money into existence by issuing a treasury bond that eventually goes to the Federal Reserve.
This means there are now Fed notes in circulation, which are the dollars we have.
Those dollars are now liabilities of the Fed, and they're backed up by the treasury bonds that the Fed now has on its balance sheet.
That's how the balance sheet exploded up to $4.5 trillion during quantitative easing.
The Fed bought all these treasuries and mortgage-backed securities and replaced them with cash that is now circulating in the economy and was used to bit up financial assets and things like that.
Peter Schiff: But there is no real production of goods and services.
The people have to support the government, but the government can never support the people.
Today, people think the government could support everybody and provide free stuff. They can't. The government only has what it takes from the people.
Now, it has various ways it can take it.
It can do it honestly by raising taxes on the people, but it can also borrow money, and the people don't necessarily see that cost, but they still bear it because they have to repay the loan.
So when the government is borrowing money, it is simply deferring taxes to the future plus interest because the lender charges interest.
Or if the Fed ends up monetizing the debt, by doing quantitative easing or whatever they want to call it, and buys the bonds by creating money, it destroys the value of the money that already exists.
So people are robbed of their purchasing power instead of being robbed of their money.
George Gammon: Yeah. That's a great explanation.
So now we understand how the additional money that's being printed by the Fed or being spent by the government gets into the real economy.
But to add the situation we have now with the coronavirus, I heard you say there's a supply shock, on your Monday's podcast, which was fantastic.
Probably one of the best episodes I've ever heard.
So we have this additional money supply potentially not just chasing the same amount of goods and services, but actually fewer goods and services.
Which would really spike inflation for consumer prices. Can you explain that a little further?
Peter Schiff: Yeah, exactly.
Well, obviously, due to the coronavirus, people are sick, and those sick people are not productive.
But more importantly, there are a lot of people who don't want to get sick or spread a virus they don't know they may have.
So everybody is kind of isolating themselves and trying to interact less frequently with other individuals.
People aren't going to work and aren't as productive as they used to be.
Factories aren't producing as much stuff, or they're not producing the components that other factories need to make their stuff.
So we're less productive staying at home and taking some time off because we're not making things.
So what the Federal government should be doing is shrinking the money supply so we have price stability, if that's their goal.
If we're producing less stuff, then we need less money.
But what they're doing is saying, “No, no, we want to give people more money. We want to put money in people's pockets.”
But what good is that going to do if there's less stuff for people to buy?
It just accelerates the inflationary process.
Peter Schiff: I mean, what is keeping a lid on it is the US dollar is the reserve currency, and a lot of the money we create ends up being exported.
But if that happens to a lesser degree, more and more of that cash is going to just stay around here.
I mean, our trade deficit is going to come down if the Chinese aren't producing as much stuff anymore to ship to us.
So What are Americans going to do with it?
Well, they're going to the supermarkets trying to stock up on food or other supplies, but eventually, they're going to run out, and prices will start to go up.
Differences and similarities between 2008 and today's crisis
George Gammon: You were one of the first people to call the last financial crisis that we had, and I think you started calling it way back in 2000, 2002.
You're way ahead of that curve.
You saw the whole thing happening from the front lines, and now you're seeing what's going on with this collapse.
How are they similar, and how are they different?
Peter Schiff: Well, first of all, I think the Covid-19 is acting as a pin for this bubble, but I think the bubble was already deflating before it found this pin just kind of on its own.
Once the Fed started to hike rates, in the fourth quarter of 2018, everything started to fall apart.
That's when the Fed panicked, reverse course, started cutting rates, and just doing a stealth QE program.
It really wasn't stealth. It was out in the open, but they just didn't want to admit that it was QE.
They're still really coy. They don't want to call what they're doing QE. It's exactly what they did before.
I don't know why they're so embarrassed about saying it's QE if they think it did such a good job.
Why not admit that they're doing it again? But I saw this coming a long time ago.
I mean, the book that I wrote, The Real Crash, which I wrote after 2008 was to remind people that wasn't the crash.
The real crash is the one that's about to happen because of the massive bubble the Fed inflated after the bursting of the housing bubble.
So to answer your question, the similarities and the differences between what's happening now and what happened in '08, in both cases, we had credit bubbles that popped.
In 2008, it was primarily a mortgage bubble.
People had borrowed a lot of money to buy houses and used them as collateral for a lot of other loans.
They took out home equity loans to go out and buy stuff, furniture, remodel, take vacations, and pay off their credit cards. So we had a lot of mortgage debt collateralized by houses.
Peter Schiff: When the houses fell in value, which is something I was predicting would happen for years, a lot of the borrowers who had stretched themselves so much, lied about their incomes.
All that to get a house because they wanted to get rich as homeowners.
People thought housing prices would never stop rising, including the lenders, because they were confident about housing prices going up.
They didn't care about the borrower because they knew they had the collateral of the house, which they thought would always go up.
But, once housing prices went down, the borrowers said, “Well, no point in making my mortgage payments. I mean, I have no equity. What's the point in making my payments now?”
The banks were in trouble, real estate prices came down and that became a financial crisis.
It became a financial crisis because of the credit.
We had banks and GSEs failing, and then we had all the bailouts. It was all caused by the Fed.
If the Fed had not left interest rates so low, all of that mortgage debt would have never existed.
If the government had not guaranteed the mortgages, the banks would have been much more strict about the terms under which they loan money.
But since so much of this stuff was guaranteed, they didn't care.
Peter Schiff: So today, we have another credit bubble, except now it's a bigger bubble.
We have a lot more debt today than we had in 2008. What is the pin today?
Well, the coronavirus is substantially slowing economic activity for vast segments of the economy.
The obvious casualties are airlines, companies that service them like Boeing, companies in need of supply chain, the hotel and leisure industry, restaurants, casinos, and a lot of businesses.
The problem with all of these businesses is they have enormous amounts of debt.
So the problem isn't about business slowing down. The problem is the businesses that are highly indebted can't make their debt payments.
The same problem exists for their employees when they try to cut back on their workforce because they have less business.
Now, their employees miss a paycheck, and we have a record number of workers who are working paycheck to paycheck.
If they miss one paycheck, they can't pay their credit card bill, student loan, auto loan, mortgage, or rent. That has a cascading effect.
So this is another financial crisis.
This is a health crisis becoming a financial crisis, whereas before, it was a housing crisis becoming a financial crisis.
But the reason they have a financial crisis is because of the debt.
Why do we have all this debt? Because the Federal Reserve forced fed the money into the economy.
They held interest rates artificially low.
Peter Schiff: So instead of de-leveraging after the debt bubble popped in '08, we leveraged up even more and have an even bigger bubble.
So the problem isn't the pin. The problem is the bubble, and since this is a much bigger bubble, it's much worse.
Now, instead of just bailing out the banks, they got to bail out everybody.
I mean, every business in America is now going to Washington for a bailout, and pretty soon, it's going to be the banks too.
U.S. Bank's balance sheet in 2020
George Gammon: Okay. So that was my question. If you thought the banks were as at risk today as they were back in 2007, 2008.
Everyone hears the bank's balance sheet, at least the US banks, are a lot better now.
But to your point, if everyone's defaulting on those loans, at some point in time, that has to flow back to the banks.
Peter Schiff: Yeah. Remember, everybody said the banks were sound in 2008.
Even weeks before, they were saying everything was fine, but it wasn't until Lehman and Bear went bankrupt that they noticed.
People can go back now and say, “Oh, the banks are in great shape, it's not like 2008,” except in 2008, the same people were talking about how the banks were in great shape.
So you can't believe them. In fact, when the Federal Reserve does these stress tests, I think they're engineered so that all the banks pass.
I mean, they're not really putting them through the type of stress that they need.
What are the circumstances that what they've never tested was: what happens if there's a recession, but interest rates go up?
That's never one of their assumptions. They've always assumed that if there was a recession, interest rates will always go down.
Well, what if they go up? What if long-term rates go up? No bank can withstand that if we have stagflation, and that's where we're headed.
I think there's going to be a currency crisis.
The reason the dollar didn't collapse in 2008 with QE one and two, all of the tarps and the various bailouts, was that everybody believed it was a one-off thing.
They believed it was temporary and the Fed could unwind the balance sheet and normalize interest rates. But none of that ever happened.
Now the balance sheet is blowing through the roof, and it's going to be much bigger than it ever was before.
They're back down at zero, just like I said they would for years.
Peter Schiff: Now, no one is going to believe they can ever normalize rates.
If they couldn't do it last time, how are they going to do it this time?
Especially since we have so much more debt now, the more debt you have, the harder it is to normalize rates.
It's like the more drugs you take, the harder it is to kick the habit.
People are going to realize this is a permanent situation of zero and QE, inflation is going to take off, and that's going to put a lot of downward pressure on bonds across the spectrum.
Not just treasuries, but also muni bonds and corporate bonds. There already is pressure on the las two.
But that pressure is going to intensify, and the Fed will have to print more and more money to try to buy these bonds and keep rates from rising.
They're going to have one bailout after another, and eventually, the bottom's going to fall out.
I mean, gold's going to take off, and we're going to go through massive inflation. It's going to be an inflationary depression.
Why bailouts aren't a good idea
George Gammon: Yeah.
I'd like you to address your argument of the bailouts not being a good idea and how the world wouldn't come to an end if we didn't have any of them, that the free market would handle that.
Can you explain that further?
Peter Schiff: Bailouts benefit the owners of the companies or their creditors. So people who bought stock and who loaned money get bailed out.
But people think, for example, with the airlines, “Oh, we can't let the airlines fail because we need airlines.”
Well, if the airlines go bankrupt, they're still going to be here. What happens is there's a bankruptcy. They have to restructure.
All of the current shareholders get wiped out, the stockholders lose their money, and the bondholders then own the business.
Now, what do the bondholders do with the business? Either they operate it themselves, collectively, or sell the assets.
Now, if somebody buys the assets, someone is going to operate that airline and will come in with cash.
They're going to buy the assets with a clean balance sheet, operate the planes, and own the airline, right?
The people who ran it into bankruptcy get punished. They lose their asset.
Lenders probably aren't made whole. They never should have loaned so much money to a company that was already so heavily indebted.
So the people who made mistakes and did foolish things, lose money.
But now more responsible people come in, take over the management of the company, and they go public again or maybe it's another public entity or private entity.
Peter Schiff: But the airlines don't go away. I mean, Americans want air service. Entrepreneurs are going to provide it, right?
So they're going to buy up those assets and infrastructure.
Obviously, without the debt, the airlines could be very profitable. The problem is all the debt. But that gets eradicated during bankruptcy.
The other good part about this is the people who buy the airline know they better be careful with their balance sheet.
“We better not borrow too much money because if something goes wrong, we may not be able to weather that storm.
So we better have a rainy day fund. We better be prudent. We better not over-leverage.”
The message we send by bailing them out over and over again is “borrow as much money as possible”. Don't have any rainy day fund.
Act as if it's never going to rain.
Just spend like crazy, borrow like crazy because when it rains, just go to the government, they'll bail you out.
That's moral hazard, and we don't want that. We've already created that.
We have enough of that in the banking system with deposit insurance.
Everybody knows they can be as aggressive as they want and take as much risk as they want.
Because all of the market mechanisms that would reign in that aggressive behavior have been short-circuited by the government with guarantees, backstops, and moral hazard.
So this is all wrong.
Peter Schiff: If we hadn't bailed out anybody in 2008, and yes, it would've been a more painful recession at that time, we wouldn't be in this situation.
But because we did bail them out, the next recession is going to be far more painful.
George Gammon: Yeah, it would be a lot stronger today.
But, what's the argument for not bailing out the average Joe?
As you said before, they're going to lose their job and are not going to be able to make rent.
I'm not saying that I'm a proponent of this, I'm just trying to play devil's advocate so you can explain it.
Why should the government not send them a thousand bucks a month until this thing blows over?
Peter Schiff: Well, the government doesn't have any money.
The government has to borrow it or print it into existence. So where does it come from? The government only has the money it takes for the people.
But, if you're going to say, “Hey, we should raise taxes on the rich to give some money to the middle class,” if that's what your plan is, let's redistribute some money.
The problem is people should be taking care of themselves, not relying on the government.
That's what America is supposed to be about.
We're supposed to be a nation of rugged individuals, not a bunch of freeloaders that are looking for a handout.
I made an example on my own podcast, which you can listen by going to Peter Schiff podcast, and the example was this:
I thought it was interesting a lot of politicians are referencing World War II.
Kind of like, “Hey, we need a national effort. We have to come together like we did to fight World War II.
We have to approach the coronavirus like it's a war, and we're fighting this war against this enemy.”
Well, that's fine. But they don't understand what happened during World War II.
Because if you think about it, World War II was more disruptive to the economy than the Covid-19.
I can't think of anything more disruptive than the entire world fighting a war.
We took 16 million men away from their families, away from their homes, and we sent them to Japan and Europe.
Those 16 million people weren't going to bars and restaurants, they weren't taking vacations either nor working in their jobs.
Consumption collapsed during the Second World War. Auto sales were down 50% and entertainment went down 25%. People were fighting, they weren't at home.
So restaurants and hotels lost a lot of business. A lot of bad stuff happened.
Peter Schiff: Second World War was nobody's fault.
No American citizen is responsible for the Japanese bombing of Pearl Harbor. Nobody asked for that.
But the government didn't say, “Hey, we're going to war, so we're going to send everybody a check so you have extra spending money because we don't want anybody to suffer.
So if you lost your job because your customers are now fighting a war, don't worry about it. We're going to give you some extra money so you don't get hurt and are made whole.”
No, no, no. What the government said in World War II is, “Hey, the government needs a lot of money.
We have to fight a war. So we're raising your taxes. We don't care about your circumstances, we are raising your taxes.”
In 1941, only 3% of Americans paid income taxes.
1942, 30% of Americans paid income taxes because they lowered the brackets and jacked up the rates.
In addition, they imposed all sorts of new taxes, in 1942 they started the victory, and the telephone excise tax among a lot others on consumption.
So we tripled taxes on the middle-class to pay for the war because the government gets the money from the people.
However, that wasn't enough. The government needed more money. So the government borrowed money from the people.
The US government sold war bonds.
The people in today's dollars, middle-class Americans loaned trillions to the Federal government so that they could pay for the war.
Peter Schiff: So today, the government is saying, “Oh, the US government's going to loan money to the people and the businesses. We're going to make loans.”
What money? The government doesn't have any money.
Can you imagine in 1941, if Roosevelt said, “Oh, don't worry. We're going cut your taxes, not raise them.
We're going to loan money to the businesses that are being affected by World War II.”
Well then, how would we fight World War II?
Where would the government get the money for tanks, bombs, and planes, and how would we feed and clothe the troops? We needed the money.
We had a Federal Reserve back then, why didn't we just have the Fed printing money?
Because we would've had hyperinflation and the Germans would have won the war right away.
That was what America looked like when it was honest.
But you have to ask yourself this, how did average middle-class Americans have so much money?
I mean, we had just come out of the great depression, yet middle-class Americans had enough money to pay the taxes that were triple from what they were paying before the war.
In addition, they had all this extra money to buy war bonds, when today, Americans have nothing. They're one paycheck away from bankruptcy.
That's when we had a real economy, we were a powerhouse and that's why America was great.
Trump never made America great again because America hasn't been what it was in 1941 when we were a nation of rugged individuals that actually had savings and resources they could make available to the government in times of crisis.
Peter Schiff: Now, everybody's living paycheck to paycheck.
They're all loaded up to the hilt with debt. Nobody has any savings, and we all think the government can take care of us when they can't.
All they have is that printing press, and they're going to use it, but they will destroy the value of the dollar.
That's what's coming.
That's why I'm so insistent with people and have been working with my clients for years to get them prepared because people are going to get wiped out.
Anybody with savings, people that have money in dollars, treasuries, muni bonds, cash value, and an insurance policy, everyone's getting wiped out.
The dollar is going to crash.
All the purchasing power that they're stealing to spend it into existence is being stolen from the savers.
The bottom hasn't dropped out yet, but it's going to happen. We're printing all this money and everybody thinks it's fine.
People need to get portfolios together, get their money out of dollars, own gold, gold stocks, and assets in foreign countries that have sounder economies.
Countries where the currencies will not collapse completely but have real assets that pay dividends so you'll have real purchasing power.
Because people who are depending on interest in dividends in dollars are going to get wiped out.
About gold and silver…
George Gammon: Okay. Let me just get a couple more questions I know my viewers are really interested in. Number one would be the gold price going down right now.
You explained it really well with the margin call. But I don't know if everyone understands how that process works.
Can you explain that?
Then I'd like to get your thoughts on not only the dividend-paying stocks outside the United States, but also the silver to gold ratio and why that's important.
Peter Schiff: Well, first of all, the price of gold is around, $1,500 and change right now, 1,530, 1,550-ish.
The most recent bull move started in January 2016 with gold just above a thousand and peaked out at $1,700 early in this crisis.
So we had almost a 70% move up at the price of gold. Then we had about a 10% correction as the market started to implode.
The stock market went down 30%, the small caps down 40%, and gold went down less than stocks.
So people who were in gold preserved a lot more purchasing power than people who were in riskier assets.
But you mentioned silver. Silver is at an all-time record low. You could buy more than a hundred ounces of gold with silver.
That's never happened before.
Gold is gaining value relative to commodities and financial assets, and yes, there was a rush to sell some gold recently.
I think people needed money, and they had to get it wherever they could.
They had margin call they had to meet, not necessarily on gold, maybe on other assets, and to meet it, they had to sell gold.
They couldn't meet the calls with gold. They had to get dollars. So I think there was some selling in that market. But it wasn't dramatic.
I think we might've already seen the lows in gold, and I think we're headed back up.
Just because it goes down for a few days it doesn't mean it's not a long-term store value or a long-term safe haven.
Sure, anything can fluctuate in value on any given day depending on the market.
Peter Schiff: But I think gold is going much, much higher in terms of stocks.
Gold was only down about 2% this year when stocks went down 25% to 30%.
I think by the end of the year, gold is going to finish much higher. I don't expect the US stock market to recover these losses. It's going to have a down year for 2020.
Gold investors are doing much better. In fact, if you go back to the beginning of this century, your 2000, gold was under 300. The Dow was around 10,000, 11,000.
The Dow has roughly doubled based on where it is now, and the price of gold is up five-fold.
So even with the dividends on the Dow, it doesn't compete with just owning an ounce of gold and keeping it in a shoebox.
I think that's going to continue, you're going to see gold continuing to gain value. However, gold stocks are highly speculative and got clobbered more than non-gold stocks.
I think, again, it's a less liquid market. So if you get a bunch of sell orders coming in, it's going to have a bigger effect on the way down.
But of course, it has an even bigger effect on the way up.
Look over the last two days. We've seen some of these gold stocks up 40% to 50% off their lows in two days. So you have extreme volatility in these assets.
If you can stomach the volatility, I think a lot of these stocks will go up 10 times, 20 times, even 50 times over the course of the next five or 10 years.
They will continue to go up as this bull market gathers strength and as we go to this inflationary environment.
So we manage, well, I don't manage it personally, Adrian Day is our manager, but we have the EuroPacific gold fund he manages.
And we also have separately managed accounts of gold stocks.
I highly recommend people contact us if they want to get into space, especially in the junior miners.
It's a very specialized field. In fact, most professional gold fund managers don't even understand this sector.
George Gammon: Is that applicable to silver as well? Do you guys handle silver in your funds?
Peter Schiff: Yeah. We sell physical gold and silver at my company, Schiff Gold.
But for the mining stocks, we have managed accounts at your Pacific asset management and Pacific capital.
I think we add a lot of value by having a manager that knows what he's doing. He's been doing it for 40 years, and he knows the sector.
He knows the management teams and the good investments from the cons.
I mean, they're a lot of gold stocks that will go to zero because they don't have any gold, and they never will. But they have a story, and people buy into it.
There are stocks that didn't go up, as I said, 50 X. So we want to try to avoid the ones that go to zero as many as we can and get as many of those 10 baggers, 50 baggers as we can.
How does the PEs of overseas dividend-paying stocks behave?
George Gammon: Can you speak to the dividend-paying stocks?
I mean, everyone knows you for silver, gold, and precious metals.
But your company researches a lot of these dividend-paying stocks overseas that you pointed out on your podcast the other day are extremely cheap.
So when you say they're cheap, what type of PEs are you talking about? What type of dividends?
Peter Schiff: Yeah, we're talking about low double-digit or high single-digit PEs.
The yields are in the higher single digits and low double digits as well.
A lot of the stocks that we've been buying are now lower than they were in 2009.
They never had the big rally the US stock market has. So they were above those lows.
This bubble was really concentrated in US stocks and a handful of other types of names, but the value stocks, the dividend-paying defensive names, nobody was really buying those.
So they never went up very much. Of course, they did pay dividends, and we've been collecting those.
But when the stock markets crashed, everything crashed, the value stocks along with the high flyers.
The difference is the value stocks should recover much quicker.
They do because when the dust settles and people look for yield because they can't find any in bonds anymore, and they see these stocks paying 7%, 8%, 9%, 10%, 11% dividends, they try to buy those.
Of course, when everybody's trying to buy them and nobody wants to anymore, the prices will go up very fast.
But the reason that I've been recommending dividend-paying foreign stocks to people who are planning retirement or who are already retired, is that inflation is going to be the biggest enemy of retirees.
The cost of living is going to skyrocket, and most people's incomes are going to be inadequate.
But if you build a portfolio of these dividend-paying foreign stocks, I believe the dividends will rise sufficiently to provide meaningful purchasing power for you.
The dollar will lose so much value that when you translate your Euros, Swiss francs, New Zealand dollars, Singapore dollars, or your Norwegian Krones you'll have enough of them to buy the food and things you need.
But if you just have dollars, you won't be able to afford it.
You'll have to go back into the labor force to earn the dollars because the value of the dollars you already earned and saved will be destroyed by inflation.
George Gammon: All right, Peter, I want to be cognizant of your time. Thank you very much.
You've mentioned a couple of places where people can find you. But are there any other websites?
I know you're trying to promote your YouTube channel, Twitter, anything like that?
Peter Schiff: Yeah. You can go to my YouTube channel, Peter Schiff.
I put a lot of contacts up there and my podcast, which you can listen to at schiffradio.com.
People can also read my books by going to schiffbooks.com. You can buy most of them now. They're pretty cheap on amazon.com.
I haven't written a new one, but you can pick up books like The Real Crash at quite a discount now on Amazon.
My brokerage firm, EuroPacific Capital's website is europac.com, and EuroPacific Funds is europacificfunds.com.
I have a lot of businesses, where I help investors manage money. So you can try and get ahold of me.
If you have money that you want to transfer an account over, you can certainly follow me on Twitter.
I've been tweeting a lot these days, doing more stuff there. I'm now almost up to 200,000 followers because I've been doing more tweeting.
Also, on Facebook, you can friend me over there.
George Gammon: Yeah. You tweet great.
Peter Schiff: We have to build that up because more people need to read what I have to say because there's so much nonsense out there.
In particular, listen to my podcast because the mainstream media, the news is terrible on what's going on.
So if you really want to know what's going on, you got to get it from a source like me or maybe a source like you.
George Gammon: Yeah. I also want to point out before we go, that it may seem as though just a lot of blue-collar guys or ordinary people are following Peter. But that's not the case.
The reason I know that, and Peter, I'm sure you've recognized this as well, whenever I hear you use an analogy, it's almost guaranteed that two weeks later or less, I'll hear Jeffrey Gundlach use the exact same analogy on CNBC.
Peter Schiff: Yeah. Well, Jeff has gotten quite a few analogies from me, and I'm happy to help.
I mean, look, he's a nice guy. I've met him, been to his house and have a lot of respect for the guy.
I do wish you would kind of credit me once in a while.
There are a lot more guys I know follow me, and I'll hear them say something. I just tweeted that.
They never want to attribute anything to me, or they never want to give me any credit for anything.
But I do have an underground following of mainstream people.
Every once in a while, they'll send me an email because I used to get people when I used to be on CNBC a lot.
People used to come up to me on the street and say, “Hey, I love seeing you on CNBC. The only time I turn up the volume is when I see you.”
They only just watched it for the quotes. But if they saw me, then they knew I was going to say something relevant or interesting at least or maybe funny.
So they would turn up the volume.
But of course, now they don't have me on. So there's no point in ever turning up the volume. I just turn it up because I get material.
I get to make fun of them on my podcast or on Twitter.
George Gammon: All right. Also, I want to give respect to your father. I know you still sell a lot of his books. Where can we find those?
Peter Schiff: Well, on Schiff Books, I only sell a few copies we got left, and again, there's some on Amazon too. But just go to schiffbooks.com.
George Gammon: All right, Peter. Thanks for being on The Rebel Capitalist Show.
Peter Schiff: All right.
George Gammon: Can't wait to do it again.
Peter Schiff: Okay. Take care.