JH: Peter, thanks so much for taking the time. We’re gonna have a lot of fun over the next 30 minutes. Thanks so much that you’re doing this for the german audience.
PS: Yeah, thanks a lot for having me on Julian.
JH: First question, do you think you and your son Spencer gonna go down as the best marketing team in the financial industry ever?
PS: I doubt it. I mean we’re not intentionally trying to market anything, although my son really had a pretty good drink of the Bitcoin kool-aid now. He’s not listening to reason, but I think he’s gonna come around because with age and experience comes more wisdom and I believe he’s gonna lose a lot of money in Bitcoin and so that will probably be a wake-up call. But if you’re gonna lose a lot of money, it’s good to do it when you’re young. And you have plenty of time to make it back but I feel badly for some of the older people who are gonna lose their life savings in this mania. When the music stops and they’re still HODLing.
JH: I have so many questions on this, maybe the first one. How do dinners kind of happen at the Schiffs. Do you guys talk about that is or is there like 60 other conversations around the dinner table?
PS: Well first remember my son is 18, he’s a freshman in college now although he’s been going virtually. But he’s my son for my first marriage and so he spends a lot of time with my ex and so he’s not constantly here. He was here, he left a couple weeks ago, he’s going to come back I think in a month or two. He’ll stay here for maybe a month, a month and a half at a time. Most of the time he’s not necessarily here to have dinner. But when he is here, certainly the topic of Bitcoin comes up and it comes up when he’s not here too. I’m living in Puerto Rico, I have a lot of friends.
JH: It’s Bitcoin island, come on.
PS: Yeah, I’m surrounded. Look Brock Pierce is almost my next door neighbour. He’s just a few houses down and so he just moved into the neighbourhood. He’s been in Puerto Rico for a while but now he’s right up my street. But there’s a lot of crypto people around, so the conversations do come up.
JH: How do they go, when you have like these personal talks? Or do you guys talk more like Macro or do you actually talk about a lot of other things?
PS: Well on the Macro we generally agree, I mean that’s the thing. A lot of the people who are hardcore crypto guys got that way, because they have a similar world view as me. In fact a lot of the people tell me that the reason they’re in Bitcoin is because of me. Because I kind of educated them about economics and money and inflation and central banks and I got them to understand the problems of this FIAT monetary system and as a result they ended up in Bitcoin. That wasn’t my intention to lead them down that road, but that’s where they ended up. We agree on a lot of this stuff, we just disagree profoundly on Bitcoin and not just Bitcoin, but all of the cryptocurrencies. I don’t really think they’re cryptocurrencies, they’re crypto tokens. I mean they’re not used as currencies, I don’t think they’re a store of value because I don’t think there’s any value there to store. But I do think that people are collecting them, they’re digital tokens and I don’t think any of them are ultimately going to withstand the test of time, I think it’s one gigantic bubble and I think the NFTs are maybe just the next iteration of that bubble, just taking it to a new degree of insanity. But I think in general when people are trapped inside a bubble, they have no idea that that’s where they are. Because they’re not looking at it from the proper vantage point, but after it pops it’s a lot easier for the people who are inside to realise with the benefit of hindsight, what was going on.
JH: So let’s talk a bit about Macro. How do you see the main driving forces right now? I mean a lot of it is coming from the US obviously globally. But how do you see Biden managing this right now? How do you see the fed, the stimulus that was just passed on, how do you see all that?
PS: Well, politicians, they always want to get reelected and they get reelected by perpetuating the illusion that their policies are making people’s lives better and a lot of that is measured by government programs. How much free stuff the government is providing me what am I going to get from government that I didn’t have to earn myself and they’re really just trying to kick the can down the road to prevent a real crisis from developing on their watch. And that’s kind of where we are, I don’t know how much more room there is to kick this can, there’s not a lot of road left and the can is getting heavier and heavier as we go. We keep delaying the day of reckoning by making all the problems that we need to reckon with much bigger. Rather than really being a stimulus, what government is doing is sedating the economy but they’re getting it high on a drug at the same time. We’re kind of oblivious to how bad things are getting, because we’re so high on the drug of cheap money, so we keep going deeper and deeper into debt. In America we keep spending money we don’t have or didn’t earn to buy products that we didn’t produce and we run these massive trade deficits and massive budget deficits and this whole thing is a gigantic bubble and I think the pin ultimately is going to be the US dollar, the federal reserve cannot continue to print dollars to buy endless amounts of US treasuries and other debt. In order to keep interest rates artificially suppressed indefinitely, because it’s the artificially low interest rates that are the reason that the government could pretend that it’s solvent. And that it can service all of the debt, not only the debt that we already have, but all the debt that we’re incurring on a daily basis. But once the bottom drops out of the dollar, then the party’s over and I think we have a real currency crisis in the United States, a US dollar crisis and a sovereign debt crisis, that really upends the entire global FIAT monetary system, that’s really based on the dollar. You have all these currencies around the world and the primary reserve is the US dollar. So everybody backs their currency with dollars except the dollars backed by nothing. Now once upon a time everybody backed their currencies by gold and that was real money, because gold is a real commodity that actually has value, it’s not just a piece of paper. And gold circulated as money before paper currencies were invented, that maybe made gold as money more efficient to utilise, because instead of carrying around your gold you could leave your gold in a vault or with a bank or with a government and you could negotiate in the paper. But what gave the paper currency value was the gold that backed it up, because the paper itself had no intrinsic value at all. And when the US took the world off the gold standard and we convinced the world to hold US dollars as reserves instead of gold, at the time we did that the dollar was not only backed by gold but fully convertible into gold. It seemed like a good deal for our trading partners, because they can have the gold but also earn interest on it by buying US treasuries with their dollars that were redeemable on demand in gold. And of course at the time the US was the world’s biggest creditor nation, we had massive trade surpluses, our standard of living was unequaled anywhere in the world, we were by far the wealthiest country with the highest living standards and we had the most gold. Everybody needed dollars to buy all the manufactured goods that we were exporting, so it kind of made sense. But today, with America the world’s biggest debtor nation, with Americans having to import all the things that we don’t have the capacity to produce, we’re really a shadow of our former selves and since the dollar is no longer backed by anything, it doesn’t make any sense for this system to continue. And I think this crisis is going to bring it to an end and then the question is, what is going to follow the dollar. Is there going to be a new reserve currency? Are we going to anoint the euro or the japanese yen or the chinese rmb to replace the dollar? I don’t think so, I think we’re just going to go back to what existed before the dollar, and it wasn’t the british pound because the pound was backed by gold. I mean the dollar is the only reserve currency that’s also been a FIAT currency. All the other currencies that were the primary currencies of commerce in the world before the dollar were all backed by gold. I mean none of them were just FIAT. I think we’re going to remonetize gold in a bigger degree. I think gold is going to play a stronger role in the monetary system again. That is going to be particularly disruptive for America, it won’t be as disruptive for a lot of other countries, because if you’re in a normal country you can’t print dollars.
JH: What’s a normal country?
PS: A country that doesn’t issue the reserve currency. If you can’t print dollars, let’s say the New Zealand dollar. The New Zealand dollar is not the reserve currency, so if people in New Zealand want to earn US dollars, they have to export, they actually have to work to get those dollars, they have to do something of value. America doesn’t have to do anything, we just print them. But everybody is on a level playing field when you’re on the gold standard, because if America wants to earn gold it’s going to have to produce something. I mean if it doesn’t produce the gold, it’s going to have to produce something that it could trade for gold. The rest of the world isn’t going to feel this as much as the US, because we have been living far beyond our means based on the ability to just print the dollar that everybody will accept, in exchange for all the goods they produce. So when we have to start producing to consume, that’s going to be a huge change in America, there’s going to be a big collapse in our standard of living. Now a lot of people, this is where the Bitcoiners and I diverge, they see Bitcoin as the solution that, “aha we have this collapse of the FIAT system or the dollar and Bitcoin is the answer. The world’s gonna forget about gold because Bitcoin is better than gold. Bitcoin is gold 2.0” and that I think is pure fantasy. I don’t think Bitcoin is any better than a FIAT currency, issued by a sovereign nation. I think it’s digital FIAT.
JH: But it can’t be FIAT. Bitcoin cannot be FIAT, because by definition there’s no one who says it shall be, right?
PS: Right, there’s no government saying it shall be but basically all of the people who believe in it, that’s exactly what they’re saying. They’re saying Bitcoin has value.
JH: I’m not anti-gold, I’m a gold holder as well, but don’t you see that this is very similar to gold as well?
PS: No, I don’t think so.
JH: What is the inherent value to gold?
PS: I don’t think there’s any similarities at all because there’s nothing that you can do with Bitcoin that you could do with gold in the real world. Gold is a metal, it’s an actual commodity, it’s the most useful metal in the world. Bitcoin isn’t used for anything. I can’t take Bitcoin and use it instead of gold for any of the applications, whether it’s in jewellery, in industry, in aerospace, in medicine, in dentistry whatever, Bitcoin cannot be used as a replacement for gold. The point I wanted to make about the FIAT, is each person who believes in Bitcoin is themselves saying this has value because I say it has value. And a lot of other people will agree, yes we will all agree to believe that Bitcoin has value and that belief is all just confidence. People are confident that other people will continue to believe that this digital string of numbers is going to have value, that is what makes it similar to FIAT in that all of the value derives from confidence. Now when you have a FIAT currency you have a government that’s helping to instil that confidence. You have a government that is mandating taxes be paid in that currency, which gives it some type of use case because you don’t want to go to jail so you need the currency to pay your taxes. But you also have a long tradition of use in FIAT currencies as a unit of account as the meaning of exchange prices are in dollars or euros or yen. Contracts, bonds, rents, salaries, I mean you have a long history and yes these currencies have been losing value, but they they kind of lose value slowly. So on a short-term basis, that your purchasing power can be stored, because it’s not going to just crash between the time you get your paycheck and the time you spend it. Now ultimately that’s going to happen, that happens to all FIAT currencies in the long run. But right now Bitcoin is all based on faith and confidence and I don’t think that that can survive. That you can’t just agree, that something that has no real value has value just because we believe it has value. And then you have a bunch of people who own it, who don’t want to sell it because they think that it’s always going to go up and they’d be a fool if they sell it. So they’re HODLing it and then more people come in and want to buy it and you create this momentum. It feeds on itself and you get the move and the price, but ultimately this whole thing is going to collapse like a house of cards. Eventually people are going to want to buy stuff with their Bitcoin and it’s not going to be this world of the fantasy where Bitcoin just becomes the new medium of exchange. That’s not gonna happen if you wanna buy something with your Bitcoin, you have to find somebody who wants to buy your Bitcoin so you can get dollars or euros or yen. So you can go into the real world and buy a house or buy a car, take a vacation and do whatever you want. But eventually we’re going to run out of fools willing to pay higher and higher prices for basically nothing and the bottom’s going to drop out, everybody’s going to rush to the exits.
JH: But you know there’s people like Buffett or something who say the same thing about gold as well.
PS: Buffett doesn’t say the same thing about gold, I mean I’m pretty familiar with Buffett. And Buffett believes that businesses are better inflation hedge than gold and over the long run I would agree with him depending on the businesses and depending on the price that you pay for him. But he’s a stock guy and he understands inflation and he knows that it’s money printing and he calls it a tax and he’s referred to the US Squanderville and US dollars as squander bucks. But what Buffett thinks is that why would I just hold gold, the commodity, that doesn’t produce any income, when I can own shares of a business that is generating profits and paying dividends. I’d rather have an inflation hedge in a real business. Now during hyperinflation if Warren Buffett believed the dollar was going to crash, he’d buy a lot of gold because what I look at and what Buffett looks at is I look at gold as a form of liquidity. As money. So I agree with Buffett as a long-term investor. I’m not burying my money in gold, most of my money is not in gold. Most of my money is in businesses just like Warren Buffett. I happen to invest mostly outside the United States, because I have a much more bearish outlook on the US economy and the crisis that’s coming. Buffett doesn’t necessarily see that. I mean we own some stocks in common, he has some foreign stocks that he owns and I’m in some of those stocks as well. But Buffett understands inflation and money and if Buffett really believed, that there was going to be an immediate substantial drop, not only in the dollar but in the overall stock market, he would go to gold. There’s no question he would go to gold or silver, he would never go to Bitcoin. He understands the profound difference between a real metal, that can store value. And the reason gold stores value is because gold has a historic relationship to all the other commodities. Because when you’re storing your gold, most people aren’t going to use the gold in industry. They’re not going to use the gold to make jewellery. But you have jewellers who need gold, you have chip manufacturers who need gold, right? And so gold’s a commodity that people are going to need. People need wheat, people need corn, people need oil, people need copper, these are all these other commodities. Well if you’ve just got FIAT currency and there’s lots of inflation, the price of all these commodities is gonna go up and everything’s gonna get more expensive. Maybe you need a lot of copper, but copper is bulky and harder to store, maybe you need a bunch of oil, well I can’t have big vats of oil in my backyard but hey I can hold gold. Gold is small, it has a lot of value in a small place and there are historic relationships how much gold do you need to buy a barrel of oil. How much gold you need to buy wheat, how much gold you need to buy copper. So instead of having all those commodities, I’ll just store my value in this gold and as inflation erodes away the value of paper money and all commodity prices go up, well the value of my gold is going up along with the price of copper and oil and now I can use gold to buy those things. Bitcoin has no use in the real world, so there’s no relative price that Bitcoin is going to have, relative to oil or copper or wheat or anything.
JH: Do you see the value in the digital world? Especially like what millennials see. I mean a great example is all the computer games. I mean fortnight costs zero dollars to play, people spend billions of dollars to acquire status in there.
PS: Yeah, that’s entertainment. I see value in internet entertainment, yeah virtual reality, playing games and all kinds of stuff. But not as an investment. It’s entertainment, it’s like going to the movies. It’s like going to a sporting event, yes we’re going to have a virtual world, but this idea that people should buy virtual houses and as an investment that’s nonsense. You can buy a program, a VR program of the biggest mansion in the world, it’s cheap and there’s an unlimited supply of them. It’s not like I’m going to have something unique, no, you don’t have anything unique when you have something that’s digital. Nothing that’s digital is unique, you can make infinite copies of it. Everybody can enjoy the same exact experience at the same time. Look I’m not anti-technology but this is nonsense to claim that you’re investing in it. Food has value, digital food no, it’s not going to nourish me, if I have a diet of digital food, I’m going to starve to death. A digital house doesn’t provide me with any shelter, I can’t actually live in there. All this stuff, a digital car is really cool but I can’t drive it anywhere, I can’t get anywhere. But is it fun to have in a video game? Sure. But it’s not going to be an investment, it’s not going to appreciate value, that’s nonsense. In fact it’s going to go down in value as technology makes it cheaper to produce digital assets and they get better. That’s the history of everything that’s technological. We have better and faster ways and more efficient ways of producing things and they go down. I mean can you imagine if you bought a cell phone and thought it was an investment or a computer. I remember my first computer, my apple computer. I got it, it was five thousand dollars. I could have bought a nice car for five thousand dollars when I bought my apple IIe for five thousand dollars. I had a dot matrix printer, I had these big floppy disk drives, I had a dial up modem. It was really a glorified word processor. iPhone is way more sophisticated than that. I mean it didn’t go up in value.
JH: Maybe though, as a collector item you could get a lot of money for it right now.
PS: But if I just had a photograph of it, if someone made an NFT and took a photograph of my old apple IIe, I don’t think anybody would be willing to buy it from you right now. Yeah at least if I kept it in a pristine condition in a box but I doubt it would still be worth the five grand I paid for it. I don’t think it would.
JH: What’s the rational explanation for you that gold, and again I am a gold investor, the first six months after the drop last year, the first six months gold performed like just as M2 did like it really tracked them too, then it had been dying off since then. Bitcoin’s been rallying insanely. Where is that different kind of buyer’s interest coming from?
PS: Yeah, remember they are two very different assets and for Bitcoin I’m putting asset in quotes, because I don’t even really regard it as an asset. But obviously people think it is, because to me an asset generates income, real estate, stocks bonds, even if they don’t pay the dividends.
JH: But then by your definition gold’s shouldn’t be an asset either.
PS: Right, but gold is a commodity. Because commodities have a use, Bitcoin doesn’t have a use and it doesn’t generate income. I’d just call it token, but the reason that these digital tokens have been going way up has nothing to do with what’s going on with gold. They’re completely different. Gold is actually reacting to the way major investors around the world view the economy, view the markets view central banks, view inflation. I still think that the big money is wrong just the way they were before the 2008 financial crisis. I think there’s too much confidence and faith in central banks and the belief that they have it under control and that they’re going to be able to fight inflation by raising interest rates and shrinking balance sheets. And so I think the gold market is reflecting a lot of optimism that currently exists about the overall markets and economy and about the ability of the fed to control everything. Gold is discounting higher interest rates in the future, a stronger dollar in the future and I think that’s wrong but that’s currently in the market. Gold has pulled back from its record high that it hit last year above 2100, but gold has been in a pretty big secular bull market since it bottomed out in around 2000, 2001 at less than 300 dollars an ounce. I think it was the bank of England that kind of hit the bottom around 260 when it basically dumped a bunch of gold that it had been holding on to. We’re in a long-term bull market, I mean it’s not a meteoric rise but it’s a very steady bull market that is eventually going to get into a bigger move up, as the the big players realise that they’ve got it wrong. And now they have to reposition and get out of dollars and get into inflation hedges. Bitcoin is in a whole different game. I mean Bitcoin is part of the bubble. People keep saying Bitcoins not the bubble it’s the pin. No it’s not. I mean gold might be the pin that helps prick the Bitcoin bubble but Bitcoin is part of this, people trying to get rich quick. It’s all this liquidity in the market is fuelling manias and speculative bubbles all over the place. I think Bitcoin is simply the epitome of that. Not just the stock that’s overpriced. I don’t think it has any value, so a hundred percent of the price is excess and people are just gambling in it and I think part of the story is, hey look gold’s not doing very well and Bitcoin is, people keep wanting to compare Bitcoin to gold even though they have nothing in common. You might as well just compare Bitcoin to the Nasdaq or pick any stock or any other asset. It has more in common with other speculative assets than it does with gold. Gold’s a store of value, Bitcoin has no value so it can’t store anything. Gold’s low risk, safe haven, Bitcoin is high risk, gamble. But yes, part of the whole fraud of the marketing behind Bitcoin is to make it look like gold, that’s why I call it fool’s gold. I mean they try to represent Bitcoin as a coin and they make the coin gold, but there is no coin, it’s a string of numbers. There’s nothing there, they talk about mining Bitcoin. You don’t mine it, you have computers solving math problems, that’s not mining. And yes, can you divide Bitcoin? Sure you could divide it but who cares. You’re dividing nothing. If I have half of nothing that’s the same thing as having nothing. I mean will it last forever? Well maybe if the computer networks are there and the miners are spending a tremendous amount of money to keep this network going. But none of this is gonna work. I mean there are people that have tried, alchemists tried to come up with new forms of gold. This is not new. This is just alchemy for the digital age, it’s digital fool’s gold.
JH: What was the first time that you actually heard about Bitcoin? What was the dollar price? Because I have seen you debate with Erik, I think in 2013.
PS: I never debated, oh Erik Voorhees yeah, I have.
JH: Yeah. I think that was in 2013 and what was Bitcoin, like what 200 dollars?
PS: No, well that was the low. I think when Erik and I went out to dinner because he set up my Bitcoin wallet, which he never gave me the password. I had about a third of a Bitcoin in there that had been gifted to me by various people, so easy come easy go. But no, it wasn’t at the rock bottom but it was definitely higher. It was maybe a thousand, but I heard about it when it was very low. I can’t remember how low, if it was below 10 dollars or not, it may have been. I don’t think it was below a dollar. I don’t think so.
JH: Don’t you sometimes think, had I not just put one percent of my gold holdings or ten percent into Bitcoin?
PS: Oh look, of course it’s always what if, could have, should have, would have. There are a lot of things with the benefit of hindsight that I could have bought. When I didn’t have the benefit of hindsight, I didn’t buy them. Because I’m a value guy. I mean when I first heard about Bitcoin I understand all the flaws, I understood them. I mean one of the first things I said was well what’s to stop somebody from coming up with another digital currency, well nothing. There’s thousands and thousands of them. But I underestimated how many people would be conned into this. I mean it was the same thing with the dot-com bubble. I could have made a lot of money in dot-com stocks early on if I had got into them. I didn’t. I just thought they were a bubble and of course I was right, they crashed, 90 percent of them went away, went to zero. I mean a few of them survived and you could have bought them after the bubble popped, the amazons and stuff like that or eBay survived. But the vast majority of these companies went away. Same thing happened, I was renting houses for a long time during the real estate bubble, yeah I could have made money flipping houses, but I didn’t. I waited for the bust and then I got a good deal. But yeah, I mean this was a bubble if there was ever a bubble tailor made for me, this was it. Because it incorporated all of my concerns. I could have got on really early into this thing sure I could have made billions of dollars like anybody else who would have got in and HODLed the whole way. I mean that’s another thing. I mean if I’d have bought it at a dollar, would I have sold it at ten dollars and thought I was a genius or a hundred dollars or I don’t know, what I would have done. I mean the best thing is the guy that loses his Bitcoin and couldn’t find them and then maybe five years later he finds them again.
JH: True. The richest people are those who lost their Bitcoins and then find them again because they have been the long-term HODLers.
PS: But based on what’s happened, yes you could say, yeah I underestimated the intelligence I guess of the rest of the world. I didn’t know that they’d be foolish enough to actually buy into this thing
JH: … or smart enough.
PS: I think what happened was. I think some big money did get into it. After that run up to a thousand I think would have pulled back. I think some big money came in and they did a hell of a job marketing it. They really promoted it, but to me it’s just a big Ponzi. I think a lot of these Bitcoin guys are like today’s Hare Krishna’s, they’re always trying to evangelise and they have to convert more people.
JH: I’m actually not disagreeing with you on this. Because I’m not a Bitcoin maximalist at all, I have quite some Altcoins, so I actually do agree, I invest in stocks and everything. So I do agree with the religious aspect that a lot of Bitcoin has, so you’re not wrong there.
PS: But the nature of Bitcoin is, you need more and more people to buy it to keep the price going up. Now people keep saying, well that’s the same thing with gold. No, because gold is going to be bought. There’s real demand for gold. And I don’t tell people to buy gold to get rich. I tell people to buy gold to keep from becoming poor. It’s a store of value, it’s not a get rich quick scheme. People are buying Bitcoin, because they believe they will get rich owning it. That this is their ticket to wealth. That they just have to buy some Bitcoin and then sit back and they’re gonna get rich and this is all a bunch of nonsense. Or I keep people talk hearing about how Bitcoin is taking gold’s market share. Bitcoin’s not taking nothing. I don’t care what the price of Bitcoin is. People aren’t selling it, they’re just holding on to it. The price could be a million, if nobody sells what difference does it make. It only matters is what can you get out and can you actually buy gold with your Bitcoin. At the end of the day when a lot of people want to sell there’s going to be nothing you could buy, because the price is going to collapse. You got to have new people coming into the market so that the people that got in earlier can get out. And of course a lot of the people who are trying to get out, want to convince other people not to get out. That’s why the big money the whales they need to constantly convince everybody else. The minnows, all the little guys don’t sell no matter what, turn out the FUD, you can’t sell, because they want to sell, they don’t want competition. And now you have a lot of these high-profile guys, like Mark Cuban who used to be as bearish on Bitcoin as me, who said well it has less intrinsic value than a banana. Now all of a sudden when it’s at 50.000 and he’s getting paid or he’s involved in some project or Kevin O’Leary, all these guys are now Bitcoin bulls.
JH: What about Michael Saylor? He was on my channel as well.
PS: Michael Saylor is, I mean I don’t know what’s going on with this guy, I mean I listen to him and this is to me complete nonsense. I mean maybe he’s trying to create a diversion, maybe there were some problems at MicroStrategy, but come on. I mean this guy has borrowed money, he has issued debt, convertible debt to go out and gamble on Bitcoin. It’s not just that he’s converting his balance sheet into Bitcoin, he’s levering up the company and then he’s using the borrowed money to buy Bitcoin. And the whole thing, if you hear Saylor talk about, ‘hey my balance sheet is at risk, the dollar could go down 2 percent a year, I’m losing 2 percent a year’. Okay, then own gold. I mean if you’re worried about losing 2 percent a year, how can you buy Bitcoin which can go down 2 percent in a minute. It can go down 50 percent in a week, I mean there’s so much more volatility and risk in Bitcoin. You can’t buy it as a hedge, because you can’t hedge something by owning something that’s riskier, than what you’re trying to hedge. You have to go to something that has less volatility and that would be gold and I don’t even know why. What Saylor could be doing is, okay how about some Swiss francs, how about some Singapore dollars, how about just diversify in FIAT. I mean at least get out of the dollar. I mean there are other central banks, there are other things you can do other than just gamble on lottery tickets, but now that he’s bought all this Bitcoin he has to go out and try to con other CEOs into following his lead down this primrose path. He’s got to get them to go out and buy Bitcoin to make the value of the Bitcoin he already owns go up.
JH: What about Elon?
PS: I don’t know what’s going on with Elon Musk. I mean that guy, I mean he could just be joking with everybody.
JH: Joking that he doesn’t own Bitcoin? I mean he cannot lie that he bought Bitcoin with Tesla and then he doesn’t have it.
PS: No, I’m sure he bought it, but I mean the thing is what does he care? I mean Tesla in and of itself is a bubble, so what difference does it make? Tesla is a real business, but the price is completely devoid of any relationship to what that business could possibly be worth, even in the most optimistic future for that company. I think he just could be playing games with everybody. I mean, it’s all just a game to him, the guy’s got so much money on paper, what does he care where he’s got it. I think he gets a laugh out of this.
JH: I want to ask one question before I ask you the last question, because I really want to be respectful of your time and I really appreciate what we’re going over already. You mentioned other countries, what countries are you bullish on, if you want to talk about that. Because that’s obviously very interesting to me, because I’ve been a big US investor. I don’t live in the US, so I have very little US exposure. I live in Singapore, I see China, I see India, I see Europe. Do you want to share a bit there?
PS: Yeah, I mean, look, I love Singapore as a place to be, a friend of mine Jim Rogers, I don’t know if you run into him over there.
JH: He’s a fellow Austrian, good friend of mine.
PS: Yeah, so he moved over to Singapore with his little girls and he loves it there and he read the writing on the wall a long time ago. He’s a big bull on China as am I. The emerging markets in Southeast Asia, I think are going to be the best places to be, in terms of growth. And then also countries that have a lot of commodities, a lot of raw materials and a lot of those materials are going to be exported into the emerging economy. See the way I think the world is going to transition in a post-US dollar reserve currency world, where I think we’re back on sound money which is great for the world to be off the FIAT standard and back on a gold standard. Which seems to me to be inevitable but when you have all these other countries, that have a lot more economic freedom and to me political freedom is overrated. People think, ‘oh democracy is great’, look democracy can be every bit as oppressive and tyrannical as a dictator or king. Because you’re just being exploited by the majority. The key is to protect the rights of the minority and democracy is generally not the best way to do that. But what I look at is not whether or not you can vote right but whether or not you are free in terms of your property – your labor. The government leaves you alone and they let you engage with other citizens without as much regulation, you can make your own choices in life without a government babysitting you, that’s not good for you, no you can’t do that. So where you have more economic freedom and that’s generally in Asia. And you have a lot of young hard-working people, smart people, educated people. There isn’t a culture of the government’s gonna take care of me and people aren’t looking forward to social security and government pensions and welfare. People are working and they’ve been saving and they’ve just been saving the wrong asset, they’ve been saving dollars and US treasuries, but they have big trade surpluses. I think when the dollar crashes and their currencies rise, you’re going to start to see the birth of the emerging market consumer. Americans are done consuming, we’re broke but they’re going to start buying what we can no longer afford and I think when the world is no longer squandering its resources by loaning them to the United States, when it can invest its savings productively in its own economy, when its own citizens can consume what they produce and eat the fruits of their labor, I think you’re going to see economic booms. I think you’re going to see a realignment of asset prices. Assets in that part of the world are going to be far more valuable on a relative basis, relative to assets in the United States. That’s where I have a lot of my own money in companies there.
JH: How do you invest in those? Do you invest directly into the public traded companies? Do you invest in ETFs? Do you invest in country ETFs? How do you invest in this?
PS: I have a pool of portfolio managers, a team of portfolio managers that work with me here in in Puerto Rico and we don’t just buy ETFs. I don’t go in and make direct investments, because I’m not on the ground, I want to buy stuff that’s publicly traded. It’s a lot more transparent, it’s a lot more liquid for what I’m doing. But I want to do my own homework, I want my own analysts to look at individual companies. I don’t just want to buy a basket. I want to buy companies that I think are going to do very well in the world the way I think it’s going to evolve. I don’t care about short-term relative performance, because that’s not going to matter if I’m right on my worldview, there’s a huge payoff to me for owning the types of businesses in the countries and owning the currencies that are going to really be on the winning side of what amounts to a huge transfer of wealth. And unfortunately the transfer is not going to be the people who have Bitcoin, I mean their wealth is going to evaporate. I mean the people who make money in Bitcoin are the people who sell. The people who are buying it aren’t making anything, they’re just helping somebody else to get out. But I do these portfolios and anybody who’s listening to this, I mean even if you don’t want to believe me, if you still want to hold on to some of your Bitcoin, do not have most of your money in Bitcoin. My son made that mistake, he had some silver stocks.
JH: He has getting some serious returns though.
PS: He made some good money on those investments, but he is all in Bitcoin, he doesn’t have anything else. But instead of people criticising him, hey kid you’re making a mistake you should diversify.
JH: They’re cheering for him.
PS: But I’m telling you, people listen to this, if you’re 40, 50 or 60 years old, do not take the advice of an 18 year old who’s never had a job. I’m telling you and if you guys are right, if Bitcoin really goes to a million, you’ll be rich even if you just have 10 percent in Bitcoin. But if I’m right and you’re wrong.
JH: 10 percent would be an appropriate Bitcoin allocation for you, is this something we can have as the title for the YouTube Video.
PS: I don’t even think there is a one percent chance.
JH: It says “10 Percent of your asset can be in Bitcoin”.
PS: Look to me, I’m throwing away one percent of my money. I’d rather gamble it on something else, but look if I thought that maybe there was a slim chance that it could work, maybe I’d buy some. But if you do think it could work, I mean anybody who’s in Bitcoin has to agree that it may not work, it may crash, maybe no cryptos will work, somebody will come up with a better one. I mean it could be outlawed, who knows what could happen to Bitcoin. I don’t think even if nothing bad happens, it’s going to implode all by itself. But there’s all sorts of things that can kill it, if it doesn’t die of natural causes. So make sure that you allocate your risk capital, some of that risk money to Bitcoin. It’s not safe it’s not a store of value right it is a risky digital token. Maybe it’ll go up. A lot of people are saying, well it’s going to be a store of value in the future. In the future it’s going to be stable. Maybe. But that’s the gamble, you’re gambling that something that’s not a store of value today, that’s not a hedge against inflation, that will be the future. And they’ve already given up on Bitcoin as a medium of exchange. I mean when it first came out, ‘hey this is going to be money, people are going to use it’. Now they’re like well you’re not going to use it because it doesn’t really work as a medium of exchange, but people are going to hold it anyway as a store of value. Which is nonsense. But if you believe that it might happen, you’re gambling on something that might happen. Don’t gamble with all your money. What I’m doing, I think is a prudent approach if you’re worried about inflation you’re worried about a loss of value of FIAT currencies, then own real businesses or own real assets which is what Warren Buffett is saying. Buy them in the right countries, like Singapore. I own stocks in Singapore. Companies where their customers are not in America, where the customers are in China or other places, where their currencies are going to go up. So if the Chinese Yuan goes way up, which I think it will, that means the wages of Chinese workers go up in real terms. The value of their savings goes up in real terms, so they can buy more stuff, they become better customers. The dollar crashes Americans so they can’t buy anything. I mean right now the only reason we can buy is because people will lend us the money, but when that music stops then the shopping spree stops. So there are prudent things that you could do, if you believe that we’re going to have lots of inflation and the dollar’s going to crash. Don’t put all your money in Bitcoin and assuming that that’s the answer that you have a hedge, you don’t. You need to own real assets and if you want to have liquidity, have some real money which is gold. I mean gold has a history of being money. Gold has a history of being a store of value and a medium of exchange. Gold has done that for thousands of years Bitcoin has never done it. Even though Bitcoin has been here for 10 years it’s done nothing but act as a speculative token. So you can’t look at that period of time and draw any conclusions about what Bitcoin is going to look like in another 10 years, let alone 100 years or a thousand years. But you have that reliable history in gold and Bitcoin is not going to disrupt that. It can’t.
JH: Can I ask you a personal question for myself, so I’ve done financially fairly well, let’s remove all the Bitcoin stuff, even without Bitcoin, I’ve done financially really well. I have a six month old son as I told you before the interview, I’m a bit worried that I cannot give him the hard-working kind of values or the hunger that I have and I still have. What have you done, that you think you would be able to pass on for me, for my kid to give the right values there.
PS: I mean I’m sure you’re raising them the right way, I mean whether or not they’re going to be as hungry as you. That’s always the problem, I grew up without a lot of money. I mean I wasn’t poor, don’t get me wrong. But my parents weren’t rich and my parents were divorced and so yeah I was ambitious and I was driven and I see sometimes in my kids, they’re in a much better financial position than I was in, and so we’ll see. I mean, I know that there are people who have grown up in very wealthy families and have gone on to even create even more wealth, than what they inherited and it’s been a good example. And then you have the rich playboys, who just squander the money and just wine women and entertainment and stuff like that. They don’t have the ambition. I mean a lot of that too has to do with the parenting and the way the kids are being brought up and I hope that my kids are more grounded. But I’m trying to educate them, I mean that’s one of the things I did with Spencer. Early on I introduced him to Austrian economics and then he just really got into it on his own and he’s further. I mean I’m a libertarian but he’s an arco capitalist. I’m not like he’s way beyond me, I mean I don’t want to get rid of all governments, I mean I would, if I thought it would work. I just don’t think anarchy can exist, I think it’s like a vacuum, it always gets filled and it gets filled with something bad. So to prevent it from being filled with something bad, I want to create something that’s not as bad but I want to heavily limit it with a constitution or with laws and I know it’s difficult. I mean you can keep the forces of democracy in check for a while, but it’s hard to do it permanently. I mean we’ve seen history is repleting itself, I mean we had a great example with the constitution, but obviously it didn’t work. It worked for a while, that’s why America became the wealthiest country in the history of the world, but it ain’t working now. That’s why that wealth has been dissipated and we’re headed for a massive crash but I’m doing what I can not only to educate my kids about economics. I do my podcast just all the time and I’m talking about these issues and I’m trying to educate people, not just looking for customers of my asset management business. I mean that’s great, I love it when people listen to my podcasts and then become clients. And a lot of my clients are regular listeners to my podcast which is great because I can’t speak to all the clients personally, we have too many. But if they listen to my podcast I can speak to them all right and so they kind of know what my thinking is and what’s going on. But I think the majority of the people who listen to me are not clients, I don’t even think they have the money, they’re younger people. Maybe they will be clients in the future, but I’m trying to educate people, because there’s so much misinformation out there. I mean the status, the governments, the universities, they have the numbers and they’re out there and they’re bombarding everybody with all this Keynesian nonsense about how the world works and how governments work and how capitalism is bad and businessmen are just greedy, out to screw you. Saying we need the government to protect us and all that nonsense and so I’m putting all that content out there and it’s there, I mean it will be around long after I’m not. The internet is here, everything is archived. So hopefully I’ll have an impact not only on my own children, but on everybody’s children and generations to come about economics and I think when a lot of the things that I’m predicting now just like with the financial crisis of ’08 this is a much bigger crisis that’s coming and I obviously have a lot more stuff out there, content that I’ve been putting out. I think history is going to vindicate me, not only on that but on Bitcoin as well and all the cryptos.
JH: You don’t have to be right on everything.
PS: I certainly was wrong about Bitcoin too early as you said, I could have made a lot of money on it. But most people are going to lose a lot of money on it, so at least I’m going to avoid the losses. It’s not even a zero-sum game, it’s a negative sum game, because you have all these trading costs and you have taxes. But all the money that people made in Bitcoin is going to equal the money that people lose in Bitcoin, because Bitcoin in and of itself doesn’t create any value. The fact that there is, I don’t know, how many Bitcoins are there now, is there 19 million of them?
JH: Close to, yeah
PS: If you go back to when we only had one Bitcoin and now we have 19 million. We have 19 million nothings and we used to have one nothing. As far as what the world can actually do with those Bitcoins, we’re no better off. There’s been no wealth created, there’s no factories there’s no output there’s no commodity, no resource that we could use. Yes, people have gotten rich off of Bitcoin, because wealth has been transferred to them, by the people who bought the Bitcoin that they sold. Now the people that have Bitcoin fortunes on paper, until they sell they’ve got nothing. They’ve just got paper, they’ve got the potential to take somebody’s wealth if they can sell and somebody buys it. But we’re not better off. At the end of the day, the people who got in early and got out, they will have been the recipients of the wealth than the people who got in later and didn’t get out at the right time and wrote it down. But we’re not actually any better off because of all this, in fact we’re worse off because look at all of the energy that we wasted. Look at how expensive it was to solve these problems, to create these Bitcoin. What could we have done with those resources, if we didn’t squander it on nothing. We could have used it for something. So at the end of the day, it’s a huge net worth loss for the world this experiment and I think the sooner it ends, the better. And I think what’s ultimately potentially the biggest problem with Bitcoin is, I see Bitcoin’s failure to be used by governments as a proof that the free market doesn’t work. When Bitcoin crashes and people lose money the politicians are going to say, oh we told you so or we need more regulation. This is what happens when we have too much freedom, people do dumb things. We need governments to protect people from this and there’s gonna be lots of lawsuits and more government. Hopefully it doesn’t blow back into the gold industry, hopefully it doesn’t end up, oh people can’t buy gold either because maybe they’ll say, it’s just like Bitcoin and they try to put a lot more regulations on gold making it more expensive to buy and sell that. At the end of the day I think this is going to feed into the government and it’s going to achieve the exact opposite of what the Bitcoin people are hoping for. Instead of taking the power away from government, they’re going to help government usurp even more power.
JH: Do you think the government’s going to go around of national socialism not only in the US, Europe and so on, where they just start taxing assets in general and unrealised gains and try to get FIAT back that way and try to get value back into FIAT that way?
PS: That is certainly the trend in a lot of the western economies. Government has to get bigger and bigger and bigger to try to make good on the promises that it made to voters in the past that it can’t keep in the present. But national socialism I mean that’s pretty much it. I mean the whole world to an extent has adopted the policies of Mussolini.
JH: In what sense?
PS: The difference between fascism and communism, because communism and fascism are both forms of socialism. And so in communism the government just takes over everything outright, the government owns the means of production. There’s no private ownership. But government can’t run anything efficiently, so communism has been a complete disaster. Every time it’s been tried it’s an utter failure. Now what the fascists do is, they recognise if we leave the assets privately owned, the owners of those assets will be incentivised to run them a lot better than bureaucrats. We’re just going to take ownership through taxation and regulation and so that’s what the fascists do. They want to control a lot of these businesses by regulations and they really want to take ownership through taxation. Because if you have a government that’s getting 50 percent of the profits or 60 percent of the profits, that’s just like owning the business except they don’t have to do any of the work. And in fact most businesses, if you look at how much taxes they pay, not just the taxes that they pay on the business side, but all their workers who have to pay their own taxes and payroll taxes in America the US government makes more money from every business, than the owners of that business. So the US government basically owns the business without having to nationalise it. I mean fascism is really the economic system that most countries have today, it’s the form of socialism that we’ve adopted and people think that communism and fascism are opposites. They’re not, they’re very similar.
JH: I would have said that they’re opposites.
PS: Yeah, they’re two gangs trying to battle over the same turf. I mean here’s communism, fascism’s over here, I want to be over here, this is freedom this is liberty, limited government this is a constitutional republic. And as you go further in this direction you get to totalitarianism and fascism is here, it’s not radical right. It’s not like if you believe in too much freedom somehow you become a fascist. Fascism isn’t about freedom at all, it’s about empowering government, it’s about taking away freedom and I want to maximise freedom. But obviously you’re not free to harm other people, the freedom of your fist stops at my face. That’s what I want and that’s where government is supposed to be to protect our rights to protect our liberty. But government is not there to steal for us. They’re not there to take stuff from other people and give it to us. But unfortunately that’s what we have right now and yeah so your question is taxes keep going up, spending keeps going up but all this is going to end a disaster. The question is when this ends in collapse we have hyperinflation, when these whole welfare states implode what’s next? Where do we go? Are we going to go back to freedom and recognise the mistakes that we’ve made, it’s happened. Societies have done that. But it’s a difficult road and I’m hoping that what I’m doing now, is helping to lay a foundation to follow that path, by making sure that my information is out there and people will come back and say, yes Peter Schiff, he got this right, he understood this. Everybody else was talking about how great it is and he was warning about these problems. Sure he warned about them early because all warnings have got to be early but he warned early because he understood the problems early because he understands economics. And all these other guys that were just pounding the table for more money printing and said everything is great, they didn’t get it. And the politicians are on the wrong side of history, the central bankers are on the wrong side. And there’s enough information out there, hopefully that we could do the right thing and I think if enough people invest the way I’m recommending at least they won’t be broke, at least they’ll have some wealth to play a greater role in restructuring and being a positive impact in the future.
JH: What are the links and resources that I should link up, especially from you the two or three where you’re like these are the trump of points? Maybe think about the German speaking audience.
PS: Yeah, well I don’t have any German content.
JH: That’s fine, I assumed so, that’s why we’re doing all the translations.
PS: But I mean most Germans speak English, at least the younger ones. But yeah I mean my podcast is in English, that’s Schiff Radio or on YouTube. So that’s where I put out most of the information. I mean you can follow me on Twitter and Instagram and Facebook.
JH: I always found that you’re either native to Instagram or you’re native to Twitter, these are to me very opposite kind of platforms, from a spectrum. Which one are you better at?
PS: I just started Instagram last year, so I only have maybe 60.000 followers. I always thought it was more just for kids sharing images and things but I started getting into it, to try to reach a younger audience and try to get into that. But I’ve been doing Twitter a lot longer, that’s why I think I’m at 440.000 Twitter followers which is not that much in the scheme of things, when you look at some of these young kids these influencers and how many people follow them. But as far as people that are talking about economics and finance, it’s good and I expect to get more. I have about a similar number with YouTube – almost 450 000 YouTube subscribers. A lot of people on YouTube listen to my podcast and I have a lot of people who listen to it on iTunes and you can go to Schiff Radio as well. But a lot more people listen to my Podcast on YouTube than would typically be the case of podcasters and I think it’s because I started on YouTube. I started with a YouTube channel before I did the podcast and so I kind of cultivated a YouTube audience. But the other way to reach me is through my company. So if you’re in Singapore or Germany or anywhere you go to my website epacfunds.com and that’s the website for my asset management company, based here in Puerto Rico. And I work with clients all around the world to help build them custom portfolios of the types of stocks in the countries that are earning the currencies that I think are going to represent real opportunities, and that are going to be on the receiving end of this transfer. A massive transfer of wealth and I want to be on the receiving end of that transfer. I want to own the assets that are going to be gaining in value, the currencies that are going to be gaining purchasing power. And a lot of the resources that are going to be in heavy demand in the new economy where you have the birth of the emerging market consumer, who needs so many things. A lot of Americans have too much stuff. We have two cars, three cars and you have a lot of people don’t even have one car, they’re on a bicycle. And so if Americans want to buy a car, they going to recycle one. If you’re in China you’re buying your first car, where’s all the steel going to come from? I mean there’s a lot of raw materials that are going to be used to kind of reward a lot of the people in that part of the world for all the hard work and all the savings that they’ve done. I mean there’s a big payoff at the end of that. And so I just want to own the businesses and the resources that are going to benefit from that and still I want to be hopeful about the long-term health of America. I mean I’m still an American, I live here I’m very patriotic about the country, I don’t like what’s happened to it. I don’t like what it’s become, but I really like what it was and I’d like to return America to its former glory. That nothing would make me happier than to see that happen and so America could lead the world again in economic freedom and limited government and sound money. I mean that’s all possible but right now we’re leading the world in a very different direction and I think the sooner the world stops following that example the better.
JH: Peter, last question, I don’t know if you’ve made that Tweet already or if it’s a Tweet you would put up. Let’s say Twitter shuts down, one Tweet still standing, what does this Tweet look like? What would this Tweet say? What would be the statement on there?
PS: I don’t know. There’s no more Twitter, Twitter’s gone. I don’t know my Tweet.
JH: Yeah so last Tweet standing, what’s the last Tweet?
PS: I guess my last Tweet, maybe it’ll be “I told you so”.
JH: Fair enough, that’s a good one. Okay great. Peter, thanks so much. Yeah maybe we get a second round at some point, I would love to talk about the rest of the world, not so much on the Bitcoin gold debate, on many other things, but that would be for a later round. I really appreciate all the energy and time and effort that you put in.
PS: I wonder how much higher Bitcoin will be the next time we talk. Because that’s the path of the least resistance, right now.
JH: We were at 58.000 today. Let’s see, cool. I appreciate it. All the best, have a nice day, thanks so much, stay safe and tell Spencer I said hi. Cool. Thanks Peter, bye.
Links & Resources
Schiff Radio: https://www.schiffradio.com/
Epac Funds: epacfunds.com