Peter Schiff on Frying Pans, Fires and Fed Policy

This interview (filmed before the recent banking crisis) starts with a decade-and-a-half-old clip of Peter Schiff's Henry Hazlitt Memorial Lecture; the subject is the US national debt. Despite the potentially dry subject matter, Schiff has the audience in stitches. The comedy comes from truth revealed. The truth in this case is that the US will have to repudiate its debt, either by outright default or by printing money, thereby inflating the currency and thus devaluing the debt burden. There is no way the debt can ever be repaid.

And today, nothing has changed, apart from the headline debt figure, now standing at nearly 32 trillion dollars. Another debate over the politics of raising the debt ceiling is underway in the US Congress. Peter Schiff points out the reality: that the US will borrow more and more until it reaches the point where no-one will lend any more—the point where the market realises it is dealing with a Ponzi scheme.

Schiff also analyses the differences between the US and Japan, a nation with even greater levels of government debt. He concludes that the real position of the US is actually worse than Japan's, due to the amount of US debt held by foreigners and to America's huge trade deficit.

The interview covers the issue of pensions—now an intergenerational Ponzi scheme, with pension contributions being treated as part of general tax revenue and with people who contribute to the social security system today relying on future taxpayers, not on any sort of retained value. The position of those future taxpayers, their ability to pay and the effect of taxation on their lives is, of course, presently unknown. But as time goes on, and the debt burden increases, we are seeing more and more people unable to establish themselves in a home with a family. The intergenerational theft of the future of the young to pay for the retirement ease of the elderly cannot be politically ignored forever.

In their discussion, David Scott and Peter Schiff anticipated the Spring 2023 banking crisis. They note the willingness of central banks to pivot their policies to save financial institutions. They also discuss the recent Liz Truss failure—an inflationary policy of cuts to taxes without corresponding spending cuts—and consider the need for reductions in government spending.

Taking a broad overview, Schiff observes that it is US financial asset values that support the dollar. He concludes that, when demand for those assets falls, the value of the dollar must fall in lockstep. He advises those in the UK that divesting from British assets to American assets is leaping from the frying pan into the fire.

Will the solution be to go to war? Peter Schiff responds that war solves nothing, and especially it does not solve inflation. Rather, it diverts production from those items people need, to produce munitions and tanks and to pay soldiers instead. Schiff highlights that the US cannot afford peace, let alone war. But he does concede that war is a distraction, and that politicians may seek such a distraction despite the adverse effects.

Peter Schiff can be found on YouTube, SchiffGold News and Euro Pacific Asset Management.