Peter Schiff on Gold’s Dominance Over the S&P and the Plot to Stop You From Noticing

In this podcast episode, Peter Schiff discusses his personal history with gold, the factors driving gold's enduring value compared to stocks and the U.S. dollar, and the growing trend among central banks moving away from the dollar toward gold. The conversation explores the mechanics and consequences of inflation, the flaws in government economic statistics, the role of monetary policy in asset bubbles, and the contrast between gold and cryptocurrencies like Bitcoin. Schiff also critiques government intervention in housing, education, and healthcare markets, and addresses the challenges and opportunities presented by tokenized gold in the digital age.

Early Gold Buying Experience

Peter Schiff shares his first experience buying physical gold as a 13-year-old during his bar mitzvah in the 1970s amid the original gold bull market. He explains how he bought gold with his bar mitzvah money and sold it near the peak in 1980 to purchase his first car. He notes that after that peak, gold entered a 20-year bear market, bottoming out around 1999-2000, which is roughly when Schiff began recommending gold investments to his clients.

Gold versus the Stock Market

Schiff highlights that when stock market indices like the Dow Jones or the S&P 500 are priced in gold rather than dollars, they have significantly underperformed over the past two decades. Although nominal stock prices have risen sharply in dollar terms, the decline in the dollar's purchasing power masks the real value loss. He explains that the stock market gains are largely an illusion caused by inflation, not genuine growth.

The Dollar, Inflation, and the Gold Standard

The history and implications of the U.S. dollar's detachment from the gold standard are a major focus. Schiff explains how, until 1971, the U.S. dollar was redeemable in gold, providing stability and limiting inflation. After the dollar went off gold, the government began unchecked money printing, resulting in chronic inflation and currency devaluation. He points out that inflation is the expansion of money and credit, not simply rising prices, and that government redefinition of inflation as price increases creates confusion and misdirects blame.

Current Dollar Reserve Status and Its Risks

Schiff discusses how the U.S. dollar's status as the world's reserve currency has allowed America to import goods and live beyond its means by printing money that other countries accept. However, this system is under threat as foreign governments, wary of U.S. sanction risks and inflationary policies, are divesting their dollar reserves and buying gold instead. He views this as a potential tipping point leading to a major crisis as the dollar's global dominance diminishes.

The Inflationary Impact of COVID-19 Policies

During the COVID-19 pandemic, Schiff critiques the government's inflationary fiscal and monetary policies, including stimulus checks, enhanced unemployment benefits, and the Federal Reserve's balance sheet expansion. He predicted massive inflation resulting from money being printed while economic production shut down, leading to soaring consumer prices with a lag of several months.

Government Manipulation of Economic Statistics

Schiff explains how the Consumer Price Index (CPI) and unemployment rates have been manipulated over the decades to understate true inflation and unemployment. He points out changes like substitution and hedonic adjustments in CPI calculations and exclusion of discouraged workers from unemployment figures. These adjustments distort public perception and political accountability.

Deficits, Debt, and the Federal Reserve's Role

Schiff critiques large government deficits and debt accumulation, arguing that low interest rates maintained by the Federal Reserve have enabled this unsustainable borrowing. He warns that rising interest rates will sharply increase debt servicing costs, potentially consuming more than government revenues. The Fed's recent U-turn to quantitative easing, or money printing, signals continued inflationary pressure rather than resolution.

Housing Market Bubbles and Affordability Issues

He discusses how artificially low interest rates and government-backed mortgage guarantees have inflated housing prices beyond affordability. Now, with mortgage rates rising from historic lows, homebuyers face overpriced homes leading to falling real estate values. At the same time, many existing homeowners with low-rate mortgages are reluctant to sell, and labor shortages and tariffs further exacerbate construction costs, limiting new home supply.

Government Involvement in Education and Healthcare

Schiff critiques government interventions in education and healthcare markets, attributing soaring college tuition and healthcare costs to distorted incentives created by government-backed loans and insurance systems. He argues that government guarantees led to unchecked borrowing and price inflation in education, while mandated coverage policies and employer-based health insurance distorted healthcare economics, increasing costs and inefficiencies.

Cryptocurrency versus Gold

The discussion compares cryptocurrencies, particularly Bitcoin, to gold. Schiff views Bitcoin as speculative rather than a real store of value, lacking intrinsic utility beyond its appeal as a potential investment vehicle. He notes that while Bitcoin mimics some monetary properties digitally, it does not have inherent material value or widespread industrial use like gold. Schiff also contends that central banks and sovereign wealth funds are reluctant to hold Bitcoin as reserves.

The Importance of Gold's Intrinsic and Historical Value

Schiff emphasizes gold's unique physical properties—durability, divisibility, portability—and its long-standing role as a universal store of value and medium of exchange across civilizations. He highlights gold's industrial uses in technology, medicine, and aerospace and suggests that its value transcends mere symbolism or tradition, making it an enduring financial asset.

The Declining Faith in Fiat Currency and the Future of Money

The conversation clarifies the difference between money and currency, defining currency as a claim or substitute backed by money (such as gold). Schiff explains that current fiat currencies, including the dollar, rely on government decree and confidence, which is eroding. He doubts Bitcoin can replace the dollar as a global reserve because it lacks tangible backing and broad institutional acceptance.

Tokenized Gold and Blockchain Applications

Schiff discusses innovations like blockchain-based tokenized gold, which can combine the intrinsic value of physical gold with the convenience and transferability of digital assets. Tokenized gold allows instant, peer-to-peer transactions backed by physical bullion stored in secure vaults. Schiff believes tokenized gold can modernize gold's role as money and potentially facilitate commerce with the stability of a real asset.

Distrust in Financial Media and Gold Industry Practices

He critiques mainstream financial media for rarely promoting gold and frequently pushing crypto, influenced by advertising incentives. Schiff also exposes malpractice in the gold retail market, where many buyers are overcharged through opaque premium structures and misrepresented collectible coins. He explains that low consumer volume forced the industry to rely on high margins, often at customer expense.

Inflation's Impact on Asset Prices

Schiff explains how the inflation created by Federal Reserve policies primarily inflates asset prices like stocks and real estate rather than consumer goods, misleading many into believing they are getting wealthier. True value creation is masked by this distortion. He stresses the importance of evaluating investments in real terms, such as pricing assets in gold rather than inflated dollars.

Criticism of Government Economic Policies and Recommendations

Throughout the discussion, Schiff voices skepticism about government interventions that distort free market mechanisms. He warns that policy failures in fiscal spending, monetary easing, regulatory mandates, and subsidies across sectors impede economic growth, increase prices, and undermine savings while fueling speculation and bubbles. He advocates for a return to sound money principles and greater personal financial responsibility.