JRE #1002 - Peter Schiff

8/23/2017

#1002 – Peter Schiff

Peter Schiff, an American businessman and financial commentator, joins Joe Rogan to discuss his move to Puerto Rico, the failures of socialism, the negative impact of minimum wage, the Jones Act, and his bullish outlook on gold as a hedge against an impending dollar crisis.

1. Puerto Rico: The Tax Haven with a Socialist Past

Schiff moved his asset management firm to Puerto Rico in 2013, attracted by Act 20 and Act 22, which offer significant tax breaks for individuals and businesses.
He describes Puerto Rico as a poster child for socialist failures, blaming its economic struggles on excessive government spending and borrowing.
Schiff believes the island’s economic future depends on attracting entrepreneurs and businesses, not becoming a US state, which he argues would lead to even higher taxes and welfare dependency.
He contrasts the current low-tax environment with the potential for sky-high taxes if Puerto Rico joins the US, warning of a “disaster” for residents.

2. The Minimum Wage: A “Stupidest Law” Destroying Opportunities

Schiff argues vehemently against any form of minimum wage, calling it “the stupidest law that anybody has ever conceived.”
He asserts that minimum wage hurts the very people it intends to help, limiting their job options and preventing them from gaining valuable skills in entry-level positions.
Schiff cites the example of American Samoa, where the imposition of the minimum wage led to the closure of tuna factories and a significant increase in unemployment.
He believes that the minimum wage should be abolished, allowing a free market to determine wages based on individual productivity, leading to greater competition and higher overall wages.

3. The Jones Act: A Maritime Union’s Monopoly Hobbling Puerto Rico

The Jones Act, a law requiring all goods transported to US territories to be shipped on US-flagged vessels with US crews, is a major obstacle to economic growth in Puerto Rico, according to Schiff.
It inflates shipping costs, making Puerto Rico’s tourism less competitive with other Caribbean islands that can receive goods at lower prices.
Schiff criticizes the Jones Act as a protectionist measure designed to benefit the maritime unions, who lobby for its continuation.
He advocates for its repeal as a way to unleash free markets and lower the cost of living in Puerto Rico, particularly for its poorer residents.

4. The US Dollar: On the Brink of a Collapse Driven by Government Intervention

Schiff predicts a currency crisis in the US, fueled by unsustainable debt levels, excessive money printing by the Federal Reserve, and the failure to raise interest rates.
He believes the next economic downturn will be far worse than the 2008 financial crisis, leading to a significant drop in the dollar’s value and a surge in inflation.
Schiff advises investors to diversify their portfolios away from US dollar assets, seeking refuge in gold, Singapore, Switzerland, and other countries with strong economies.
He warns that the Federal Reserve’s zero-interest rate policy and quantitative easing are creating a “monetary roach motel” where rates cannot normalize without causing a catastrophic collapse.

5. The Appeal of Socialism: Ignorance, Envy, and the Promise of “Free Stuff”

Schiff attributes the appeal of socialism to a combination of ignorance about its failures and the seductive promise of “free stuff,” often fueled by envy and resentment towards those who have accumulated wealth through free market competition.
He contrasts the economic success of countries with minimal socialist policies, like Singapore, with the failures of socialist experiments in the Soviet Union, Cuba, and Venezuela.
Schiff argues that government redistribution of wealth ultimately harms everyone by disincentivizing productivity and creating a welfare state that encourages dependence and discourages work.
He emphasizes that “free stuff” is never truly free, as it must be taken from someone else, ultimately leading to a decrease in overall wealth and prosperity.

6. Healthcare: Government Intervention Drives Up Costs and Limits Choice

Schiff blames government intervention in healthcare for the spiraling costs and inefficiencies that plague the US system.
He argues that a free market could deliver healthcare more efficiently and affordably than government-run programs, pointing to the pre-Obamacare era when healthcare costs were lower and readily accessible.
Schiff advocates for separating health insurance from employment, allowing individuals to purchase policies that align with their needs and risk tolerance, rather than relying on employer-provided plans that often cover unnecessary services.
He criticizes the ban on preexisting conditions in Obamacare, arguing that it creates an incentive for people to wait until they are sick to purchase insurance, driving up costs for everyone.

7. The Role of Government: Power, Corruption, and the Enticement of “Special Perks”

Schiff sees government as the root cause of economic problems, arguing that its power to regulate, tax, and bail out corporations creates moral hazards and distorts the free market.
He criticizes the tendency of politicians to prioritize their own power and perks over the needs of their constituents, often catering to special interests and those who contribute to their campaigns.
Schiff believes that reducing government power is essential to unleashing economic freedom and creating a more prosperous society.
He contrasts the potential benefits of a free market, where businesses strive to win customers by offering better products and services, with the negative impact of government intervention, which often leads to higher prices, less choice, and stifled innovation.

8. The 2008 Financial Crisis: Government Intervention Was the Culprit, Not Capitalism

Schiff maintains that the 2008 financial crisis was not a failure of capitalism, but rather a result of government policies, including the Federal Reserve’s easy money policies and Fannie Mae and Freddie Mac’s encouragement of risky mortgages.
He criticizes the bailouts of big banks as a moral hazard, rewarding institutions that had taken on excessive risk and further distorting the market.
Schiff believes that allowing banks to fail would have been a painful but necessary step toward a healthier financial system.
He emphasizes that the government’s intervention, driven by short-term political considerations, exacerbated the underlying problems and resulted in a weak and sluggish economic recovery.

9. The “Booming Economy”: A Façade of Jobless Recovery and a Stock Market Bubble

Schiff refutes President Trump’s claims of a booming economy, pointing to a jobless recovery characterized by low-paying, part-time jobs and an increase in labor force participation by older workers who cannot afford to retire.
He considers the low unemployment rate a misleading metric, as it does not account for those who have given up looking for work and are no longer counted as unemployed.
Schiff views the stock market as a bubble fueled by the Federal Reserve’s easy money policies and Trump’s tax cuts, which he believes are unsustainable and will ultimately lead to a market correction.
He criticizes Trump’s hypocrisy, pointing to his pre-election criticism of the Obama administration’s economic policies and his current celebration of the same economic indicators he previously denounced.

10. Anti-Discrimination Laws: Unintended Consequences and a Slippery Slope

Schiff argues that anti-discrimination laws, while intended to protect minority groups, have actually had the unintended consequence of increasing discrimination, particularly in the hiring process.
He believes that employers, fearing lawsuits, are more hesitant to hire certain groups, creating a chilling effect that disproportionately affects minorities and women.
Schiff advocates for a free market approach, arguing that racism and sexism will be punished by the market, as businesses that discriminate based on race or gender will lose customers and profits.
He views government intervention as an attempt to substitute laws and regulations for personal responsibility, ultimately leading to more lawsuits, less choice, and a culture of victimhood.

11. The Google Memo: A Case for Free Speech and the Importance of Objective Assessment

Schiff supports Google’s right to fire James Damore for expressing his controversial views on gender differences in the tech industry, but criticizes the firing as a violation of free speech and a symptom of a society that increasingly values political correctness over truth.
He believes Damore’s memo, while potentially offensive to some, raised legitimate concerns about the potential for affirmative action policies to negatively impact the quality of hiring and workplace culture.
Schiff argues that denying the existence of inherent gender differences is detrimental to both men and women, preventing individuals from making informed choices about their careers and lives.
He emphasizes the importance of objectivity in assessing individual talent and performance, regardless of gender, race, or sexual orientation.

12. The Gender Pay Gap: A Myth Fueled by Political Expediency

Schiff refutes the notion of a gender pay gap, arguing that it is a myth used by politicians to gain votes by appealing to women who are promised government intervention to force employers to pay them more.
He points out that when comparing men and women with similar backgrounds, education, and career trajectories, there is no significant difference in their earnings.
Schiff attributes the apparent pay gap to the choices women often make throughout their careers, prioritizing family and children over career advancement, leading to lower overall earnings.
He emphasizes that a free market rewards those who are most productive and ambitious, regardless of gender, and that women who work as hard as men will earn the same.

13. Education: Government Intervention Creates Expensive, Ineffective Monopolies

Schiff believes that government intervention in education has led to a system of expensive, inefficient monopolies that stifle innovation and leave students with excessive debt.
He argues that a free market could provide education more efficiently and affordably, with entrepreneurs competing to offer the best value for students.
Schiff criticizes government-guaranteed student loans as a major driver of rising college tuition costs, creating a false sense of affordability that encourages students to take on unsustainable debt.
He emphasizes the availability of affordable alternatives to traditional college education, including online courses, books, and self-learning resources, allowing individuals to acquire valuable knowledge without incurring massive debt.

14. Bitcoin and Cryptocurrencies: A “Fool’s Gold” with No Intrinsic Value

Schiff remains skeptical of Bitcoin and other cryptocurrencies, believing they are a speculative bubble with no intrinsic value and limited potential to become a viable medium of exchange.
He argues that Bitcoin lacks the key properties of money, including stability, scarcity, and widespread acceptance, and that its value is solely based on the willingness of others to pay a higher price, creating a Ponzi scheme dynamic.
Schiff points out that the blockchain technology underlying Bitcoin, while potentially innovative, does not guarantee the value of the cryptocurrency itself.
He believes that gold, thanks to its inherent value and the ease of digital transactions through platforms like GoldMoney.com, represents a more viable alternative to both fiat currencies and cryptocurrencies.

15. The Return of Gold: Economic Freedom and a Free Market Solution

Schiff is a staunch advocate for a return to a gold standard, believing that it offers the best protection against government manipulation of money and inflation.
He highlights the historical success of the gold standard in promoting economic growth and prosperity, contrasting it with the current system of fiat currencies, which he considers unsustainable and prone to excessive spending and inflation.
Schiff believes that gold money, which allows individuals to own physical gold stored in secure vaults and spend it using debit cards, represents a viable free market alternative to the current banking system.
He encourages listeners to consider gold as a store of value and a medium of exchange, voting with their feet and rejecting the fiat currency system.

5 Memorable Quotes:

“Puerto Rico was in trouble today. Despite the fact that you don’t have to pay federal income taxes there.” – Schiff highlights the irony of Puerto Rico’s economic woes despite the tax advantages it offers.
“It is the stupidest law that anybody has ever conceived, it should be obliterated.” – Schiff’s forceful condemnation of the minimum wage reflects his passionate belief in free markets.
“The real enemy is government and the power that government has. We have to take that power away from government.” – Schiff’s libertarian philosophy emphasizes the dangers of excessive government power.
“The dollar has been rising these past few years. Because everybody thought, oh, the Fed’s gonna normalize interest rates, the Fed’s gonna shrink the balance sheet when none of this stuff happens.” – Schiff highlights the unrealistic expectations surrounding the Federal Reserve’s ability to manage the economy.
“Gold is economic freedom. Right? I mean, that’s like even Allen Greenspan said it. That was the title of his essay, ‘Gold and Economic Freedom’.” – Schiff underscores the importance of gold as a symbol of economic freedom and a hedge against government overreach.

JRE #1002 – Peter Schiff