JRE #1508 – Peter Schiff

15-Jul-20

This podcast dives into the world of finance and economics with Peter Schiff, a renowned investment broker and financial commentator. The conversation tackles a wide range of topics, from the US economic outlook to the pitfalls of government intervention, offering a critical lens on current events and future predictions. The podcast is punctuated by Schiff’s blunt and unfiltered insights, sparking debate and potentially leaving listeners with a new understanding of the economic landscape.

Major Topics

1. Biden’s Presidential Prospects

   1. Schiff believes Biden has a strong likelihood of winning the 2020 election due to his perceived moderate approach.
   2. He argues Trump’s failure to fulfill campaign promises, particularly regarding deficit reduction and “draining the swamp,” weakens his re-election chances.
   3. The podcast was recorded in July 2020, highlighting the pre-election context.
   4. Schiff’s stance on Trump’s potential for change and Biden’s perceived status quo positions are highlighted.

2. The Pre-COVID Economic Bubble

   1. Schiff claims that the US economy was already facing a deflating bubble before COVID-19 hit, due to artificially low interest rates.
   2. He argues that the Federal Reserve’s actions under both Obama and Trump fueled this bubble, primarily to maintain positive market appearances.
   3. He points out that Trump’s criticism of Janet Yellen’s policies under Obama was justified, but he ultimately continued similar policies.
   4. Schiff highlights the dangers of relying on cheap money and the need for a real economic recovery, not just inflating bubbles.

3. COVID-19 Stimulus and its Economic Impact

   1. Schiff criticizes the government’s response to COVID-19, arguing that bailouts and stimulus packages will exacerbate existing economic problems.
   2. He draws parallels to World War 2, highlighting the stark differences in how Americans responded to a crisis then versus now.
   3. He emphasizes that the government does not have its own money, and the stimulus measures will ultimately lead to inflation and reduce purchasing power.
   4. Schiff argues that allowing states to manage their own policies and financial burdens would encourage a more responsible approach.

4. The Impact of the Stimulus on Commercial Real Estate

   1. Schiff predicts that the commercial real estate market will face a significant downturn, exacerbated by the pandemic.
   2. He explains the domino effect of tenant defaults leading to landlord defaults and ultimately impacting mortgage holders.
   3. He emphasizes the role of artificially low interest rates in fueling this bubble, making the eventual collapse more disruptive.
   4. He argues that the current situation highlights the need to allow market forces to naturally correct imbalances rather than trying to artificially sustain bubbles.

5. The Role of Hedge Funds in the Stimulus

   1. Schiff reveals that hedge funds and asset management companies received significant PPP loans, despite not experiencing revenue losses due to COVID-19.
   2. He criticizes the lack of scrutiny in the program, arguing that it created opportunities for fraud and unfair distribution of funds.
   3. He explains how these firms actually benefited from the Federal Reserve’s actions, leading to inflated asset prices and increased management fees.
   4. Schiff argues that this highlights the dangers of government programs designed to help businesses, as they often end up benefiting the wealthiest players.

6. The Consequences of Inflated Asset Prices

   1. Schiff argues that the current economic situation is unsustainable, with artificially inflated asset prices due to excessive money printing.
   2. He predicts that the dollar will eventually crash, leading to hyperinflation and an inability to import goods.
   3. He emphasizes the importance of understanding that the government cannot create real purchasing power, only manipulate the supply of money.
   4. Schiff highlights the consequences for consumers and businesses, warning of potential shortages and a significant decline in the standard of living.

7. The Need for Government Spending Cuts

   1. Schiff advocates for significant government spending cuts, arguing that government spending is a drag on the economy.
   2. He highlights the inefficiencies and waste associated with government programs, arguing that they often benefit bureaucracy rather than the intended recipients.
   3. He points to the historical evidence of declining poverty rates before government intervention, highlighting the power of free market capitalism in lifting people out of poverty.
   4. Schiff proposes a shift toward private charity and voluntary giving, arguing that it is more efficient and effective than government-led programs.

8. The Dangers of Government Intervention in the Free Market

   1. Schiff criticizes the government’s role in bailing out companies that should have failed, arguing that it distorts the natural market forces.
   2. He emphasizes the importance of failure as a necessary part of capitalism, allowing resources to be reallocated to more productive ventures.
   3. He argues that government intervention often creates moral hazards, encouraging risky behavior and a reliance on government support.
   4. Schiff highlights the dangers of government power, arguing that it can be used to benefit special interests at the expense of the general public.

9. The Minimum Wage Debate

   1. Schiff argues against the existence of a minimum wage, claiming that it primarily hurts low-skilled workers, particularly young people and minorities.
   2. He explains that businesses will adapt to minimum wage laws by hiring fewer workers, automating tasks, outsourcing, or raising prices, ultimately leading to job losses.
   3. He points to historical data suggesting that black teenage unemployment rates were lower before the minimum wage was implemented, highlighting its disproportionate impact.
   4. Schiff proposes a free market approach, where individuals are free to accept employment opportunities based on their skills and productivity.

10. The Government’s Role in Education

    1. Schiff criticizes government-run education, arguing that it is often inefficient and provides a subpar education.
    2. He advocates for a free market approach to education, with vouchers and private schools competing for students and funding.
    3. He highlights the dangers of government subsidies in education, leading to inflated tuition costs and a devaluation of degrees.
    4. Schiff emphasizes the importance of allowing individuals to pursue educational opportunities that best suit their needs and abilities.

11. The Influence of Socialism in Academia

    1. Schiff argues that a significant portion of academia, particularly in fields like economics and political science, promotes socialist ideologies.
    2. He believes that universities often hire professors with government experience, perpetuating a cycle of big government and Keynesian economics.
    3. He expresses concern about the lack of representation for free market economists and the potential for biased education.
    4. Schiff highlights the role of academia in shaping the public’s perception of economics and the potential for ideological indoctrination.

12. The Moral and Ethical Implications of Socialism

    1. Schiff argues that socialism, despite its perceived compassion, is ultimately immoral and leads to theft and impoverishment.
    2. He contrasts socialism with capitalism, highlighting the ethical implications of voluntary exchange and the creation of wealth through productive means.
    3. He points to historical examples of socialist regimes leading to widespread poverty and violence.
    4. Schiff emphasizes the importance of individual responsibility and the dangers of relying on government handouts.

13. The Future of the US Economy

    1. Schiff paints a grim picture of the US economic future, predicting a significant crash and hyperinflation.
    2. He believes that the current economic situation is unsustainable due to excessive debt and a reliance on the Federal Reserve to print money.
    3. He emphasizes the importance of diversifying investments and protecting wealth from inflation.
    4. Schiff calls for a return to free market capitalism, arguing that it is the only solution to the current economic challenges.

14. The Role of Government in Agriculture

    1. Schiff criticizes the government’s role in agriculture, arguing that subsidies artificially inflate food prices and distort market forces.
    2. He exposes the rationale behind farm subsidies, arguing that they are often presented as a way to protect farmers but actually serve to benefit special interests.
    3. Schiff argues that the government’s interference in agriculture creates inefficiencies and makes food less affordable for consumers.
    4. He emphasizes the importance of allowing the free market to regulate the agricultural industry, promoting competition and efficiency.

5 Memorable Quotes

1. “The only thing that spreads faster than the coronavirus is ignorance, about economics, about finance.”
2. “Trump never really campaigned on cutting spending. He didn’t wanna talk about that because he didn’t wanna alienate any voters. So he just talked about cutting taxes, and he did, you know, officially cut taxes. But he actually raised taxes.”
3. “The government doesn’t have any money. Right? The government only has money it takes from the people one way or another.”
4. “The government is great at crippling you and then handing you a crutch and saying, you see without me you couldn’t walk.”
5. “Government makes people poor. It’s free market capitalism that makes them wealthier.”