Peter Schiff: Trump Kick-Starts Dedollarization

On his Thursday podcast, Peter lays out why the market that really matters right now isn’t the Dow or the NASDAQ but precious metals and the stocks that mine them. He argues that institutional money is quietly rotating into gold and silver miners because central bank policies and geopolitical shifts, like threats of taking over Greenland, are undermining the dollar’s reserve role. 

He starts by pointing out where the real action in the market was on Thursday, and why it matters more to long-term investors than headline indexes do:

And I’m not really talking about the Dow Jones or the NASDAQ because what’s going on there I think is really irrelevant to the bigger picture, which is what’s playing out in precious metals, in the dollar, and probably more significantly for my clients and me personally in gold and silver mining stocks. Because today I think intraday I really saw some major institutional flows coming in across the board into these mining stocks.

Peter ties the spike in miner flows to a single political event, arguing it served as a catalyst for short-term moves and for a broader reassessment of risk:

But the catalyst was Donald Trump’s speech at Davos yesterday and his announcement later in the day that followed that speech. … But I think the bigger speech on the world stage was the one that happened yesterday at Davos. Now, the biggest news that initially came out of that speech was that Donald Trump was not going to invade Greenland. He wasn’t going to take it by force, which is what he had been stating he was going to do.

He notes how markets reacted almost instantly to the tone and messaging coming out of Davos, with stocks rallying and metals easing—evidence, he says, of how political confidence still drives appetite for risk:

As soon as he said that he wasn’t going to take Greenland by force, the markets breathed a sigh of relief. You saw the stock market, the Dow, which was negative, rallied. And the metals came off. And what Donald Trump said was that the U.S. still needs Greenland. We need to own Greenland.

Peter criticizes the economic bullying he hears from the podium, arguing it could accelerate other countries’ moves to reduce reliance on the dollar:

Because, you know, anybody who actually watched that speech and watched the president, right, basically tell the whole world that they’re nothing without America. America is everything and the world is nothing. That without America, the world doesn’t even work– that countries can’t even survive. I mean, Trump talked about the fact that he could bankrupt other countries. He said, you know, I thought about maybe bankrupting Switzerland, you know, by jacking up the tariffs and making them really high.

To make the point vivid, he uses an analogy about uneven trade relationships to explain why other nations might stop accepting the dollar and instead build reserves in something that can’t be debased by U.S. monetary policy:

And so all day long, all these Asians are out there hunting and fishing and farming and gathering while the American is lying on the beach working on his tan. And then at the end of the day, they all get together and they prepare this huge meal for the American to eat. And then, you know, the American eats, but he realizes that the Asians have to eat something because he needs them to go out tomorrow and prepare another meal for him. … The best thing the Asians can do is kick that fat American’s ass right off that island.

He closes by warning that if countries lose faith in the dollar, they will replace dollar reserves with assets that can’t be inflated away—chief among them gold—weakening America’s ability to run persistent trade deficits and forcing a realignment of global power:

So the world is going to move away from the dollar. And a big part of that is buying gold, replacing U.S. dollars reserves with gold. And once gold is the reserve, nobody needs dollars. You don’t need dollars to buy our products because we have huge trade deficits. And the world is going to take America down several pegs.