Schiff on Golf Cart Chronicles: The Dollar Is Starting a Tough Decade

Last week, Peter joined Matt on Golf Cart Chronicles to warn listeners that the decline of the dollar and a targeted hit on the precious metals market signal big shifts ahead. He argues the recent market actions were not random, predicts a long period of weak dollar performance and higher interest rates, and urges advisors and investors to rethink exposure to “fake assets” like speculative cryptocurrencies.  

He begins by calling the recent decline in the metals market an intentional political intervention, not an accident, and explains why policymakers felt pressure to act:

I don’t think it was just a random event. I think it was an orchestrated attack. I think the Trump administration was rightly concerned about the message that was being sent in the precious metals market when gold was, you know, over 5,500, silver was 120 dollars an ounce. This was a massive vote of no confidence in the Trump administration, the Fed, in the US dollar and the economy and our ability to manage our finances, and I think they needed to do something to kind of diffuse that bomb before it exploded.

From there he pivots to investment strategy: he insists U.S. investors should be shifting away from dollar-denominated risk and into defensive positions because the world is moving out of the dollar and U.S. assets:

They should be very defensive with respect to their US portfolios because the world is moving away from the dollar, moving out of US assets. Prior to last year US investors had a great ride; in fact, foreign investors had a great ride in the US — our markets for a decade we dominated, we had the greatest returns, we had a strong dollar and all that is about to change. We’re gonna have a weak dollar, we’re gonna have US markets that underperform foreign markets, underperform emerging markets, and that continue to underperform gold.

He ties the coming economic decade to historical precedent: the 1970s went bad after the U.S. left the gold standard, and Peter says a similar global shift away from the dollar will have comparable consequences:

The 70s — what kicked off the 70s was the US going off the gold standard. That was a big problem and the dollar, you know, got marked down; the dollar lost two-thirds of its value, gold went from 35 to 850 and silver basically went from a dollar to $50. The oil went from three dollars to forty dollars, right? But this was all because we devalued the currency by leaving the gold standard. What’s gonna precipitate this bad decade is the world going off the dollar standard.

He paints a stark picture of what losing reserve currency status looks like for everyday Americans: less goods, higher prices, and a standard of living that falls because we don’t produce enough and foreign creditors stop financing our deficits:

They’re not gonna be lending us all this money. And so that means a massive decline in the American standard of living because the goods available for sale are gonna collapse. We’re gonna have empty shelves with sky-high prices. … There just won’t be a lot of stuff there because we don’t make any of this stuff, and interest rates are gonna be a lot higher because we don’t have any savings.

Next he reflects on his track record of opposing bubbles and stresses the duty advisors have to think independently, not follow Wall Street groupthink:

You know, I’ve been going against the conventional wisdom pretty much my entire career. During the dot-com bubble I was very outspoken about that bubble and what would happen when it popped, and even more so with the housing bubble and what would end the financial crisis that was coming when that was gonna pop. … I think it’s important for advisors to really get ahead of the curve, to really differentiate themselves from the masses and the groupthink and present clients with an alternative.

Finally, he takes a hard line on cryptocurrencies and Bitcoin, calling them “fake assets” and warning fiduciaries about legal exposure if they recommend speculative positions to clients:

It’s gonna be a tough decade if you stay in these fake assets. So you definitely don’t want to have any exposure for your clients to Bitcoin or crypto, especially if you don’t want to get sued. Yeah, because I think there’s gonna be a lot of litigation when the dust settles because people are gonna lose everything and in America when you lose a lot of money, you know, the lawyers always look for somebody to blame, right?