Schiff on Milk Road: Gold, Not Bitcoin, Will Protect You

In his recent interview on the Milk Road Show, Peter walks through why Bitcoin looks weaker when priced in gold, how insiders and political hype have distorted crypto markets, and why the Federal Reserve’s moves have not been nearly restrictive enough. He closes by urging listeners to own gold and other commodity exposures as the economy drifts toward a harsher form of stagflation.

He opens by reframing the Bitcoin story around a true monetary yardstick — gold — and says that once you stop idolizing price-in-dollars you see a much different trend in crypto markets:

But you know, Bitcoin really peaked out in November of 2021 priced in gold. And that’s how I like to look at it, especially since Bitcoin, you know, is being marketed as a digital version of gold, even though I take a lot of issue with that comparison. But that’s how it’s marketed. That’s the meme associated with Bitcoin. And so if you price Bitcoin in gold, it’s actually in a bear market.

Peter follows that up by alleging the crypto boom was amplified by insider behavior and political favoritism, and he suggests much of the upside was engineered so insiders could exit into retail demand:

A lot of the big insiders, I think, have been unloading their tokens. A lot of them, I think, gave a lot of money to politicians, Donald Trump, in order to get a lot of hype that would enable them to sell even more of their tokens. In fact, the president and his family cashed in on hundreds of millions of dollars on crypto hype right after he got elected. But also, if you look at the crypto stocks, they’re getting obliterated. Some of the stocks that went public earlier this year are just down 50 percent or more from where they were just a couple of months ago.  

He then turns to the role of monetary policy in all of this and argues that headline rate increases never translated into a genuinely restrictive stance, because credit kept growing while the Fed was hiking:

And now they’re cutting, but the Fed never really got monetary policy restrictive and the Fed still claims that policy is moderately restrictive. Now it’s not, it’s still too loose. The way you know that is to look at credit growth because inflation is the expansion of money and credit and the entire time the Fed was raising rates, credit continued to expand. Consumers kept borrowing more money. Household debt hit new record highs. Credit card debt hit new record highs. Government debt exploded.

Peter explains what he means by “not restrictive”: when inflation is higher than the Fed funds rate, real rates are negative and borrowing is being rewarded — the opposite of true tightening. He invokes the Volcker era to show how different real policy looked when the Fed actually fought inflation:

If the government is telling us inflation is 3, it’s 6. If inflation is 6 and the Fed funds is 4, you got negative rates. By what definition is the Fed being restrictive when people are being paid to borrow money? Polls rates seem to be much, much higher. In Volcker in 1980, short-term rates got to 20%. That was more than double the inflation rate at the time.

He expands that safe-money stance into a broader portfolio prescription, telling listeners to hold an overweight in commodity-related equities as a hedge against de-dollarization and prolonged stagflation — a cycle he thinks will be longer and harsher than the 1970s:

I think they should also have an overweight to commodity type stocks, whether it’s not just precious metals, industrial metals, agriculture, energy. I think a lot of these things are going to do very well in an inflationary de-dollarization environment. We’re going to be in that for a long time. It’s stagflation like the 1970s, except a lot worse than the 1970s.

For more of Peter’s analysis on metal price action, check out the latest Friday Gold Wrap Podcast!