Schiff on Wealth Building Blueprint: Higher Rates are the Cure

In a recent appearance on the Wealth Building Blueprint, Peter goes wide on the gold and silver setup and the macro limits of policy in this episode, arguing that everything from central banks to retail investors will be forced to take notice of the metals’ recent price action. He traces the last cycle, explains why mining stocks stand to benefit, and warns that policymakers lack the tools to manage the fallout from decades of debt and monetary expansion.

He begins by reminding listeners where the last major metals cycle left off and why the current move is only getting started:

2011 was kind of the end of a big move. This is the beginning of another big move because you know, the bull market in gold and silver and mining stocks started around 2001, 2002. And so 10 years later, we had had gold move from below 300 to 1900. Silver had moved from four bucks up to, you know, over 45. So you’d had a 10x move in silver.

Peter lays out the demand story next, predicting broadening participation from official buyers to institutions and individuals alike:

But what I think is going to happen and is already happening is central banks will not only continue to accumulate gold, but the banks that have been accumulating will accumulate more and those that haven’t bought any will start. So you’re going to see, you know, more wider participation by more central banks. You’re going to see the institutional investors start to participate. And I think that’s starting in the space, particularly in the mining stocks and you’re going to see retail. And so everybody is going to be buying.

He points out that rising demand will translate directly into revenue for miners—there is no practical way to flood the market and depress prices once real buying pressure returns:

But the demand is going to be there because people need to have it. I mean, they’re just going to have to pay more for it. But that’s going to be great for the mining companies. I mean, they’re going to sell every ounce they can dig up. It’s not like they’re going to have a surplus of gold that they have nothing to do with.

Peter turns to silver and the asymmetric upside it often shows in precious-metals cycles, while noting the higher volatility that comes with the metal:

Well, the fundamentals for silver are great. I mean, first of all, silver is now catching up to gold because gold, you know, kind of was the only precious metal moving for the last couple of years. And now you got silver, you got platinum, right, following gold’s lead in all bull markets, you know, precious metals bull markets, you would expect silver to outperform gold. And now that’s happening and that’s going to continue. I think you’re going to continue to see more appreciation, albeit with more volatility in silver than gold.

He sees a window of opportunity created by mainstream investors’ disbelief—Wall Street skeptics are not yet bidding up miners because they doubt price durability:

I think the reason you have the opportunity is because most stock investors, you know, Wall Street, they still don’t get what’s happening. They still don’t have confidence in the silver rally. They think it’s maybe a bubble and it’s going to burst. And so these silver prices are not sustainable over the long run. And so they’re not willing to bid up the mining stocks because they don’t believe that the earnings are actually going to be there because they don’t expect the price to hold up.

Finally, Peter brings macro reality into view: policy options are constrained by the sheer scale of debt and past policy choices, so the usual cures—sharp rate hikes, deflationary medicine—are no longer feasible without catastrophic consequences:

But now the solutions not only won’t make people feel better in the short run, the immediate impact will be to make everything worse. So we have not experienced this since the 70s and we were willing to deal with it in the early 80s with 20 percent interest rates and stuff like that. But we don’t even have the capacity to do that now because the numbers, the debt is now so large that if we swallow the bitter tasting medicine that we swallowed in 1980, we’ll die from the medicine. So either we die from the disease or we die from the cure. Survival is not even a possibility here.