Schiff w/ Bitcoin Magazine: The Bond Bear Market is Just Getting Started

In a recent interview with Bitcoin Magazine, Peter breaks down the long unwind of the decades-long bond bull market and explains why he thinks the pain is far from over. He also takes aim at reckless government spending under both parties, dismisses the Fed’s tepid rate moves as irrelevant, and delivers his verdict on Bitcoin’s future.

Peter starts by putting today’s bond market troubles into historical context. He explains that what we’re witnessing isn’t some sudden shock, but the long overdue reversal of a decades-long trend:

First of all, the bond market already broke. I think the bull market and bonds really ended in 2020 and that was a 40 year bull market. So it was a very long bull market that ended really in a blow off top for the bond market when the yield on the 10 year treasury was below 1%. And so now we’re finally back up to 5%. Took about six years to get here. But I think this bear market has a long way to go.

From there, Peter connects the dots between a struggling bond market and the fate of the dollar itself. He warns that as confidence erodes, the two may collapse together, with the dollar possibly leading the way down:

So, you know, if they can’t win, the only question is, when does this become a crash? When does the bond market collapse? When does it take the dollar down with it? And in fact, maybe the dollar goes first because all bonds really are promises to pay dollars. And, you know, if you’re losing confidence in the dollar, then there’s no reason to own treasuries because they’re just up to future payments of dollars.

Turning to Washington, Peter argues that no amount of monetary tinkering can fix what is fundamentally a spending problem. He singles out recent legislation as evidence that neither party has the will to make real cuts:

But what we need is dramatic cuts in government spending. Something that neither party is willing to do. The Republicans clearly won’t do that. The big, beautiful bill was a disaster. One of the worst pieces of legislation passed. And, you know, and, you know, and that’s quite a feat considering that there’s been so much bad legislation passed.

Peter then shifts to the Federal Reserve, arguing that its incremental rate moves are laughably inadequate against the scale of the inflation problem. He insists that nominal rate hikes mean little when real rates continue to fall behind actual price increases:

I think that regardless of what they do, it’s not going to matter. They are not going to rein in inflation with 50 basis points of rate hikes, whether it’s in one month or spread out over a couple. It’s too little, too late. Inflation has already increased by more than that, you know, since they’ve done nothing. So real rates are declining. Nominal rates are really irrelevant.

Pivoting to crypto, Peter offers a sobering assessment of Bitcoin’s track record for the vast majority of its current holders. He notes that while early adopters made fortunes, most recent buyers have simply missed out on better opportunities elsewhere:

So Bitcoin was a great speculative investment if you owned it from its exception in 2009 up through 2021. But the vast majority of people who own Bitcoin today did not own it back then. They have purchased it in the past four or five years. And it’s been a horrible investment for most of those people. Even if they didn’t lose money, they lost out on the opportunity of making money someplace else because everything else has gone up while Bitcoin has gone sideways.

Peter closes with a blunt declaration that Bitcoin’s bull run is finished, and that those still holding on are only compounding their losses. He suggests it’s time for believers to face reality rather than wait around to become the last ones holding the bag:

I think the bull market is over. Yeah, I didn’t make any money in that bull market. I missed out on it. I underestimated the gullibility and the greed of the people who bought it. But I think that people who are sticking with the trade are making it maybe an even bigger mistake. I mean, they should recognize reality, cash out and let somebody else be a bag holder.