Schiff w/ Livera: Debt is the Bubble, Bitcoin Isn’t the Answer

At the end of January, in addition to his highly anticipated debate at the Plan B Bitcoin Forum in El Salvador, Peter also took part in an interview with debate moderator Stephan Livera on his podcast. In their conversation, Peter lays out a broad critique of where he thinks American policy and markets are headed: runaway federal debt, political incentives that prop up asset bubbles like housing, and a predictable tilt toward dovish Fed policy. He strikes a familiar line — cautious about monetary intervention, skeptical of crypto as a monetary solution.

He opens by returning to his central theme: the national debt overwhelms every other issue, and political incentives mean the problem will only get worse. He warns this debt dynamic makes bubbles self-reinforcing, even in housing policy:

But the biggest reason of them all is our runaway debt, that it should be obvious to everybody that, regardless of which political party is in control, the debt train isn’t going to slow down. We’re just going to keep on running, ever increasing debt that we have no ability to repay. In fact, we can’t even really service it. And even yesterday, you know, Donald Trump mentioned that his main goal for housing is to keep prices rising. Even though it’s clearly a bubble because people can’t afford to buy, he wants the prices to go up anyway.

From that fiscal backdrop, Peter turns to the Federal Reserve and the politics of appointments, arguing that presidents appoint chairs who reflect the monetary stance they want — and that Trump’s public complaints about Jerome Powell actually signal he wants easier policy, not tighter discipline:

Well, you know, first of all, Trump wouldn’t have nominated him if that was going to be the goal, right? He wants to get rid of Powell, you know, he calls him too late Powell because he wasn’t dovish enough. He wants even more interest rate cuts. He wants to expand the balance sheet more. So it wouldn’t make any sense that he would try to appoint a new Fed chairman who would be less dovish than Powell or a hawk.

Peter doesn’t reject new technology; in fact he acknowledges the real upside of artificial intelligence, describing how productivity gains could compress long timelines for discovery and development — provided markets and incentives let innovation flourish rather than being distorted by bad money:

So, you know, and I can see the incredible potential of the technology as it ultimately gets developed and becomes more integrated into businesses in ways that it can save on labor, make things more efficient. And hopefully the AI, you know, can advance the whole evolution of human progress. You know, if they’re that smart and we basically increase our collective intelligence, things that may have taken us, you know, a hundred years to invent, maybe we can invent them in one year. 

But when he shifts to crypto, his skepticism returns. Peter traces Bitcoin’s recent strength to Wall Street’s willingness to turn any hype into profit, and he suggests that institutional participation didn’t come from conviction about Bitcoin’s monetary merits so much as a chance to make fees and trading revenue:

But I think what’s really kept it going over the last few years was first Wall Street getting in on the action. Once I guess there was enough demand cultivated that Wall Street thought they could make money off of Bitcoin, then they got into it. Not because they really believed in it. They just thought they could make money off of it. And they didn’t really care, right, if everybody ends up losing all their money like casinos.

At the end of the day, Peter claims, Bitcoin’s performance condemns the cryptocurrency. When big holders like Michael Saylor are presented as proof of Bitcoin’s durability, the balance-sheet reality tells a different story — large concentrated positions look good until someone tries to exit:

His Strategy [formerly MicroStrategy]  has spent 55 billion dollars buying Bitcoin over the past five years, and his average price is 76,000 dollars. The current price, as everybody well knows here, is about 84,000 dollars. He barely has a gain, barely. And that’s only because he hasn’t tried to sell. If Saylor tried to liquidate his Bitcoin, the price would crash and he would lose money. But had Saylor bought just about anything else other than Bitcoin, he would be in much better financial position today.