Schiff w/ Millman: Gold Will Replace the Dollar

Last week, Peter joined Everett Millman on the Verified Macro Report to lay out a clear, uncompromising case against the last several decades of monetary policy and to explain why he sees gold and silver—not fiat or most cryptocurrencies—as the natural refuge for investors. He ties the Fed’s policy errors to rising long-term rates, a deeper inflation problem ahead, and a potential reconfiguration of the global reserve system in favor of gold.

He opens by tracing the Fed’s mistakes in rate policy and slow responses to crises, arguing that the central bank’s pattern of cutting too deep and raising too late has left the economy vulnerable and the dollar weakened:

I think the rate cuts are a mistake. I mean, the Fed has done nothing but make mistakes. They never should have lowered interest rates to zero at any point. They never should have slashed them to 1% when the dot com bubble burst, and they shouldn’t have gone to zero when the housing bubble burst, and they shouldn’t have gone to zero during COVID. And they raised rates much too slowly.

From that foundation, Peter turns to what he sees as the inevitable reallocation of reserves: central banks and private investors moving away from the dollar and into gold and silver as reliable stores of value and portfolio hedges:

What may be happening now is just a major reset of the gold and silver price to align with a new monetary order where the U.S. dollar is no longer the reserve currency, and instead central banks hold gold as a reserve for their currencies. And in that world, the price of gold needs to be a lot higher. 

He warns that the Fed is already losing control of the long end of the yield curve, which creates political pressure to suppress long-term rates by injecting more inflation into the system—an outcome that would further erode purchasing power:

But I think it’s losing control of the longer end of the curve. And I do expect to see a lot of upward pressure on long term rates, which is going to put a lot of political pressure on the Fed to do something to reduce them. And of course, to do that, all they can do is create more inflation. So if you think inflation is bad now, just wait. It’s going to get a whole lot worse.

Because the dollar’s fate ultimately depends on how many dollars policymakers keep printing, Peter stresses that gold’s fair value is difficult to pin down—but he insists the metal is headed much higher, recalling how little it used to cost under a true gold standard:

You know, the price of gold, it’s hard to say where it should be because you don’t know how many dollars we’re going to create. But I think that ultimately gold prices are headed significantly higher even from here when we’re, you know, fifty three hundred dollars an ounce. You know, when we were on the gold standard from the birth of the Republic, really, in the first Coinage Act of 1789, up until 1933, gold was twenty dollars an ounce. So it’s gone from twenty dollars now to over five thousand dollars. So, you know, who knows how much higher it’s going?

Finally, Peter addresses the intersection of precious metals and modern finance: if investors insist on custody and tokenization, a gold-backed token makes far more sense than a dollar-backed stablecoin because gold preserves purchasing power and the dollar does not:

If you’re going to have a custodian, right, then you might as well have the custodian hold your gold as opposed to hold your dollars because gold will maintain value over the time. Well, the dollar will lose value over time. And after all, you’re not getting any interest on your stablecoin. So why not just own a stablecoin that’s backed by gold. So tokenizing gold is a much better deal for the holder of the token, right?

Why did silver crash last week? Check out Peter’s analysis of the episode to learn more.