Where is Bitcoin really headed? Are virtual currencies like BTC and ETH really sustainable? Join Ken McElroy and famed economist, Peter Schiff, in a discussion about the future of digital currencies, gold, and the crash of bitcoin.
Ken McElroy:
Hey everybody. So, I’m really excited to have my friend Peter Schiff here, Peter and I met years ago. I can believe that when we were speaking together, he’s a CEO of a Euro Pacific capital and of course an economist, and he has a massive following on YouTube. And, uh, the coolest part was, is right after we met. He had just predicted the 2008 crash. If you guys go back and look, you’ll see that he did that. He’s one of the few that did that. He’s written some books on it, crash proof, the new one after that was the real crash as how to save yourself and save your country. Uh, Peter. Welcome. Welcome. Welcome.
Peter Schiff:
Oh, thanks Kenny. Thanks for having me on your podcast. And by the way, you know, several years ago, I sold your Pacific capital. So I’m not the CEO anymore. I did that, you know, in conjunction with my move to Puerto Rico. So yeah, I’m still affiliated with the company. I’m their, uh, senior, uh, uh, condominium market strategist. But the company I really run and work for is your Pacific asset management, which is the company that manages the international separately managed accounts at Europe. So of capital, uh, manages the rap program. And we also manage a lot of accounts directly from Puerto Rico and we own and operate a family of mutual funds, the Europe Pacific fund family. And so I’m doing that in Puerto Rico. So I kind of got rid of my, my us businesses and I’m pretty much fully operating out of Puerto Rico at this point, actually.
Ken McElroy:
I know we’re going to get into some foreign investment here because good timing for you. I can’t wait to get into this now. So thanks for the update. So let’s jump right in. Uh, you know, we’ve talked a lot about Bitcoin and I know I watch your stuff on Bitcoin and, um, you know, and let, let’s talk about, you know, I like to have both sides. Obviously we had people on here that say Bitcoins, Bitcoin’s going crazy. You and I are both goldbugs you way more than me, but I’ve been a gold bug since the eighties. Uh, so, so as Robert Kiyosaki and a bunch of others, and I know you, you know, you’ve, you’ve had, uh, your hands in that a long time. Um, you know, but there’s, they’re calling Bitcoin the new gold. What are you your thoughts on that?
Peter Schiff:
Yeah, well, that’s part of the marketing gimmick to get people to buy it, right? In fact, if you look at the way they depict Bitcoin, it’s a coin that’s golden color with a big B on it, right? But Bitcoin is not a coin. It’s a string of numbers. So if you could represent Bitcoin, it wouldn’t look like a gold coin. They do that to create the false impression that when you’re buying a Bitcoin or a fraction of a Bitcoin. Now a lot of people can’t afford a whole Bitcoin when they’re, you know, 56,000 a Bitcoin, but they’re trying to create the false impression that you’re buying some alternative to gold. That’s like gold, except it’s digital. It’s better than actual goal. Like gold is analog, right? This is new digital goal. It’s, it’s better than the analog version, except with analog gold. I can actually do stuff, right?
Peter Schiff:
I mean, you can make jewelry. I’m wearing a ring, right? Is gold. I got a watch on, you know, you can’t make that with Bitcoin. You know, if you got a cell phone, a computer there’s gold in those chips, conducting electricity, making it all work, you can’t do that with Bitcoin. There’s all sorts of uses that gold has. And it’s because gold is the most useful metal in the world. And it’s also one of the rarest metals that is so valuable. And because it doesn’t decay over time or tarnish or uses lose its properties, it’s been a great store of value because if you find gold, that was dropped at the, you know, in his shipwreck 500 years ago, and you bring it back to the surface, that gold is as good as it was the day. That ships thing, probably everything else that was on that ship is gone and can’t be used for anything.
Peter Schiff:
But if you find a goal, this is as good as new, right? So it’s a store of value. None of those properties, uh, diminish over time, but Bitcoin has no value. So it can’t be a store of value. You can’t store, you don’t have. Right? And so it’s not digital gold. I mean, it’s digital, fool’s gold. It’s a tool that mania 2.0, it’s not money. It’s not currency. It’s not even an asset in any real sense, right? Because assets have a return, right? Real estate, you know, has rent, right? Real, estate’s an asset because I can live in the house myself and I get the utility of shelter and a roof over my head, or I can rent it out to somebody else and get the cashflow, right? So that’s real estate and asset. Um, stocks are an asset. They pay dividends or they, they grow their earnings and they buy back stock.
Peter Schiff:
I can get a return bonds, you know, most bonds pay interest, right? Uh, bonds are an asset. Then you have commodities. You know, we boil, right. They don’t pay any, any dividends, but you use them. I, I consume, I eat wheat. I make bread out of it. I eat it. I take oil and I drive my car with it. Gold fits into the commodity basket. Right? Gold doesn’t have any income. Gold is a commodity like wheat or oil, except, you know, it’s easy to store and it doesn’t, uh, you know, wear out over time. And it’s the best commodity to use as money. Right. But Bitcoin, isn’t a commodity. It can’t be used as money. It’s not a store value. It’s not a unit of account. Nobody prices anything in Bitcoin. And it’s not a very good medium of exchange because it’s very expensive and very time consuming to actually pay somebody using Bitcoin. So unless you’re doing a very, very large transaction, it would make no sense to use it for anything. Yeah.
Ken McElroy:
And I, you know, it goes back to being tangible or not tangible, right? Like it’s, it’s something that you can actually…
Peter Schiff:
It’s not that it’s tangible versus intangible because intangible things can have value, right? Music is intangible, but the value of it is it’s entertaining. I can listen to it. I can sing along to it. I can dance to it. It makes me feel good when I have music, it livens up a party, right? So there’s value to intangibles software, computer programs, right? If I have a certain program, it can make a system operate better. I can become more efficient because I’m utilizing a computer software program. So I’m not against intangibles is saying intangibles don’t have value. It’s just that Bitcoin, as an intangible has no value because Bitcoin doesn’t do anything for me. I can’t do anything with my Bitcoin. There’s, you know, 20 million or some odd Bitcoin out there, maybe 19 million. I’m not sure the exact quantity. I know the 21 million is supposedly the hard cap.
Peter Schiff:
So we’re not quite there yet, but the world is no better off today with 20 million Bitcoin than it was 10 years ago with nut. I mean, they haven’t added an ounce of productivity to the global economy, but they have consumed a lot of energy. We have wasted a tremendous amount of energy and computer hardware to manufacture nothing, to solve math problems for no reason, just so people can speculate on these tokens. And that’s what they’re doing. They’re digital tokens. Yes. I get it. People have made a lot of money buying these tokens early and selling them now to greater fools who think the price is going to rise forever, but it’s not at some point the music’s going to stop. And the bubble pops and the whole thing comes crashing down. And then you’re going to have a whole group of people who are very unhappy because they would have lost a tremendous amount of money. The winners will have been the people who got out before that happened and turned their paper profits into actual real profits.
Ken McElroy:
So you, you know, I know that you keep up on this stuff, but we’ve watched Musk and Michael Saylor. And everybody’s saying that Bitcoin is going to continue to go up as the dollar inflates. Now this is really your strikes on, you know, obviously, you know, they’re kind of using this again, like the dollar for sure is going to inflate. I think we all agree on that at least you and I do. Um, and you know, w you know, why are some of these big names jumping in now? You know, we’re seeing obviously micro strategy, Michael Saylor, we see a mosque with Tesla and, you know, yeah, yeah. But do you remember–
Peter Schiff:
There’s hardly anybody. Yeah. There’s Michael Saylor. Yeah. The Zee Elon Musk. But what percent of, you know, the S and P 500, you know, CEOs are into Bitcoin. I mean, maybe it’s just those two guys. I mean, you have a little bit, uh, um, with square and Twitter, Jack, Dorsey’s controlling both companies, so I can throw him in there. Uh, but you know, square is utilizing Bitcoin to some extent. So maybe there’s a reason that they might be, uh, talking about it, but you’re talking about a very small, but highly vocal minority. So when you say everybody’s talking about it, they’re not, I mean, a lot of people are talking about it, but they’re not buying it. The only ones that are buying it are, you know, the, the Elon Musks and the Michael sailors. But of course, once these guys buy it, they can’t stop talking about it because they have to keep talking about it because they got to talk it up.
Peter Schiff:
They’ve got to get more people to buy, because there, there is no actual use case for Bitcoin. There’s no real market for it. Like there is for gold. The only market is people who think the price is going to go up. And the only way the price will go up is if more people buy. And the only way that people who already own it can get out of it is if they have new buyers to sell it to. So that’s why Michael Saylor has to constantly pound the table. He does any interview. I mean, no matter who requests them, he will do any podcast, no matter how small he is, 24 seven, uh, Bitcoin promoter. I mean, who the hell is running micro strategy. I mean, maybe he’s doing this whole thing as a distraction because maybe his software company is failing. And so he turned it into a Bitcoin ETF, and all he does is tout Bitcoin.
Peter Schiff:
That’s his basic job now is to try to pump this thing up. Uh, but once you get beyond these big pumpers, you know, it’s just a distraction for most companies. I mean, they look at it, but they’ve got nothing to do with it. And to answer your question about, will it be an inflation hedge? No, I don’t think it’s an inflation hedge at all. I mean, I think people are marketing it as a hedge against inflation, but the reason gold is a hedge against inflation or anything like real estate or something like that is that those are real things. And so when, when you print more paper right now, the price of all the things that you buy with paper goes up and commodities are usually some of the most, you know, the first reactors, you know, you print more money and now food gets more expensive or energy gets more expensive.
Peter Schiff:
But when you have gold, you’re owning one of those commodities that is going to go up in price with inflation. You know, as you print more money, you need more money to buy gold. You need more money to buy a house. You need more money to buy oil or wheat or copper or anything. So gold was an inflation hedge because it gets you out of paper into something real that has some kind of relationship to all the other commodities or other assets. But Bitcoin isn’t real. It has no relationship to anything. There is no historic, you know, a metric that says, how many Bitcoins should it take to buy a house? How many Bitcoins should it take? Uh, you know, Dubai announced a gold or a barrel of oil. I mean, there’s no relationship, but you could go back over history and say, Hey, how much should the average house cost in terms of goal, right?
Peter Schiff:
How many ounces of gold should it take to buy a house? You know, how much gold do you need to buy oil or buy weed to buy copper? I mean, you can go back for a hundreds of years or more, and you can kind of look at this and say, okay, well, if paper’s going to collapse and I got to get out of paper and I want to store my purchasing power to buy the things that I needed in the future, well, I’ll buy gold because gold will hold onto its purchasing power. And then I can use my gold to buy a house or to buy the things that I need because of I’m just holding on to dollars paper. I may not be able to buy anything because the paper can lose so much value. But I think people who think Bitcoin is going to behave like gold are raw.
Peter Schiff:
I mean, first of all, it’s not behaving anything like gold. Now it just goes straight up gold. Does it do that accident marches to its own drum. It’s a pure speculative mania. And we could have a huge outbreak of inflation where gold goes to five or 10,000. And in that environment, Bitcoin could go to zero. I mean, it’s got no relationship to anything other than its own speculative mania. And as soon as the buying dries up, uh, this whole thing is going to collapse regardless of what’s happening to inflation the dollar gold or anything else. Right. Right.
Ken McElroy:
I completely agree. So we’re going to take a quick break. And after this, we’re going to talk to Peter about, you know, what he sees on the crash for Bitcoin right after this.
Ken McElroy:
So Peter, so, uh, we just got done hammering Bitcoin and I clearly, uh, I I’m very clear on how you feel about it. So, uh, let’s talk about a potential crash because a lot of people are saying the crash is impossible and you know, I know you study this. Yeah. I mean, I, I really love your videos and obviously you’re an economist. So you look at things very differently. Uh, what do you say to them?
Peter Schiff:
Well, first of all, clearly a Bitcoin crash is not only impossible or not impossible. It’s highly probable because Bitcoin has already crashed many, many times in its tenure existence. I mean, you look at how many times the price of Bitcoin has collapsed by 70, 80, 90% or more. I mean, it’s probably at least a dozen, maybe more. I’m not really sure. So it, a history of crashing. So I don’t know why anybody in Bitcoin would say it can’t crash. It’s just that up until now, every time it’s crashed, it’s come back. Right? So a lot of people are very complacent. They recognize that Bitcoin can crash at any moment because obviously it’s done it so many times in the past, but what they also expect to happen is that after it crashes, it comes back and makes a new high, because that’s what it’s done every time.
Peter Schiff:
But just because it’s done that in the past, there is no guarantee that it’s going to do that in the future. One of these days, Bitcoin is going to crash and it ain’t going to come back except you don’t know which crash is the last and which crash is just another one in the cycle. And nobody will know for sure until probably many years into the future, looking back at the whole thing. And that is the big problem for these Bitcoin wholesalers, right? The guys that are holding on and never sell, because they’re so confident that every crash will recover. What happens when you have the last crash and it never recovers, they just hold and hope indefinitely. And then at some point they keep throwing more good money after bad expecting Bitcoin to recover. And it just keeps making new lows until they’ve lost all of their money. So I think a lot of people are going to be completely wiped out with Bitcoin because they’re just going to make the false assumption that just because Bitcoin has recovered from prior crashes, it’s going to recover from every crash, because at some point it’s going to crash for the last time and it’s just going to keep on falling.
Ken McElroy:
Let’s talk a little bit about, you know, the government’s right, because they’ve been kind of sitting back and watching this. And I know, I think you probably saw that China created its own digital currency. It just came out this week and you know, that may now have a cyber. Is it you won? Is that how they say you won? I believe, yeah, you are. Yeah. So they now have a cyber you won and, and, uh, you know, in the fed is all over this issue. Uh, what do you see coming down the road? You know, as some of these governments try to, you know, get back.
Peter Schiff:
Yeah. Well certainly a Fiat, a digital sovereign via currency, but as much different, much different than Bitcoin, right? So the digital you on will basically be one for one at all times with the paper you want. And in fact, the Chinese government has said that they’re not going to just simply issue, uh, the digital one. In addition to the paper one, they’re going to destroy a D paper Iwan. Every time they issue one in digital form. So it’s not a net increase in inflation, right? The money supply is not going to expand as they create digital Yuan. They’re simply going to replace some of the paper, money supply with a digital money supply. And so basically the Chinese consumers will have a choice. They can carry around paper in their wallet, or they can carry the digital Yuan in, in their smartphones. Right. So one of the other, now I have a feeling that eventually over time they will phase out completely the paper because of the Chinese government wants to have complete control over the population and know everything that they do.
Peter Schiff:
What better way than the force, all your transactions online, where the Chinese government knows everything you buy, right? That way, if you buy something that they don’t like, you know, they could arrest you. Right. So, uh, it’s, it’s, it’s a very oppressive tool and I don’t like this at all. And I don’t like the us government having this either. And so, but I think we’re going to move in that direction. Uh, but I do think that a digital Yuan will be very attractive for people around the world to own, because it will be much easier. Like if you wanted to buy paper you on right now, what are you going to go to a bank? I mean, how many of us banks can you go into and buy you on? I mean, probably none. Right? But if you could just go online and buy yourself some digital one at the prevailing exchange rate, I think that could be a real alternative, much better than Bitcoin because the digital you want would be very stable.
Peter Schiff:
You ought as a very stable currency. If you look at it, you know, it’s pretty, you know, it doesn’t vary very much. Day-to-day, it’s a lot of stability there. I think long-term, it’s a much better store value than the dollar. Uh, but I think it can really elevate. Do you wan to be a more international currency, to the extent that people anywhere in the world can decide they want to save Chinese Yuan instead of their local currency? I mean, I think it’s a much better alternative for people in high inflation countries, uh, that want to get out of their own CIA currency right now, maybe they would go to Bitcoin, which is extremely volatile and extremely expensive. The Yuan would be far more stable and much cheaper to transact it. So I think it could ultimately be a big threat, not only to Bitcoin, but also to the U S dollar to the extent that we don’t have a digital dollar. And they’ve got a digital Yuan and more and more people want to own that instead of the dollar, then again, it helps diminish the dollar’s role as the primary.
Ken McElroy:
And it’ll be a hell of a case for gold too. Right? I mean, people are gonna, cause that’ll be obviously the, uh, you know, kind of the last thing, the physical piece that you’ll be able to again have.
Peter Schiff:
Oh yeah, yeah. So, I mean, look, this, the world is going in this direction. Uh, but I would like to see the Chinese U on backed by gold. So if you had a digital Yuan and that, but the one was also backed by gold, the way the dollar used to be backed by gold, right? The way the pound Sterling, the way every currency used to be backed by gold. If the Chinese go back to that, they can secure for themselves the dominant, uh, currency, uh, probably for this century at least. And who knows how many more into the future.
Ken McElroy:
And if anybody’s followed that, the China’s just loaded up on gold over the last, you know, 20 years plus, I
Peter Schiff:
Mean, they’re the, they’re the biggest producer of gold in the world, China, and they don’t export it, they keep it. So it’s, uh…
Ken McElroy:
You’re right. That could be where it’s going. So, so this next question, Peter is for our premium members, um, if someone’s sitting on a lot of cash right now, cause that’s kind of the thing, you know, and I know we’re going to jump into and talk a lot about inflation in a, in a little bit, but should they hold onto it? Should they convert it into a different asset? Um, you know, what would be your recommendation, Peter? Thanks everybody, uh, run on over to Peter’s YouTube and, and he’s got all kinds of resources there. If you want to, uh, learn more about, uh, what he’s just talking about on some of these foreign investments through EpacFunds.com, uh, just go check his channel out, uh, Peter as always. Thanks, man.
Peter Schiff:
Yeah, thanks. I really appreciate it. Miss, miss you on these, uh, the real estate guys, cruises, it’ll be nice when they can get these cruise ships back in the waters and people can come on board and uh, you know, so that’ll be good, but yeah, people can listen to my podcast. I’m going to record one a little bit later today. Uh, but I usually do two or three a week. People can listen on my YouTube channel or go to shift radio.com and just listen there or any of the iTunes or any of these places where you’ll find podcasts, you’ll find mine. Uh, you know, it’s a, it’s a good one. It’s normally somewhere in the top 21 for the investment category. In fact, one of the reasons that stop higher is so many people listen to it on YouTube. I get it. I get a much bigger audience than I think most podcasts are on my YouTube channel because I started on YouTube and then I, and then I eventually started posting my podcasts, you know, as, as podcasts. So yeah. And follow me social media, you know, I’m on Twitter. I tweet a lot. So follow me there. Um, but yeah, I’m also on Instagram, Facebook. So, um, I’m trying to do a lot of social media to get the word out.
Ken McElroy:
I love the 1% videos. You know, those, those went viral. I looked the other day, you had four and a half million views on the, I am the 1% I thought…
Peter Schiff:
Oh, that’s true. This is my version. I put that one up a couple of years ago. I mean, there’s been 10, 20 million people have seen it cause it was reason magazine that did it originally and they got millions of views and then other people copied it and they got millions of views. I didn’t even put a copy on my, on my YouTube channel until a couple of years ago. And then I got millions of views. So it’s really been seen by tens of millions of people since I did it. So yeah, it has probably been the most effective one because I get a lot of emails from people all around the world who tell me they were socialists and totally saw that. And now they’re free market capitalist libertarian. So it’s really a good educational tool, which is exactly why I did it.
Ken McElroy:
Phenominal message to, uh, thanks Peter again as always. Okay. Cheers.