Birch Gold Group recently sat down with renowned financial commentator Peter Schiff for an exclusive one-on-one interview. The full version of the fascinating interview will soon be available on our website, but in this “sneak peak” edition of the Market Report, we’re giving you some of the highlights. We asked Mr. Schiff, Has the Fed learned ANYTHING from the last fiscal crisis? Might they actually be creating a dollar bubble? And what can people do to prepare for the dollar’s collapse? Hear what Schiff had to tell us in response, and then get first reactions from our very own Vince Miller and Will Hart.
Mark Alyn: This is the Market Report from the Birch Gold Group. Hi I’m Mark Alyn. In studio we have Vince Miller from the Birch Gold Group and also from the Birch Gold Group, Will Hart. Gentlemen, welcome. We had the opportunity to interview Peter Schiff. He’s a well-known commentator on the gold markets. We’re going to play a couple of clips from an upcoming full interview that we’ll have here on the Birch Gold Group website. We’re going to play these clips and then what I’d like to do is have you comment on each of these, alright? So let’s go right away to the first clip, we asked Mr. Schiff, has the Fed learned from the crisis of 2007, 2008:
Peter Schiff: Everything that the Federal Reserve has done, everything that the government has done since the financial crisis of ’08, has just made the problems that they were trying to solve worse. Next time I think it’s going to be a dollar crisis, which is going to be much more painful than a banking crisis. And in that environment, gold is going to shine a lot brighter than it did in the last crisis. The reasons to own it now are even more numerous than they were then.
Mark Alyn: It’s an interesting quote. Vince, what’s your take on that?
Vince Miller: I think Peter makes an excellent point. I think what the Fed did to salvage our banking problems, they created bigger problems in terms of devaluing the dollar. Their efforts to print money or buy up junk debt with QE1, QE2, and now of course QE3, what it did was it made the dollar cheaper to buy and borrow, but it also made it less valuable on the global market. And of course we’ve seen a huge decline in global interest in terms of our debt, in terms of them wanting to use our dollars as they did in the past.
Mark Alyn: So companies, systems, countries are all dumping the dollar going into gold.
Vince Miller: Yeah. Well, they’re dumping the dollar and they’re putting it in other places, not just gold but yeah. Countries that have the opportunity to buy U.S. debt seem to be going elsewhere buying other countries’ debts. That’s a big concern of ours. We’ve seen a big move towards some of these European countries buying Central American debt as opposed to U.S. debt. Our problem is that we have so much debt. And one of the things that Peter mentions in the article, or mentions in the interview, is that, historically, the U.S. was one of the largest creditors of the world. And now we’re one of the largest debtors of the world. And it’s very important that there has to be some sort of change mechanism happening, otherwise it’s going to be downhill even further.
Mark Alyn: And Will what’s your take on that?
Will Hart: I agree actually 100% with what Vince is saying and also what Mr. Schiff is saying. I just think that we’re in a situation where our government is scrambling. They don’t know what to do. They’re saying, okay, we’ve got a market that, again, at historical highs when everybody’s scratching their head saying, “How can this be at a historical high when our economy is struggling?” And so what are they doing, they’re just simply saying, “Well we’ve got to keep printing, keep printing, keep printing” and, again, gold looks a lot brighter because we’ve got paper dollars being created out of thin air. Gold is not being created out of thin air, it’s expensive to dig it out of the ground and countries are all kind of waking up and saying hold on, we want to shy away from the U.S. dollar as far as we can because we hold it in our hand and its literally eroding the value while we’re holding it. So let me get over to physical gold and silver.
Mark Alyn: Let’s take another listen to another quote. We asked Mr. Schiff, “Is the Fed creating a dollar bubble?”
Peter Schiff: Well there’s been a dollar bubble the whole time. The dollar became the world’s reserve currency because we dominated the world financially, economically. We don’t do that anymore. We’re not the world’s biggest creditor, we’re the world’s biggest debtor. We have huge trade deficits, not huge trade surpluses. We’re bankrupt as a nation. So the currency of a bankrupt nation shouldn’t be the world reserve currency, yet it is and we have a lot of global imbalances. The world tried to maintain the dollar at the center of the monetary system. And it won’t be at the center much longer. And the question is what’s going to take its place? And again that brings me back to gold.
Mark Alyn: So Vince, what’s your take on the dollar bubble?
Vince Miller: That’s a great question Mark. First of all, I think that there are a few things. I think there are three primary conditions that are going to need to happen if there really is going to be a dollar bursting of this bubble or a crash of our economy. First of all, in order for there to be a dollar collapse, there must be an underlying weakness in the overall system. Second, there must be a viable currency alternative for everyone to stampede into. Obviously if they are going to trade out of dollars they’ve got to go somewhere. And I think third, a triggering event would need to happen. First of all, I’ll tell, the first condition does exist. The dollar declined 54.7% against the Euro. Part of this is because the U.S. debt nearly tripled during that time period. Literally our debt tripled from $5.9 trillion to $15 trillion. This increase, it really, in my opinion, increases the chance that the U.S. will let the dollar’s value continue to slide, allowing it to repay the debt with cheaper money. Secondly, people have looked at the Euro as possibly being the alternative currency to the dollar. Now we’ve seen back in May of 2012 we saw a run on the Greek banks where there was a big fear that the Euro was going to crash. So that sort of destabilized that idea that the Euro could be an alternative currency. But again, the Euro is still a viable possibility, according to most experts. And then of course, the third thing would need to be a triggering event, which there seems to be a lot of those that are happening a lot. I think that it’s very plausible that there could be a bursting of the dollar bubble that they’ve created in the Fed.
Mark Alyn: And all this just goes to enhance or brighten and shine up gold as a hedge.
Vince Miller: Yeah, I mean I think one of the points he makes is really good. One of the points he makes in his interview, he says just because there is a dollar crash, it will be bad for a lot of people, but ultimately there are going to be some beneficiaries as well. And obviously some of those beneficiaries would be gold, would be probably emerging markets, these other countries or other currencies that people would have to transfer into, that sort of thing.
Mark Alyn: And Will, do you have a take on this as well?
Will Hart: Yes I do. The dollar, when we took over as the world reserve currency, which was in 1967, our dollar was backed by gold. Our money was as good as gold. And that lasted for a whopping 4 years. And then we went off and we’re a fiat currency now. I kind of disagree with Vince and maybe some of the experts out there that are saying, “Oh, the Euro may take over.” Well, that’s nonsense. Because the Euro is a fiat currency. Again, it’s all based on perceived value. So what’s the point of saying we’re going to replace this paper money that’s just backed by perception with another paper money that’s backed by perception. That’s why I really believe there is going to be a big player out there. I don’t know who it’s going to be, but somebody is going to come out with a gold-backed product and people are going to look at that paper and they’re going to go, “That actually has true value.” It’s not just coming out of thin air and ink and paper. It’s backed by something that is expensive, it’s arduous to dig out of the ground and turn it. So I really feel that’s the move that’s going to happen. Do I believe that there’s going to be a dollar bubble? Yes I do. And it’s just a matter of when.
Mark Alyn: And bubbles always pop?
Vince Miller: That’s true Mark. But I’ve got to respectively disagree with Will in the sense that although I said that there are three conditions that must happen for the bubble to burst, and it’s very probable and likely that any of those could happen. Fortunately, in my opinion, I think it’s highly unlikely that the dollar will ultimately collapse to the calamity levels that some people might think. Really, the countries that have the ability to collapse the dollar like China, Japan, and a few other major foreign dollar holders. In my opinion, I don’t think that they’re going to let that happen. I mean, to be quite honest with you, it’s not really in their best interest to see the dollar collapse. I mean, why bankrupt your best customer?
Mark Alyn: Absolutely, that makes sense.
Will Hart: Yeah but again, bankrupting your best customer, nobody wants to do that. It just comes down to a fact where countries say, “I don’t trust what we’re using now as the world reserve currency.” People are losing faith. We’re seeing that happening everywhere.
Mark Alyn: Well we had the opportunity to ask Peter Schiff the following question, “What should people do to prepare for the dollar’s collapse?” Here’s what he said:
Peter Schiff: People should buy gold while it’s still cheap because when gold is remonetized, when it’s once again at the center of the monetary universe, when countries are holding gold reserves as opposed to dollar reserves. Central banks have a lot of gold to buy. The price only has one way to go, and that’s up.
Mark Alyn: Vince can you comment on Schiff’s statement there?
Vince Miller: I agree completely. Buy gold. It’s one of the few global reserve assets that’s actually nobody’s liability. It’s like Hawaii, Mark. It’s like that island out there that’s really far away to get to, but every time you show up and you say to yourself, “This is a great place. Why don’t I come here more often?” And that’s what gold is like in terms of a defensive hedge. It’s one of those places that a lot people really don’t think about because it’s kind of off the beaten path. But it is a global reserve asset, it is nobody’s liability. It does go up when other things go down. And I think it comes back to, what do you believe? And if you really think that it is getting worse and it’s going to get worse than it is now, then of course not to own an asset that goes up in value when everything declines, it would be a foolish thing not to. But if you think it’s going to get better, and if you think that what the government is doing right now to fix the problems, then of course owning metal is not the right choice for you and you should keep your money in paper. I think it’s a personal process that each person has to kind of come to terms with on their own.
Mark Alyn: And again you’ve been saying on the show now that gold is not an investment, it’s a way of maintaining and preserving value for what you have.
Vince Miller: That’s why people historically call it portfolio insurance. It’s a hedge against inflation. That’s why you buy gold. We always say it’s a defensive move, it’s not an offensive move. I think what your financial advisor, his goal is to try to grow dollar one to dollar ten million by the time you don’t need money anymore. People that buy gold don’t buy gold for that reason. Typically, they buy gold to preserve buying power against currency devaluation, against dollar devaluation. So you don’t buy gold to make money, you buy gold to protect it, over the long term. If we had an economic Armageddon, yeah, gold would go to $5,000, $10,000 an ounce. I don’t think that would necessarily be good for us but that would be good for gold.
Mark Alyn: We’re going to pick up with that on our next program. We’re going to actually hear about gold going to $10,000 or even more on the next episode. Gentlemen, thank you very much for joining us here on the Market Report from the Birch Gold Group. If you have questions about buying gold, about why you should add it to your investment portfolio, you need to call the Birch Gold Group. Call them at (800) 355-2116. Speak to one of their gold specialists, they’ll explain why and how and how easy it is, and by the way you can also roll that into a retirement account if you want as well. We always welcome your questions here at the Market Report. Just write us an email at email@example.com. And of course visit us at www.birchgold.com on the net. I’ve got to tell you, there’s so much information about gold and other precious metals. Go to www.birchgold.com. Gentlemen, again, thank you for joining us today. Vince Miller and Will Hart of the Birch Gold Group. Guys, thanks a lot.
Vince Miller: Thanks Mark.
Will Hart: Thank you Mark.
Mark Alyn: I’m Mark Alyn. We’ll see you on the next edition of the Market Report. Bye-bye for now.