March 1, 2025
On Tuesday's episode of the Peter Schiff Show, Peter takes us through this week's turbulence in the stock and crypto markets. As new trade wars, a Bitcoin crash, and growing deficits signal stagflation, the only asset safe from the turmoil appears to be gold.
Peter starts by warning that investors may be missing a critical piece of the puzzle by ignoring inflation's erosive power-even as bond buying continues unabated. Algorithmic traders can't see that this is a replay of the 1970s
But what bond investors are overlooking as they're buying bonds is the strength in inflation, because inflation erodes away the value of the bonds they're buying. So they're just focusing on the weakness in the economy, and that's kind of a reflexive move, probably a pre-programmed algorithm to buy bonds because look at all this weak economic data. But the weak economic data is actually inflationary in that it's going to mean bigger budget deficits and a weaker dollar, which is going to push consumer prices higher. Again, this is stagflation. This is not the type of economic weakness that any of the people who are trading today or who are programming algorithms to trade have experienced.
Once riding high on promises of a "crypto cabinet" under Trump's presidency, Bitcoin has now officially entered bear market territory-a timely reminder of the volatility inherent in digital assets:
I talked about this in the euphoria of the Trump victory as Bitcoin surged to 109,000 and all things crypto went up. I was saying at the time that maybe this is the euphoric top, that everybody is so optimistic: 'There's absolutely no reason for Bitcoin to go down. We've got a crypto president. We've got a crypto cabinet. We're going to have a strategic reserve.' Everybody was bullish. Nobody wanted to sell. And I said, that's the exact environment where you probably should sell. If you can't think of a reason to sell, you probably should because everybody else was buying and we had a blow off top. Bitcoin today officially entered what Wall Street would call a bear market. Earlier today, Bitcoin traded below 86,000. That was a 21% decline from the 109,000 peak from November. So that meets the definition of a bear market.
Peter questions the sustainability of strategies employed by major players in the crypto space, especially those of Michael Saylor and Microstrategy. He warns that when premium turns to discount, even the most aggressive maneuvers-like selling stock to buy Bitcoin-can backfire:
But what's going to happen with MicroStrategy? The only reason that this guy, Saylor, could keep on selling stock is because he was selling the stock at a premium. And then taking the cash to buy Bitcoin. That's where he gets this ridiculous Bitcoin yield that he's been fabricating as if it's an actual yield. Well, when the premium turns to a discount, that game is over. Because if he sold stock at a discount to buy Bitcoin, he'd have a negative Bitcoin yield. So he can't do that.
Peter calls out the bad-faith actors in the Democratic party. They take every opportunity to blame Trump for the economy, but won't admit their role in setting up stagflation
And you know, I see all these Democrats now and it really bothers me. They're on every day. They're complaining about how terrible this is, and they're going to be right about one thing. The economy is going to sink. We're going to be in a protracted recession. Inflation is going to go up and they're going to say it's because of Trump. See, we told you so. Everything was great. And Trump wrecked the economy with these crazy tax cuts for the rich and his giveaways for the billionaires. So they're wrong about how he wrecked the economy and not even that he wrecked it because when he got it, it was already wrecked. It was pre-wrecked when he took it over.
He wraps up the episode by commenting on Trump's renewed interest in protectionist policy, noting that Trump only has half the story. New tariffs won't solve our economic concerns:
Trump in many cases gets half the story, right. But he doesn't get the whole thing right.... And he still has it backwards when he thinks the world is taking advantage of us. We're taking advantage of them. But in the long run, it is a bad deal. Just like anytime you do this right, you can borrow a lot of money to live beyond your means. And in the short run, yeah, everything is great, right? Because you're, you're, you're, you're living a better life than what you could actually afford. But there is a consequence to that when you eventually run out of borrowed money and reality sets in.
Reprinted with permission from SchiffGold.com.