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But what do you think the future of cryptocurrencies is in the next, I think, 5 to 10 years? And you think again, in the next 10 years it continues to grow, it seems like it will have many ups and downs. What do you think the next five to ten years will be like with the economy and the dollar really losing its value, as you say in the next few years?
Yes, obviously more money could be sucked into this bubble. I mean, who am I to say they ca n't make the bubble grow? Look how the bubble in general grew and how many years they kicked the can down the road. So I don't know. It's a good chance we're approaching the end now that it's already so crazy with emotion, so many people in this business, it's already so crowded, there's little advantage.
In fact, Bitcoin is lower today than in April of this year, I believe, so why hasn't it gone up with all this hype, all this advertising? You watch it, it's a network like CNN, almost all the ads are cryptocurrency ads, Bitcoin, it's uninterrupted, in fact, to get into the network you practically have to be the Professor of Bitcoin, or the Bitcoin adorers, all the anchors, all the adorers, although they also love it.
They also love Bitcoin because they know they're advertisers, they want to appease advertisers, they don't even let them in if it's not positive about Bitcoin, so they keep bringing in these guys who are working in cryptocurrency companies and own all the Bitcoin, and they do well. What do you think of Bitcoin today?
Should people sell it? Of course not, everything is great, they bring in these guys. I like their objective, but they have a huge interest in supporting Bitcoin, all their livelihood depends on Bitcoin's growth, and so they need people to keep buying, therefore they will never be objective, it's always "It's going to go up, don't worry about it, it 's great, bye-bye." Some people say, "Well Peter, you say the same thing about coal, right?
You need people to buy gold?" No, I do n't need gold, it's going to go up whether I convince people to buy or not. MercadoLivre is so big that it has absolutely no capacity to influence it, whereas in crypto, crypto is small enough that the person on Twitter is influential. Yes, I mean, you're not going to have an effect on the objective by tweeting about it like Bitcoin.
Gold is a small part of what I'm advocating for. People do what I mean, I think gold is a good reserve, it's a good place to keep your savings if you don't have a better use for it, but it's not an investment. Right now, I think gold is underpriced. So I think in a way it has investment characteristics because I think it's really cheap because the market—and this is ironic when it comes to gold—is the problem.
We're getting all the inflation, or at least people are seeing inflation. We're all talking about inflation because purchases are getting more expensive, energy costs are rising, everything is going up a lot, and people are saying, " But look, look at gold, gold is falling, we're having all this inflation and falling targets.
It shouldn't be a hedge against inflation anymore." And what people don't realize is that 20 years ago gold was below $300 an ounce, so it went up a lot when supposedly we didn't have inflation. In fact, we did have inflation; we weren't talking about that, but about gold. Now, traders are making a bad bet, right?
You have highly leveraged traders who control a lot of money; they're convinced that the faith will tighten monetary policy when it ends, what is it? They're starting to raise rates to combat inflation, and that's going to hurt gold because historically, when Fred is raising rates, it can be bad for gold, except Fred won't raise rates enough to actually hurt gold.
In fact, he won't raise them enough to bend the inflation curve. They won't really fight inflation; they 're just holding firm. They'll fight inflation. They might not even get in the ring, right? They might just conceive of the fight without even engaging, but if they do get in the ring, they 'll be knocked down by inflation because inflation is already in double digits.
And if you measure it honestly... But even with the government rigged the CPI, 7% inflation. You can't fight 7% inflation with 1% interest rates. If we get that high, you need much higher interest rates than that to make a difference, and faith simply can't go there because of their past monetary mistakes.
They have an entire nation heavily indebted. You know, the national debt of the federal government is almost 30 trillion; we just passed 29 trillion. I think I remember the 80s and 90s seeing something like, "It's a..." trillion, two trillion, like that, right? I can't remember. Yes, well, it broke down at one trillion around 1988.
We're driving, so it's 30 times bigger than that. But at the moment, the cost to the government of interest expenses on the national debt is really about 1%. That's the average cost. Well, if the Central Bank had to raise interest rates to 5%. Regarding the national debt, you know what the cost would be if it exploded, and we have to refine all of this because it's all short-term paper, you know, something like a third of the debt will mature next year, and a large part of that debt that is maturing is 25 basis points, you know, like a quarter of 1%.
And if it matured and then they had to roll it over at 5%. I mean, the cost to the government is astronomical; it doesn't have money. But corporations also have a huge amount of debt; they issued debt to buy back shares. Individuals have debt; they borrowed money to buy houses, cars, to buy all sorts of things, and it would end up on their credit cards.
What happens when interest rates rise? Nobody can afford the kind of interest rate that would be necessary to really control this kind of inflation. But people simply have n't connected these dots yet. They just assume that the Fed could raise interest rates a little and that will solve the problem.
That won't solve the problem; it will only trigger an even bigger problem. That's why Fred won't really do anything; inflation will only continue to worsen. If Fred could fight inflation, he would have already done so. They wouldn't be lying and pretending it doesn't exist or claiming it's transitory.
They would have taken some preventative measures before it got so bad. The reason they didn't is because they were afraid of collateral damage to the economy. Well, if they didn't want to fight inflation before, when it was lower, because they were afraid of harming the economy, they won't fight it in the future when it...
If inflation gets even bigger, fighting it would cause even more damage to the economy. So they only talk the talk, right? There's no way around it when it comes to fighting inflation. And you know, when the markets figure this out, gold will become ballistic because people will realize that the dollar is a bottomless pit.
What are the other three sensible investments besides gold that people should be making in the next three years that aren't cryptocurrencies or gold? What would you say are those investments that I think will really happen in the next few years? It's the US dollar, which is now the world's main reserve currency.
The US dollar will gradually be phased out of this role, and it's necessary to understand how vital this role is to the American way of life today. Because once upon a time in America, we manufactured practically everything we consumed. In fact, we manufactured so much that we had surplus, and we were the largest producers of manufactured goods in the world.
All types of consumer electronics, like all the materials that are now manufactured in Japan, Germany, or China—we don't do that anymore. We don't do much in relation to what we consume and how it's made. How can we buy all these things that we didn't make? We can print money, which is... It's easy to do, right?
Just take it out of a printing press. Actually, you don't have to print it; you just make it exist on a computer. You just make a few dollars, and then we use them to buy all these things we don't make. This allows Americans to actually live a standard of living that isn't related to our real productivity.
We're living far beyond our means. Obviously, this is fun, you know? We can consume many things we don't need to make. Making things requires resources—land, labor, capital. We can get these things without having the resources, so we can do other things, like many people are involved in service. Right?
Instead of having to work in a factory making things, we do services and things like that because other people are doing it. We don't have to deal with factories, with pollution, right? We just get all the good things; we don't have any of the bad things. We leave all that to the Chinese. Well, the Chinese are willing to work hard to produce goods for Americans to consume because they have confidence in the dollars they are receiving in return.
In the future, they can take those dollars and buy the things they need, and in the meantime, they will invest in our treasuries or other assets. But when they really lose confidence in the future value of the dollar because we are printing too much... The dollar will fall, and then the price of all these things will skyrocket.
What will happen is that the American standard of living will plummet because we will no longer be able to live beyond our means. Now we will be restricted to living within our means, or perhaps even below our means, because we have to pay off a lot of debt so that Americans can only consume what we can produce.
We won't be able to maintain trade deficits of $80 billion a month. We will have to balance the books and produce so that we can consume. Furthermore, we can borrow a lot of money from foreigners; this will no longer be possible. Therefore, Americans will have to go from being spenders to a nation of savers.
Right? But when you do that, an economy based on wasteful spending will collapse. Right? 70% of our GDP—we are all spending money. But if we stop spending and start saving again, which is what we need to do within this false economy that is crumbling, there will be this great transition. But when the dollar falls, it means that other currencies, by definition, are rising relative to the dollar.
And just as Americans are losing purchasing power, other people are gaining the purchasing power that we have lost. The world will still continue to produce goods; it's just that instead of Americans consuming those goods, non-Americans will consume them because, for them, prices will fall, but for Americans, prices will rise.
The same thing happens with assets: goods in the United States, stocks, real estate will be marked up, but assets in other countries, relative to our assets, will be marked up. So, America will become poorer as a nation; other countries will become richer. In fact, America has been a great burden that the global economy has had to bear because we are, you know, over 300 million Americans.
We're not pulling our load right away. The world had to carry our water; they had to produce the materials we consume and save the money they lend us. This means they had less to consume and less savings to invest in their own economies because they have invested in ours or lent to us. Therefore, when the dollar falls and people are no longer accumulating dollars in treasuries, the global economy can actually improve.
Some countries will actually benefit from the fact that it will be lifted off their shoulders. So, in essence, your question is what I'm doing myself and what I'm encouraging my clients to do is... Investing in domestic currencies that stand to gain the most from the decline of the United States, I want to own currencies with the greatest potential for appreciation against the dollar.
I want to own assets and businesses that will benefit from wealthier American customers having increased purchasing power, just as at one time America was a young, relatively poor country, and throughout the 19th and early 20th centuries we became very rich. You invested in the United States in the 1860s and 1870s, you made a lot of money as we became this great power.
You want to invest in countries and you will see a large proportional increase in your wealth. So if any of your listeners write, "If you want to build a portfolio that will perform well, then you'll see that happening, right?" We have a stagnation in the weak US dollar similar to what we are going to experience, but this will be worse.
It was the 1970s, and when the 1970s began, an ounce of gold cost $35, when it ended it was $850. Oil was at $3 a barrel, it went to $30 in 1970. You could buy four German Marks for a dollar at the end. From the decade... Maybe an email... the Swiss franc was 23 cents in the early 70s, reaching 80 cents at the end, then all these currencies went up...
the Japanese yen... You should get 360 yen per dollar in 1970, now you never even get 100, but I think it reached maybe 30, 41, 50 in 1980, but a huge drop... If people invested, bother, say, in foreign stocks during the 70s, they made a lot of money; if they stayed in American stocks, they would lose money; if they stayed in US bonds, they would lose even more money.
Therefore, I think we are going to experience in this decade that it will be much worse financially than in the 70s for Americans who continued to invest in dollar-denominated assets, but if you get out of the dollar and invest internationally like what I'm doing, get into foreign stocks, get into commodities, I think you will make even more money in this decade than the Americans who did it in the 70s, because if you understood the 70s, the problems of the 70s had their roots in all the money that...
We printed money in the 70s to finance big government, to finance deficits, the war on poverty, the big society programs, the Vietnam War and the moon landing. The government started spending a lot of money, started having deficits, the reason for printing money, and then in the 70s we continued to print, and only when we finally got around to the 80s did we really tighten the policy.
The problem is that we can't do that now because we have much more debt now than we did before, and it's financed with short-term paper money. We don't have the capacity to swallow the bitter-tasting medicine we swallowed back then. Because this time it would kill us, we would actually die from it; the medicine would be like a toxin.
Therefore, there's nothing we can do if you understand that the inflation that was created in the previous decade, and that we are still creating, is worse than anything from the 70s or 60s. And what happened was that in 1971 we left the gold standard, and that's what really accelerated things. Well, this time the world is going to leave the dollar standard, and that's going to be even worse for the dollar than leaving the gold standard was, and that's why people...
They need to act now because it can't be too late. I mean, you're going to have to get there early, and obviously, and I got there very early because I've been preparing for a long time, but it's better to get there 10 years earlier than a day later. You 're one day late, so it's over now. I don't think you'd get there 10 years earlier if you started now because I think it's very unlikely that we'll be able to escape with another ten years of kicking and screaming.
You should already see the signs that everything is imploding. Okay, the investors are the big, big emoticons or crypto guys who say, "Look, Peter, the sale looks great, but you're wrong. I 'm seeing this growth here, I'm making money, it looks like a lot of money on paper. How do you manage that?" Well, I don't really manage them.
I mean, most of them are just lost causes. They'll just learn the hard way. A lot of crypto people are very young, and because they 're very young, they don't have much money at risk because they haven't had time to make a lot of money. Right? The best time to lose a lot of money is when you're young because you have a whole life to earn it back, and the experience itself has a lot of value.
That can help you avoid making mistakes. A bigger mistake in the future with even more money, right? So it's a life lesson, it's a growing experience of learning from pain, you know? That's where wisdom comes from. Like all these young people who have Bitcoin, they mock me, they immediately call me a bomber, the old man.
I don't understand, I 'm not in the know. I was in my 20s too, I understand, you know? Like when you think you know everything when you're a kid and you think your parents and grandparents are fools because they don't know new things, but as you get older and you appreciate how much your parents and grandparents know, all of this is natural, it's been happening probably for thousands of years, I mean I'm sure, 20 cavemen who thought they were wise, you know, the new clubs, and how they worked, or whatever, that's how they learned the lesson.
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