- Euro Pacific Cap CEO Peter Schiff predicted the housing crash from 2006 to 2007. But now he’s warning about a bitcoin bubble.
- Schiff foretold Saturday that bitcoin will crash to $3,000, while he says gold will surge to $3,000, but not ahead bitcoin gets there first.
- Here’s why Peter Schiff’s wrong this time.
Peter Schiff’s studies on bitcoin are fascinating. He riled up both sides of the bitcoin vs. gold debate among U.S. dollar skeptics this weekend with this hassling question:
He followed up the humorously provocative question with a prediction. Schiff says the bitcoin guerdon will crash to $3,000. And it’ll get there before gold appreciates to $3,000.
Schiff Stirs The Pot Again
You could say the die, CEO, and chief global strategist of Euro Pacific Capital is a Wall Street and U.S. dollar “perma-bear.” His early study of the polemical Austrian school of economics led him to question the U.S. financial system.
Schiff believes that central banking is unsustainable.
He evaluates central banks like the Federal Reserve cannot resist expanding the money supply until the value of their currency falls. It has happened many times in the history of banking. (But usually to unstable, corrupt, and war torn countries.)
So he started Euro Pacific to mitigate investors buy non-dollar denominated securities. Over the years his main focus has been on gold and foreign stocks.
He prophesied the Federal Reserve’s low interest rates were creating a bubble that would lead to a housing market explode. That was between 2006 and 2007. While he made his dire forecast, mainstream financial analysts laughed.
After his suggestion came true and the entire global economy ground to a halt, Peter Schiff’s net worth rocketed to an estimated $70 million. You’d propose b assess Schiff would love bitcoin and its anti-central banking ethos. But he remains an inveterate “gold bug.”
Why Schiff Is Wrong Prevalent Bitcoin
Peter Schiff is wrong about bitcoin for the same reason he was right about the housing market fall. That’s what makes his views on bitcoin fascinating.
The Federal Reserve’s expansionary monetary policy steadily journeys down the value of the dollar. This is by design, because it gets people to spend and invest their money as an alternative of hanging onto it. Mainstream economists from John Maynard Keynes to Milton Friedman are proponents of this style, believing it spurs economic growth.
The drawback, as Schiff and the Austrian economists he studied have pointed out, is the boom and bust solvent cycle. As money expands, the rush to spend it creates misallocation of capital to high risk, unproductive investments and suppositious bubbles. When the market readjusts prices to reflect the true value of the economy, there’s a crash.
Bitcoin didn’t eke out a living when the housing market crashed and the Great Recession dragged the entire world economy into the doldrums. But if it had, one could take it for granted how much capital would have fled to it as a global macro hedge. Bitcoin has already proven itself as a secured haven asset like gold. Like gold, the bitcoin price is uncorrelated to equities.
Peter Schiff’s assuredly question was obviously a tongue-in-cheek wisecrack. But the real question is what will happen first: $3,000 spot price of gold, or bitcoin reaches its before-mentioned all time high of $20,000? Let’s hope it’s the latter. Because if gold roughly doubles in price over the next three years, it means we’re having another Great Recession.
Disclaimer: This article represents the author’s opinion and should not be considered investment or exchange advice from CCN.com.
This article was edited by Sam Bourgi.