Peter Schiff sees Bitcoin as the pin that will burst the bubble in assets based on no real fundamentals, a speculative mania that has been aided and abetted by unprecedented monetary easing, a policy which has been implemented by central banks.
So, a reflation policy is being pursued by central banks in the wake of pandemic lockdowns, which has contracted economic activity to levels not seen since WWII.
Central banks are desperately trying to kickstart economic activity through yield suppression, keeping base rates near zero or negative, and implementing endless quantitative easing, creating currency to purchase assets.
“Peter Schiff sees Bitcoin as the pin that will burst the bubble in assets based on no real fundamentals”
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Reflation, in theory, encourages household spending and business investment, which then fires up the economic machine.
But the risk of creating too much currency is that it stimulates a speculative mania, thereby diverting capital flows from productive investments, which is where Peter Schiff sees Bitcoin as the pin that will burst the bubble.
Already signs of inflation are raising their head, despite the central banks talking it down because raising rates in a system so indebted would be unthinkable.
“It is already going to be more expensive to eat and fill up your car” said Peter Schiff.
Prices across the board are going up whether it be in soft commodities, energy and metals, noted Peter Schiff.
“It is already going to be more expensive to eat and fill up your car”
Peter Schiff doesn’t think Elon Musk’s Tesla bought Bitcoin as a hedge against currency debasement but rather as a speculative gamble, which is why Peter Schiff sees Bitcoin as the pin that will burst the bubble
“I think the reason Tesla is buying Bitcoin is that they want to help pump up the price. I think Musk knew by announcing to the world that Tesla owns $1.5 billion of Bitcoin. That announcement in itself will make the price of Bitcoin go up” said Peter Schiff.
Peter Schiff then questions whether Elon Musk was engaging in insider dealing.
“So, if you have this insider information that Telsa is buying Bitcoin and then you buy it for yourself that could be considered insider trading” he said.
Peter Schiff is against companies buying cryptocurrencies. “It is the same thing as buying a lottery ticket with shareholders’ funds it makes no sense” he added
Peter Schiff thinks that if Elon Musk was really concerned about rising costs of raw materials for building EVs he would have bought futures contracts, or maybe precious metals, particularly silver which has productive use.
“It would make more sense for Tesla to buy gold, silver because they move up with other metals Tesla would need for production. But there is no historic relationship between the price of Bitcoin and anything” he added.
“Tesla’s solidarity with other bubbles draws attention away from the fact that his stock is in a bubble” – Peter Schiff
Elon Musk’s Tesla is showing solidarity with other bubbles, Bitcoin, which is why Peter Schiff sees Bitcoin as the pin
“Tesla’s solidarity with other bubbles draws attention away from the fact that his stock is in a bubble” he said. Ironically, the Bitcoin bubble could burst the Tesla bubble.
Moreover, not all of Tesla’s shareholders are bullish or want to invest in Bitcoin, bearing in mind the company’s cryptocurrency investment undermines its environmental image.
“Tesla got $1.5bn in environmental subsidies in 2020, funded by the taxpayer and it turned around and spent $1.5bn on Bitcoin, which is mostly mined with electricity from coal. Their subsidy needs to be examined” David Gerard, author of Attack of the 50 Foot Blockchain.
“Hopefully, everyone isn’t going to follow Musk’s lead because corporate America is in bad enough shape so if we were to flush a lot of our retained earnings down the Bitcoin drain that would make the financial problem for the US even worse” said Peter Schiff.