Peter Schiff: Central Banks Have Created the Mother of All Bubbles
The Federal Reserve and other central banks around the world have pumped trillions of dollars into the global economy and depressed interest rates to artificially low levels to blow up the mother of all bubbles. In his podcast, Peter Schiff explained how the recent acquisition of Afterpay by Square reveals the extent of this global bubble economy that will inevitably have to pop.
Square paid $29 billion in an all-stock deal to purchase payment processor Afterpay. It was the biggest corporate takeover in Australian history.
Shares of Square rose 10% on the deal. As Peter noted, this isn’t typical. Normally, when a company buys another company at a premium and issues a bunch of stock, the acquiring company’s stock price drops.
But not in today’s crazy bubble world. In this bizarro world, the acquiring company goes up.”
Peter said Square overpaid for a company that he doesn’t think has much value whatsoever.
Afterpay is touted as an alternative to a credit card. When you buy something using Afterpay at a participating retailer, you only have to pay 25% at the point of sale. You then make three more payments to Afterpay over a six-week time period. In effect, the consumer gets a six-week interest-free loan.
Afterpay has been viewed as a big competitor for traditional credit card companies, but Peter pointed out this really isn’t the case.
Everybody, or most of the people, who are using Afterpay, are using their credit cards to pay Afterpay. All Afterpay is is another middleman that is getting in the way between the transaction.”
Afterpay generates revenue by charging merchants between 4 and 6% for every sale. Visa and Mastercard typically charge about 2%.
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