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Peter Schiff: The World Will Drown in an Ocean of Inflation; Gold Is Going Ballistic
Peter Schiff: The World Will Drown in an Ocean of Inflation; Gold Is Going Ballistic
The gold market took a one-two punch on Tuesday as Trump made some concessions in the trade war and inflation numbers came in a bit higher than expected. Peter Schiff talked about it in his latest podcast, saying gold traders still don’t understand the gold rally.
Stock markets surged as gold and silver dropped after US trade representatives said they would delay some of the additional tariffs recently announced by President Trump. The Dow closed 372 points higher. Meanwhile, the price of gold dropped below $1,500 briefly before rallying back above that key number.
Gold actually began selling off before the trade war news when the Consumer Price Index number came in hotter than expected. Peter said he knew that would happen.
That is the way the lemmings trade, because according to the conventional wisdom, if inflation is higher, then the Fed will be less likely to cut rates. After all, they’re cutting rates because inflation is too low and if inflation comes in hotter, well, then there’s less of a reason for the Fed to cut rates. So paradoxically, higher inflation is seen as being bad for gold. And the reason I’m saying paradoxically is because gold is an inflation hedge. Normally, the more inflation the more you want to buy gold.”
Peter said investors are banking on the Fed fighting inflation, but they’re wrong.
There is no way the Fed is going to fight inflation. I don’t care how high it is … One of these days the traders have to realize that these numbers don’t matter. I mean, maybe they matter to the public who has to live with a rising cost of living. But they don’t matter to the Fed. The Fed is going to take rates back to zero no matter what these numbers are, because the economy is going into recession even as inflation rises.”
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Peter Schiff: If You Understood What This Means, You Would Be Buying Gold as Fast as You Can
Peter Schiff: If You Understood What This Means, You Would Be Buying Gold as Fast as You Can
Gold has risen to six-year highs in recent weeks as the Federal Reserve has pivoted back toward an easy-money monetary policy. Markets widely anticipate a Federal Reserve interest rate cut this week and the economy appears to be slowing.
Peter Schiff recently appeared on RT Boom Bust to explain why he believes this is the beginning of a much bigger long-term rise in the price of gold. And it’s not just because the Fed is cutting rates.
In fact, they are going to cut rates next week and this is going to be the first step on the road back to zero. And the Fed is also going to return to quantitative easing. But we just found out that Donald Trump is cutting a deal with a Democrats to basically throw out any progress Republicans made back in 2011, thanks to efforts of the Tea Party, to at least try to rein in the increase in government spending. So, they’re throwing caution to the wind. We are going to see deficits going through the roof over the next several years, and that’s even without the recession, which I believe is coming and which is going to make them much, much worse.”
Consider that in the midst of what is supposed to be a strong economy, we’re already seeing record-setting deficits. As Peter pointed out, bigger deficits mean more money-printing and that means more inflation.
All of this is very bullish for gold … If you understood what all of this means, you would be buying gold as fast as you can.”
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Peter Schiff: The Fed Is Going to Stimulate Inflation, Not the Economy (Video)
Peter Schiff: The Fed Is Going to Stimulate Inflation, Not the Economy (Video)
In December, Peter Schiff predicted that the Federal Reserve was about to hike rates for the last time and that the next step would be rate cuts. Yesterday, Jerome Powell made comments widely interpreted to signal the rising likelihood of a rate cut. The Fed chair dropped the word “patient” from his vocabulary, saying the central bank would respond as “as appropriate” to the perceived economic impacts of tariffs and other economic data.
Peter appeared on Fox Business Countdown to the Closing Bell with Liz Claman to talk about what’s next up for the Fed and how it will impact the economy.
I don’t think that Powell would even open the door to the possibility of a rate cut if he wasn’t prepared to walk through it.”
Peter said the reason he knew the Fed would end the hiking cycle in December was because the stock market was tanking and he knew the only way the central bank could stop the carnage was to take the rate hikes off the table.
Well, now it’s falling again, and so now all they’ve got left in their quiver is to actually cut rates.”
Claman pointed out that the stock market was popping at the mere suggestion of a rate cut.
“Exactly!” Peter said. “But I think people are wrong if they think it’s going to work again.”
The Fed was able to inflate an enormous bubble with QE one, two and three, and keeping rates at zero for as long as they did. But the next time, it’s not going to work.”
Peter reiterated a point that he made during his podcast last week, noting that bond traders are anticipating a recession. They are betting that the Fed will cut rates during the downturn.
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Peter Schiff: The Uber IPO Fiasco and the Writing On the Wall
Peter Schiff: The Uber IPO Fiasco and the Writing On the Wall
Uber launched its IPO on Friday. It was less than ideal.
Meanwhile, the Federal Reserve is talking about how it wants to tweak its quantitative easing program when the next recession rolls around.
Peter Schiff talked about how these things relate — and the “writing on the wall” for the economy in his latest podcast.
Instead of buying some fixed amount of Treasurys and mortgage-backed securities, the central bankers have floated the idea of pegging a yield during the next economic downturn. For example, it would try to hold the interest rate on a one-year bond at, say, 1%. As Peter pointed out, this is essentially price-fixing.
They’re saying, ‘We don’t want the interest rate that is being determined in the market. We want to interfere in the market so that the interest rate is lower than the market would set.’”
The central bankers are basically admitting that this is not capitalism. They don’t want the free market discovering a rate because they don’t like the rate the market would choose. When you interfere with the market-clearing price – and an interest rate is simply the price of money – then you create surpluses or shortages. This is a basic supply and demand function.
As Peter said, this constant Federal Reserve suppression of rates is the source of our problems.
The reason the Fed constantly feels that it has to artificially suppress interest rates is because we have so much debt as a result of the artificial suppression of interest rates in the past.”
That’s the irony of the Fed suddenly running around warning about high levels of corporate debt. It’s a problem it created!
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Peter Schiff: The Bigger the Boom, the Bigger the Bust (Video)
Peter Schiff: The Bigger the Boom, the Bigger the Bust (Video)
During the New Orleans Investment Conference, Peter Schiff participated in a panel discussion with Ben Hunt and Mike Larson. They talked about bubbles, booms and busts.
Hunt called it the “bubble of everything.” But he said the “gravitational force” created by all of the assets central banks have purchased over the last year have changed the “bubble-popping process.” That makes it hard to predict when things will actually start to deflate. He said it will take something the undermines the market confidence that central banks can bail us out. Hunt said inflation was possibly the pin that could prick the bubble.
Larson called it the “uber-bubble,” and he said he already sees some of the background concerns that have been simmering for a long time are starting to “bubble over.” (Pun intended.) He said the last two bubbles were high in amplitude, but limited to certain parts of the economy (dot-coms and housing). The current bubble isn’t as high in amplitude, but it’s broader-based. We see bubbles in stocks, high-yield bonds, housing (again), and commercial real estate, along with a lot of other assets you don’t hear as much about – such as art and comic books.
I think the process of unwinding this is already beginning.”
Peter focused in on the cause of the bubbles.
When you see rampant, wide-scale bad decisions, generally a central banker is behind it, and they have made a bad decision to create too much money and to artificially manipulate interest rates down.”
This creates distortions in the economy because interest rates are really nothing more than price signals.
And like all prices, they need to be determined by the free market.”
Whenever the government – and central banks are really an extension of governments – price fixes something, it creates big distortions and malinvestments.
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Peter Schiff: We’re not Borrowing Ourselves Rich; We’re Borrowing Ourselves Broke
Peter Schiff: We’re not Borrowing Ourselves Rich; We’re Borrowing Ourselves Broke
Peter Schiff has been saying that despite the recent stock market rally and all of the optimism about an end to the trade war, a recession is a done deal. There is plenty of economic data to back up despite the recent economic growth. In his most recent podcast, Peter Schiff said that while the GDP number might look pretty good, the growth is unsustainable because it’s all built on debt.
Last week, we got the first look at Q4 GDP. It came in slightly stronger-than-expected with a rise of 2.6%, on an annual basis. That compares to trade expectations of a rise of around 2.2%. If that holds, total 2018 GDP may well come in at Trump’s target of 3%. This would be the biggest GDP number since 2005.
But Peter put this into a little different perspective. Consider this: in 2005, the national debt increased by $554 billion. That borrowing “purchased” 3.5% economic growth. In fiscal 2018, the national debt increased by $1.27 trillion. That’s more than double the debt increase of 2005.
So, we had to add a lot more debt in 2018 to buy not as much growth as a much smaller amount of debt in 2005. So, the takeaway from that is this is unsustainable because the growth came at a heavy cost. We had to increase the amount of debt that we had by a lot more than the percentage that the economy grew.”
And of course, it’s not just government debt. Household debt is also at record levels.
As Peter put it, “We’re not richer because of this economic growth.”
If your debt is growing faster than your economy, then you’re not getting richer. You’re getting poorer. You would have been better off without the debt and without the growth … We’re borrowing ourselves into poverty. We’re not borrowing
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Peter Schiff: The “Trump Tariff Put” on the Stock Market Is Worthless
Peter Schiff: The “Trump Tariff Put” on the Stock Market Is Worthless
Just because you’re a Republican, you don’t have to claim that anything that’s done by another Republican is great in order to make the Democrats look bad. Because ultimately that comes back and bites you because you lose all credibility when the economy turns down and you’ve been gushing over how great it is and how successful the Republican president is. And when it turns out it was just a bubble, it was just an illusion and when the bubble bursts and the illusion is replaced with a harsh reality, well you’ve got nothing and it makes it easier for the other side to scapegoat capitalism for the problems and hold out more government as the solution.”
Nevertheless, the markets are going up. One of the reasons is the so-called “Trump tariff put.” The idea is that Trump will keep an eye on the stock market and the economy, and if the tariffs actually start to have a negative impact, he can just soften his stance and perhaps even lower the tariffs. That will rescue the stock market and everything will be fine.
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