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Peter Schiff: Inflation Is Going to Win the War
Peter Schiff: Inflation Is Going to Win the War
The CPI data for December buoyed markets and raised hopes that the Federal Reserve is winning its war against inflation. But in his podcast, Peter explained that the Fed isn’t winning the war. It is losing and will ultimately surrender to inflation.
Markets rallied after the CPI data appeared to show further cooling in price inflation. Most people assume that means the central bank can be less aggressive and ease up on rate hikes in the coming year. And if there is enough progress, many people think the Fed will reverse course and start cutting interest rates later in 2023.
Peter said he agrees that there is a good chance the Fed will cut rates this year. And he thinks there is an even better chance the central bank returns to quantitative easing, whether it cuts rates or not. But this pivot won’t be because of a victory in the war against inflation.
No. They’re going to surrender. Inflation is going to win that war. The Fed is going to run to fight another battle — at least it’s going to try to fight because it’s going to lose that battle too. That battle is going to be recession, maybe financial crisis, maybe a battle to try to prop up the US government whose insolvency is becoming a bigger problem with rising interest rates.”
The US government continues to run massive budget deficits even as its interest costs rise. Interest payments on the debt rose 41% in 2022. According to the Peterson Foundation, the jump in interest expense was larger than the biggest increase in interest costs in any single fiscal year, dating back to 1962.
If interest rates remain elevated or continue rising, interest expenses could climb rapidly into the top three federal expenses. (You can read a more in-depth analysis of the national debt HERE.)
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Peter Schiff: You Think Inflation Is Bad Now? Wait Until Next Year!
Peter Schiff: You Think Inflation Is Bad Now? Wait Until Next Year!
Peter Schiff recently appeared on Real America with Dan Ball to talk about the economy, energy prices, and inflation. Peter said if you think inflation was bad this year, wait until next year with a much weaker dollar.
Dan set the interview up with a list of tech firms set to lay off employees. He asked how people can say the economy is just fine when you have tens of thousands getting laid off, nobody has any savings, and when the housing market is tanking.
Peter said they’re going to keep saying that, but it simply isn’t true. He pointed out that the entirety of the Q3 GDP increase was from a decrease in the trade deficit.
It’s not like it went away. It just got slightly less enormous than it had been. And that was for two reasons. The strong dollar enabled us to buy imports cheaper. But also, all that oil that was released from the Strategic Petroleum Reserve, we got to export that, so that increased our exports and reduced our deficit. And so that helped us out.”
But those impacts are already starting to reverse. The dollar is tanking.
And all of the economic data that’s come out so far on the fourth quarter suggests that GDP in the fourth quarter is going to be negative again.”
That would mean a drop in GDP in three of the four quarters in 2022. And Peter said the Q4 drop could be the biggest yet.
As far as the petroleum reserves, Peter said we’re going to run out sometime next year.
And I think in California, by the time Biden finishes his first term, and hopefully his only term, I bet you guys in California will be paying $10 a gallon for gas.”
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Peter Schiff: The Fed Made This Bed and Now We Have to Lie In It
Peter Schiff: The Fed Made This Bed and Now We Have to Lie In It
Inflation is running hot. Economic data is running cold. Stocks and bonds are under pressure. The Fed is scrambling. In his podcast, Peter Schiff talked about the trajectory of the economy. He said we’re on the cusp of the most obvious crisis that virtually nobody saw coming. The Federal Reserve made this bed. Now we have to lie in it.
Stocks and bonds are off to a rough start in 2022 with the expectation of rate hikes on the horizon. In fact, many analysts now think that the Fed could raise interest rates five times in 2022. And some also think the first hike in March could be 50 basis points.
Hedge fund manager Bill Ackman called a .5% rate hike “shock and awe.”
Peter called this “ridiculous.”
It’s not shock and awe. When you’re talking about 7% inflation, a move from zero to 50 basis points is still recklessly low interest rates. And for a Fed that’s actually serious about fighting inflation, raising interest rates to 50 basis points is not nearly enough for the task at hand.”
Even so, a .5% rate hike could have a profound impact and pop the bubble economy.
Given the incredible amount of leverage that’s in the system, a 50 basis point rate hike can still do a lot of damage. And I think Bill Ackman is underestimating the extent of the damage. But not just the damage from the initial hike, but from all the subsequent hike, which aren’t going to do any good about slowing down this inflation freight train.”
Peter noted the price of oil hit has continued its upward trajectory this week. The price of oil is at a seven-year high with plenty of room to keep running up. In 2021, a lot of producers ate their rising costs…
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Peter Schiff: Gold Will Explode; The Dollar Will Implode When the Markets Figure This Out
Peter Schiff: Gold Will Explode; The Dollar Will Implode When the Markets Figure This Out
Peter Schiff says gold will explode and the dollar will implode when the markets figure out the Fed is crying wolf when it comes to monetary tightening.
The Federal Reserve wrapped up another meeting without making any changes to its current extraordinary, loose, inflationary monetary policy. But the central bank did hint that it may start tapering its quantitative easing program “soon.”
That was enough for the markets. They continue to expect the Fed will tighten monetary policy and fight surging inflation. Gold sold off after the FOMC statement came out, dropping about $10.
The gold market has battled these headwinds for months. Every time the Fed hints at tightening, gold sells off. Every time inflation numbers come in hot, gold sells off. This doesn’t make sense. Why would investors sell an inflation hedge during an inflationary period? Because they honestly think the central bank can and will sweep in and successfully fight inflation.
But as we have said over and over again, the Fed cannot possibly tighten in this economic environment. In an interview on RT Boom Bust, Peter Schiff said even if the Fed does begin to taper, it will eventually reverse course and ultimately expand QE.
It knows the only foundation this bubble economy has is the Fed’s easy money policies. And I don’t think they have any actual plans to taper. And even if they just kind of feign the process by beginning it, they’ll never complete it because soon after they start the taper, again, if they even ever start, they’re going to have to reverse the process. Because ultimately, the Fed Fed is going to expand the QE program and start to buy a lot more government Treasuries and mortgage-backed securities in the future than it’s doing right now.”
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Transitory Inflation Turning Into an Inflationary Spiral
Transitory Inflation Turning Into an Inflationary Spiral
Consumer prices have been rising precipitously this year. If you annualize the Consumer Price Index through the first five months of 2021, you get a CPI increase of over 6%. Federal Reserve Chairman Jerome Powell continues to push the narrative that inflation is transitory, but not everybody buys into this storyline. On the Wolf Street Report, Financial Analyst Wolf Richter said Powell’s temporary inflation is turning into an “inflation spiral.”
Richter said some measure of inflation will likely tick down in the months ahead, but to steal Powell’s term, the relief will be transitory and only serve to offer false hope before inflation starts rising again.
The first bout of inflation always looks temporary. But during those first bouts of inflation, that’s when the triggers of persistent inflation, namely the inflationary mindset and inflation expectations are being unleashed.”
The markets seem increasingly skeptical of Powell’s insistence that inflation is transitory. Last week, the IMF warned of a “sustained” inflation rise in the United States. Many people are starting to talk about the Fed tightening monetary policy sooner rather than later to fight rising prices and worry this could cause a slowdown in the economic recovery. But Peter Schiff says the markets are bracing for the wrong impact. The Fed won’t fight inflation because it can’t. There is no way to tighten monetary policy without collapsing the economy.
It’s not that inflation is going to turn out to be not transitory and therefore the Fed is going to fight it,” Schiff said. “It’s that inflation is not transitory and the Fed is not going to fight it. And because the Fed is not going to fight the non-transitory inflation, it’s actually going to end up getting much worse than people think.”
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Peter Schiff: The Box That the Federal Reserve Is In
Peter Schiff: The Box That the Federal Reserve Is In
Jerome Powell and Janet Yellen testified jointly before the US Senate last week. Inflation was a big topic of conversation. The Fed chair continued to insist that the central can fight inflation if necessary, but that it really isn’t a problem we need to worry about right now. In his podcast, Peter Schiff said the truth is inflation is a problem. And when it comes to dealing with that problem, the Fed is in a box. It will never pick a fight that it can’t win.
The Federal Reserve balance sheet has swelled to a new record of over $7.72 trillion. It was up another $26.1 billion on the week last week. Peter said he expects this number to continue increasing at an even faster rate in the near future.
I would not be surprised to see the balance sheet hit $10 trillion by the end of 2021 because we have a lot of deficit spending in the pipeline and there is no way to pay for it other than the Federal Reserve.”
One of the questions directed toward Powell was about the Federal Reserve’s independence. Powell talked about how important it is. But Peter said the actions of the Fed chair show there’s really no independence at all.
There’s independence in form only, but not in substance. We pretend we have an independent Fed, but in reality, the Fed acts as if it’s just a branch of the US Treasury Department. The fact that both the secretary of the Treasury and the Fed chairman are testifying together shows a degree of cooperation. They’re working together and it seems that they are trying to coordinate their policies.”
The reason the Fed is keeping interest rates so low and expanding its balance sheet is to accommodate the US government as it spends more and more money.
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peter schiff, schiff gold, jerome powell, janet yellen, fed, us federal reserve, us treasury department, us senate, inflation, balance sheet
Peter Schiff: Government Tries to Replace the Economy With a Printing Press
Peter Schiff: Government Tries to Replace the Economy With a Printing Press
Peter Schiff recently spoke at the “virtual” Los Vegas Money Show and explained why we are near the endgame for the dollar.
Peter opened up his talk speculating that the Money Show could be close to the end of its run.
I think the money that most people have, or at least what they think is money isn’t going to be money much longer.”
What in the world is he talking about?
The looming dollar crisis.
The dollar is going to fall through the floor and inflation is going to ravish the United States. What’s about to happen is that the world is going to go off the dollar standard and go back to the gold standard. That is where we are headed.”
Peter warned that we’re about to see a loss of wealth on an unprecedented scale.
He reiterated that this isn’t about COVID-19. We were already on the cusp of a crisis. The coronavirus simply made it worse.
It’s one of many problems, but it’s not why we’re about to go through this massive economic collapse. But it is the monetary and fiscal policy response to COVID-19. The government’s cure is what’s going to kill the economy.”
In fact, the problems started long before the pandemic. As Peter reminds us, interest rate cuts and QE were already ongoing before the government shutdowns started last March. In fact, it goes back much further than that.
Everything the US government did in the aftermath of the 2008 financial crisis was a mistake. All the monetary policy was wrong. All the fiscal policy was wrong. As a consequence, we never actually recovered from that crisis.
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Peter Schiff: Americans Are in For a Rude Awakening
Peter Schiff: Americans Are in For a Rude Awakening
All eyes have been on the stock market in recent weeks as it has reflected the fears about the coronavirus-induced economic shutdown and the hopes of massive stimulus. It’s been quite a rollercoaster ride. But in his podcast on March 27, Peter Schiff said there’s an even bigger problem looming on the horizon that people aren’t paying any attention to – the potential destruction of the dollar. He said Americans are in for a rude awakening.
The Dow Jones finished its best week since the Great Depression with a 915.39 point drop. But even with that big plunge, the Dow was up about 13% on the week, all on the strength of the spectacular rally on Tuesday, Wednesday and Thursday. In fact, the Dow had a bull market condensed into three days. But Peter said it was not really a bull market. He called it a “vicious correction in a horrific bear market.” And he said that bear market is “a long way from over.”
But while most eyes are on the stock market, Peter said we’re missing a more significant looming bear market — the bear market we’re going to have in the US dollar.
Peter has already explained how the actions of the Federal Reserve and the US government has set the stage to devalue the dollar, saying the dollar is cooked. He said that with the central bank and government response to the coronavirus, hyperinflation has gone from being the worst-case scenario to the most likely scenario.
A bear market in the dollar can mask some of the other problems in the economy. Consider in the 1970s, the dollar fell by nearly 70%. That means that while nominal stock market losses in the decade weren’t terrible, the real losses were significantly larger. It was a destruction of the value of US stocks and Peter said it’s going to happen again.
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Peter Schiff: They’re Going to Need a Bigger Rate Cut!
Peter Schiff: They’re Going to Need a Bigger Rate Cut!
Stop and pause for a moment and think about what just happened. The Federal Reserve says the US economy is strong, but it just initiated emergency monetary policy last seen during the worst financial crisis since the Great Depression.
Something doesn’t add up.
The Fed cut rates 50 basis points on Tuesday. It was the first interest rate move between regularly schedule FMOC meetings since the 2008 financial crisis. The Fed funds rate now stands between 1.0 and 1.25%.
The decision to cut rates was unanimous.
As the Wall Street Journal pointed out, this kind of Federal Reserve move has been reserved for “when the economic outlook has quickly darkened, as in early 2001 and early 2008, when the US economy was heading into recession.” The 50-basis point cut was the first cut of such magnitude since December 2008. Pacific Management investment economist Tiffany Wilding called it a “shock-and-awe approach.”
It may have been shocking, but the results weren’t awesome.
Stocks tanked anyway.
The Dow Jones closed down 785.91 points, a 2.94% plunge. The S&P 500 fell 2.81%. The Nasdaq experienced a similar drop, closing down 2.99%.
Meanwhile, gold rallied, quickly pushing back above $1,600 and gaining over $50. Wednesday morning, the yellow metal was knocking on the door of $1,650.
Bond yields sank again as investors continued their retreat into safe-havens. The yield on the 10-year Treasury dipped below 1%.
In a press conference after the announcement, Federal Reserve Chairman Jerome Powell said the central bank “saw a risk to the economy and chose to act.”
“The magnitude and persistence of the overall effect on the US economy remain highly uncertain and the situation remains a fluid one. Against this background, the committee judged that the risks to the US outlook have changed materially. In response, we have eased the stance of monetary policy to provide some more support to the economy.”
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Peter Schiff Doubles Down on the Dollar
Peter Schiff Doubles Down on the Dollar
Last year at the Vancouver Resource Investment Conference, Peter Schiff bet Brent Johnson a gold coin that the Fed’s next move would be a rate cut. At this year’s conference, Peter collected his gold coin.
Brent and Peter went on to debate the future of the US dollar. Brent says the dollar will go up this year. Peter thinks it’s going down. Peter put his money where is mouth is and went double or nothing against the dollar.
Peter’s Highlights from the Discussion
“The central bankers are going to continue pursuing this policy as long as they can do it without some type of a crisis that intervenes. But the problem is the longer they do it the worse it’s going to be.”
“I don’t think it can go on that much longer. Decades – no way! I mean, can it go on four more years. Sure.”
“The US market has never been this overvalued, overpriced as far as I’m concerned. You know, people were optimistic in 2000.”
“The market is very, very dangerous. It can easily go down. Trump will tweet as much as he can to try to prop it up. But whether that and the Fed’s printing press is going to be enough, we’ll see.”
“I think the whole fiat system that we have is nearing the end of its life. And the fact that were at these zero percent rates or negative rates, and all the stuff that’s going on is the death knell of this system, which was doomed from the start.”
“I think gold is going to reassert itself as the primary reserve monetary asset in the world for central banks and that threatens the dollar.”
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Peter Schiff on the Ultimate Gold Panel
Peter Schiff on the Ultimate Gold Panel
During the Vancouver Resource Investment Conference, Peter Schiff joined Frank Holmes (US Global), Rick Rule (Sprott US), and Grant Williams (Vulpes Investment Management) on the “Ultimate Gold Panel. Daniela Cambone moderated the discussion.
Gold charted its best year since 2010 last year. The price increased by 18.4% in dollar terms. The yellow metal also reached record highs in every G10 currency except the dollar and the Swiss franc. Can this bull-run can continue into 2020?
Peter noted that he was on a gold panel the year before and he was the only person who thought gold was going to go up. Many were predicting the yellow metal would fall back to $1,000.
I thought that was very improbable. And now you’re throwing around could it go back down to $1,300. Look, it’s possible, but I think it’s highly improbable that that’s going to happen. If gold is broken out and 1,350 was a six-year high that capped every rally, I think we took it out, we’ve never looked back ever since. We now seem to be building support around 1,550, or just under 1,550, which was the high before we had a pullback to around what? 1,450. So, the market looks very strong to me. So, while it’s possible that we could get that large decline, I wouldn’t want to hope for it or bet on it. I think that there’s a lot more upside potential and I think the number that Dalio is talking about, 2,000, not only is that very probable, but depending on the outcome of this election, we could go much higher. I mean, if Bernie Sanders were to be elected president, just imagine what would happen to the price of gold. The very night the results came in.”
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Peter Schiff: Americans Are in for a Rude Awakening
Peter Schiff: Americans Are in for a Rude Awakening
On Jan. 13, Peter Schiff appeared on RT Boom Bust with Bubba Horwitz to talk about the yuan, the dollar, the stock market and the US economy. Peter said the dollar is eventually going to collapse and it’s going to be a rude awakening for Americans.
The Chinese yuan has been gaining strength against the dollar in recent weeks, in part because of optimism that there will eventually be a resolution to the trade war. But the Chinese currency is still over 17% lower than it was when the US imposed its first tariffs. Does this mean the markets are cautiously positioning for a deal, or is there still skepticism about the phase 1 deal? Peter focused on the bigger picture.
Well look, a phase one might happen because a phase one is insignificant. The real deal is supposedly phase two. That’s the one that’s not going to happen. So, if anybody thinks we’re going to have a substantive deal, they’re wrong. But the reality is, I think the Chinese yuan is undervalued relative to the dollar and I expect it to rise rather dramatically over time.”
Peter said this is not good news for the US.
It’s going to make imports more expensive for Americans, so it’s going to reduce our standard of living. And I do think ultimately, it’s going to push up interest rates as well, as the Chinese and a lot of other creditors are no longer lending money to Americans, and so we have to draw from our own savings pool, which is extremely shallow. It means the Federal Reserve is going to be printing a lot more money as it monetizes the debt that the Chinese and other nations no longer want to buy, and this is further going to lower the American standard of living.”
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Peak Irony: Fed Paper Admits Fed Policy Can Lead to Economic Ruin
Peak Irony: Fed Paper Admits Fed Policy Can Lead to Economic Ruin
A paper by Scott A. Wolla and Kaitlyn Frerking for the Federal Reserve Bank of St. Louis warns that the Fed’s own policy could lead to “economic ruin.”
The paper titled “Making Sense of National Debt” explains the pros and cons of national borrowing in typical Keynesian fashion. In a nutshell, a little debt is a good thing, but too much debt can become a problem.
But in the process of explaining national debt, Wolla and Frerking stumble into an ugly truth — Federal Reserve money printing can destroy a country’s economy.
So, when does the national debt become a problem?
According to Wolla and Frerking, debt only becomes an issue when it outpaces GDP, or national income, as they call it. If debt grows at a faster rate than income, eventually the debt might become unsustainable.
They note that according to the GAO, the US national debt is on an unsustainable path.
The federal debt is projected to grow at a faster rate than GDP for the foreseeable future. A significant portion of the growth in projected debt is to fund social programs such as Medicare and Social Security. Using debt held by the public (instead of total public debt), the debt-to-GDP ratio averaged 46 percent from 1946 to 2018 but reached 77 percent by the end of 2018. It is projected to exceed 100 percent within 20 years.”
Note that the total public debt is even higher. Most analysts put the total debt to GDP ratio at around 105%.
As Wolla and Frerking point out, rising levels of debt elevate the risk of default. Normally, investors holding government bonds bear this risk. While governments never have to entirely pay off debt, there are debt levels that investors might perceive as unsustainable.
…click on the above link to read the rest of the article…
Peter Schiff: There Are Bubbles Everywhere and They’re All Going to Pop
Peter Schiff: There Are Bubbles Everywhere and They’re All Going to Pop
The Dow pushed above 28,000 on Friday. The Nasdaq also closed on a record high above 8,500, and the S&P 500 made a new record high of 3,120. This despite some more gloomy economic data that came out during the day. Industrial production dropped more than expected, falling by 0.8 in October. Inventory numbers were also revised down. All of this led the Atlanta Fed to revise its Q4 GDP estimate down to 0.3.
In his most recent podcast, Peter Schiff said that it’s QE and Federal Reserve policy that is driving the stock market, not a great economy. In fact, the Fed is creating all kinds of bubbles. And like all bubbles, they will eventually pop.
Despite the weakening economy, the stock market continues to roar and Donald Trump continues to claim credit for the rising stock market and holding the stock market out as evidence of the success of his presidency.”
Ironically, a rising stock market and unemployment were the same two things Barack Obama pointed to as evidence of his success. Peter said this is really all about the Fed.
When Obama was president, we had a rising stock market and a falling unemployment rate and basically for the same reasons we have a rising stock market and a falling unemployment rate now. The stock market was going up because of the Fed, because of artificially low interest rates and quantitative easing. Well, that’s exactly why it’s going up now — artificially low interest rates and quantitative easing.”
Peter said today we have one more thing driving stock markets — talk of a trade deal.
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Peter Schiff: The Next Crash Could Bring Down the Fiat Money System
Peter Schiff: The Next Crash Could Bring Down the Fiat Money System
Peter Schiff appeared on RT Boom Bust on Tuesday (Sept. 17) to talk about interest rates, gold and the dollar. Peter said the fiat currency system may not survive the next recession.
The conversation started focusing on the repo operations conducted by the Federal Reserve early in the week, Peter said the financial media and Wall Street are being much too complacent about what’s going on.
Their instinct is to sweep it under the rug as no big deal, but I think it really is a harbinger of what’s to come.”
Peter noted that the Fed has been artificially suppressing interest rates, particularly since the 2008 financial crisis.
And by keeping interest rates artificially low, they have created a bubble that’s much bigger than the one that popped in 2008. And what happened this morning is you could see the air coming out of that bubble, because the market is trying to bring interest rates higher because we have no real savings in this country. We have enormous debt. Everybody is levered up to the max — government, the private sector, business, consumers — because rates have been so low, we’ve borrowed so much money. The market wants interest rates to be higher but the Fed doesn’t want that to happen because the road back to normal interest rates is a very bumpy one because it’s going to take us right through another financial crisis. So, the Fed is trying to keep interest rates artificially low and they almost lost control of it this morning. “
In effect, the Fed created about $50 to $70 billion out of thin air to supply the liquidity that the market needed.
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