Peter Schiff has said it’s not that we have a “volatile” economy right now. We have a bubble economy, and we are at the beginning of a much bigger crisis than we went through in 2008.
Peter continued with this theme on a recent appearance on Kitco News with Daniela Cambone noting that things are setting up for gold to shine in 2019. As far as the yo-yoing stock market?
“It’s just the air coming out of the bubble. That’s the volatility,” Peter said.
Initially, the bubble was inflating and everything was going up. Now the bubble is deflating and we see things coming down.
Peter said that judging by Fed Chair Jerome Powell’s recent dovish comments, the central bank is trying to blow some air back into the bubble.
“He’s now backing off his talk about continuing to shrink the balance sheet and maybe not raise interest rates anymore, and so that’s kind of reflating the bubble a bit. But I don’t think that’s enough to do it. I think the air is still going to come out. I think the rate hikes that have already taken place are too much for the over-leveraged US economy to bear. So, I think the Fed ultimately is going to go back to zero. I think it’s not just about slowing down the shrinking of the balance sheet, I think they’re going to blow it up even bigger with QE4. And of course, when the Fed surprises the markets by doing a complete 180 on monetary policy, I think you’re going to see the bottom drop out of the dollar, and that’s when you’re really going to see a big bid in the gold market.”
Peter said the recent gains in the stock market last week were likely the first correction in a bear market. During a bull market, corrections are down. In a bear market, corrections are up.
“I think we’re in one of those right now, but I think the primary trend in stocks is down. I think this bear market still has a way to go.”
Cambone asked Peter about Trump’s continuing criticism of the Federal Reserve. Will the president ultimately get what he wants?
“Well, I think he’s going to get lower interest rates, but it’s going to be because the economy is in a recession, which is not something that Trump wants. In fact, it’s going to work very, very much against him, especially if he tries to run for reelection in 2020 because I don’t believe that the Fed’s policies will be successful in getting the economy out of the recession. I think they’ll help put us into a depression, which may not fully take hold until the socialists come into power in 2021. But I do think we’ll have an inflationary recession that will only be exacerbated by the Fed’s attempt to reflate the bubble by going back to zero and doing more QE. I think that it’s going to have a big impact on the dollar and therefore the cost of living, so it will be not stock prices or real estate prices that go up like they did last time, but food prices and energy prices. So, it’s going to be a very, very difficult economy and obviously, that’s not what Trump wants after claiming credit for what he called the biggest boom in US history, which wasn’t even close to being true.”
Peter said we are about to have a much bigger bust than we did in 2008. Unfortunately, Trump and the Republicans in Congress will shoulder the blame.
The conversation then turned to gold. Peter noted that the yellow metal did much better than the dollar in December. It was up about 5%, its best month since January 2017. Gold is off to a good start in 2019, as well, and the dollar is off to the worst start ever if you measure it using the Bloomberg Dollar Index.
“So, gold going up, the dollar going down — I don’t think the dollar looks to be a safe haven, and I think long-term US Treasuries are even riskier than just owning the dollar itself. So, I think gold is really going to shine in 2019. And I think it could shine a lot brighter if I’m right about the politics. If we end up going with the democratic socialists in 2021, you know, my old forecast of dow 5000 is going to look very mild compared to where gold is likely to go with a socialist administration and a sympathetic Federal Reserve monetizing all of these socialist programs that are likely to be enacted following that election.”