Yesterday we brought you the first part of a Peter Schiff interview where he discussed his thoughts on inflation and how a potential victory by Joe Biden next month could send stock prices dramatically lower.
Here’s the second part of the interview where Schiff talks more about the stock market, the US dollar, and finally where he sees gold prices headed.
When asked about why the stock market hasn’t headed lower as the odds of a Biden victory increase, Schiff says it’s because bad news for stocks means the better the odds for more stimulus.
“The market’s not selling off because investors perceive a Biden victory as being a positive. If you look at the way the markets have been reacting to bad news, bad news is good news. Why is bad news on the economy good? Because it means we get more stimulus, we get more money printing. That’s the only thing that’s driving the stock market. So they’re looking at the bad news of a Biden win as being good for the stock market.”
Traditional Ways Become Irrelevant
He adds that in today’s stock market, every traditional way to value a company is irrelevant when the only focus is on how much money the Fed is printing and how long they will hold interest rates at zero.
“Corporate earnings are going to get crushed under Biden. What the markets care more about is the stimulus. The stimulus trumps the earnings. In other words, I don’t think earnings matter in this market anymore. Earnings are irrelevant. All that matters is how much money the Fed is printing. So the markets are looking at how awful the economy is going to be under Biden and they’re like “This is great news! The Fed is going to be at zero forever! Money is going to be dropping from helicopters. So stocks are going to go up in the horrible economy that will be the consequence of the Biden victory.”
Schiff says the downside to all the stimulus is an increase in the amount of US dollars in circulation, which he says will be the next crisis, not a financial crisis.
“We’re dramatically increasing the global supply of dollars. And so I think once the dollar starts to fall, it’s going to turn into a freefall. That is the crisis that’s coming. It’s not going to be a financial crisis. It’s going to be something so much worse than that, it’s going to be a US dollar crisis which also means it’s going to be a sovereign debt crisis. US Treasury bonds are going to be right in the crosshairs. And of course if Treasury bonds are collapsing, so are all bonds. All US dollar denominated bonds. And we’re a country that runs on debt. Everybody is borrowing. And if nobody wants to lend us money anymore, if the Fed is not lender of last resort, but the lender of only resort, then this whole house of cards economy is going to come collapsing down all around Joe Biden.”
The Plus Side for Gold
This, in turn, is great for gold, says Schiff.
“I think gold could shine even brighter under Biden. I think the initial reaction when Trump was elected, gold sold off because people thought Trump was going to reduce our trade deficit, he’s going to strengthen the dollar, we’re going to have a better economy, he’s going to pay down the national debt, none of that happened. All of the good news that was weighing down gold turned out to have been a false rumor. Now, nobody believes any of that is going to happen under Biden. Biden is clear he wants bigger government, he wants bigger deficits, he wants increased taxes on the productive people in the economy and increased subsidies on the unproductive. So the economy is going to be far weaker under Biden, everybody can see that, the deficits are going to be much bigger, the Fed’s going to be printing a lot more money, that is very bullish for gold.”