During a recent interview, Peter Schiff, the CEO of Euro Pacific Capital, gave his thought on the US economy. He also shared his thoughts on the Federal Reserve and a host of other topics.
Schiff was asked about his prediction in the early 2000’s that the market was set to crash. To this, he acknowledged that the bubble lasted much longer than he expected, but that he was ultimately vindicated. He says this time around, the Fed-induced bubble is much larger and the crash will be even worse.
“Just like I was vindicated in 2008, I’m going to be even more vindicated this time around because now we’re going to get the real crash. Now there’s no saving the dollar, there’s no stopping the rally in gold, we are finally going to have to pay the piper because we’ve been dancing for so long because the Fed has kept the music going, it’s going to be so much worse than what I was originally envisioning.”
On Powell and Inflation
He says Powell is worried about inflation. Former Federal Reserve Chairman Alan Greenspan during his tenure was too, but for opposite reasons.
“I was watching Greenspan be interviewed on CNBC, and specifically he told CNBC that his greatest concern was inflation, that’s what he was worried about. But it’s ironic because that’s also Powell’s concern, but for the opposite reason: Powell says we don’t have enough inflation, we want more, and Greenspan says he’s worried we already have too much. And so if Greenspan is right, and why should Greenspan be any less credible, he used to be the Fed Chairman, so why isn’t his view just as likely to be correct can the current Chairman Powell? But if Greenspan is right, then Powell is just throwing gasoline on the fire that Greenspan is already concerned about.”
On the Price of Gold
Schiff was asked if he thinks current Federal Reserve Chairman Jerome Powell watches the price of gold. He said he doesn’t think Powell really understands economics or gold as much as former Fed Chair Alan Greenspan. Greenspan, he says, used the price of gold as the barometer for his monetary policies.
“I remember when Greenspan was Fed Chairman, and gold was trading at about $350 an ounce, right now we are just under $2000. But he used to talk about $300 and $400 gold. And what he used to say publicly was that if gold prices went down to $300, he knew he was too tight, and if gold got up towards $400, he knew he was too loose. And so he would use the price of gold as a signal, a market signal as to whether or not he had the right monetary policy,” he said.
“So if he saw the price of gold going up too much, ‘Hey, I’m creating too much inflation, I better raise rates, tighten policy,’ and if gold went down, ‘Oh, we’re too tight.’ So he was looking at gold, but ever since Greenspan left, nobody gives a damn about the price of gold. I don’t think Powell cares or even appreciates the significance of $2000 gold and I don’t think he’s worried about $3000 gold or $4000 gold. He should be, I think if he knew as much as Greenspan does, I think Greenspan has a much better understanding of economics and money than any of the Fed Chairman who have succeeded him. So I think his outlook has more credibility than (Former Fed Chair Ben) Bernanke, (Former Fed Chair Janet) Yellen or Powell.”
The Federal Reserve and Inflation
Schiff says the Fed has created inflation by printing money and lowering interest rates. Now, he says the Fed doesn’t understand that it’s undermining the entire US economy.
“All the Fed ever does is create inflation. They print money and lower interest rates. What does that get us? It gets us a bubble that pops. And now they have to blow up a bigger bubble that pops. And then they have to try and blow up a bigger one. In the meantime, they are undermining the actual health of the US economy. They’re making the problems they are trying to solve worse with the very policies they continue to implement because they refuse to admit, or they don’t even understand that they are lighting the fires they are trying to put out with the same materials that set the fires. It’s gasoline. The whole country is going to be torched by this monetary policy when the dollar crashes.”
The Gold Rally
Finally, when asked about the gold, Schiff says the rally has just started. He says you haven’t missed the boat yet, and prices of both gold and silver are going much higher.
“If you think you’ve missed the boat because it’s already $1950, believe me, you haven’t even come close to missing it, we’re going a lot higher. You can sell overpriced stocks and buy gold, which isn’t overpriced, it’s underpriced. Particularly if you have some of these Nasdaq stocks that are really in bubbles that could just implode,” he stated.
He then added “if you really want to make money in the stock market, what I’m doing with my money in stocks, and what I recommend other people do, is I’m buying gold stocks, silver stocks because that’s where you’re going to make a lot of money. You’re going to not go broke. If you have gold and silver, you’re going to preserve your wealth. But if I’m right about what’s going to happen to the price of gold and silver, you’re going to dramatically increase your wealth if you invest in these mining companies. That’s what Warren Buffett did by buying Barrick Gold. He’s making a levered bet, there’s a lot of leverage inherent in these mining stocks to an increase in the price of gold and silver. Buffett isn’t just bullish on gold, he’s real bullish.”