Peter Schiff: Financial Collapse Real Possibility
Peter Schiff, CEO and chief global strategist for Euro Pacific Capital, is sounding the alarm bells once again. In a recent interview on Fox Business, Schiff warned that as long as the Federal Reserve keeps bluffing that it’s going to raise interest rates, its easy money policies have only delayed an inevitable financial collapse.
He went so far to say that there will be a stock market crash if Fed Chair Janet Yellen continues to pretend that the economy is in good shape by raising interest rates. (Source: “Fed Is Trying Everything They Can to Delay the Day of Reckoning,” YouTube, February 12, 2016.)
Schiff said that the Federal Reserve waited too long to raise interest rates. The December 2015 0.25% increase in its target funds rate is the first rate hike since June 2006. As a result, Schiff said that there is “going to be a bigger disaster” in the U.S. economy and stock market than otherwise, had the Fed raised rates earlier.
Schiff added that the stock market is already in a bear market and there is only “hot air” beneath it. Schiff argues that the markets will keep falling until the Fed admits that the U.S. economy is in trouble.
“The problem for the Fed is that they are now in this credibility box, which I thought they were smart enough to avoid when I thought they wouldn’t raise rates at all,” Schiff said. “But apparently I overestimated their intelligence. They were actually dumb enough to raise rates a little bit and think it wouldn’t matter. It matters a lot.” (Source: Ibid.)
According to Schiff, the Fed is about to launch “QE4” (a fourth round of quantitative easing) along with rate cuts into negative territory, but he is warning against such a move. Schiff believes the Fed should rule it out completely, since it does not seem to be working in stimulating the economies of other countries like Japan and those in Europe that are testing the negative interest rate policy waters.
“What the Fed should do is rule it out outright because it doesn’t work,” Schiff said. “It’s not working in Japan; it’s not working in Europe. In fact it’s backfiring. Look at what’s happening to the European banks. They’re getting crushed because of negative rates. So the Fed should rule it out. They are desperate. They are trying everything they can to delay the day of reckoning, but the problem is because they delayed it so long, we have a lot more to reckon with.” (Source: Ibid.)
Schiff also offered up his forecast for gold, which he believes will continue to rise as investors flee to assets that provide safety, such as bullion. He noted that gold is in “the perfect position,” because it will rise whether the Fed decides to cut or hike interest rates:
“Right now you got two possibilities [for gold].
“The Fed continues to pretend that it’s getting ready to raise rates again or actually raises rates, then the stock market is going to keep falling and gold’s going to benefit from the flight to safety bid that have been driving it recently.
“But on the other hand, if the Fed tried to save the stock market and calls off the rates hikes and cuts rates back to zero, which I think they are going to do—now gold really takes off.” (Source: Ibid.)