Peter Schiff Predicts Federal Reserve’s Next Move
It seems like Peter Schiff and CNBC may have finally buried the hatchet. The popular market commentator made an appearance on the news channel on Friday to discuss the recent stock market crash and concluded his talk with a peculiar prediction.
A scuffle followed between Schiff and CNBC after the news channel made an attack on the gold bug for his overly optimistic views on the gold market. Schiff responded with a strong rebuttal. However, that is a bygone now, because Schiff was back on the channel, yet again, with his idiosyncratic predictions.
When asked if he holds the New Year’s Chinese stock market crash and crumbling commodity prices to be the cause of the recent tumult in the U.S. markets, Schiff scoffed at the idea and instead held the Federal Reserve responsible for the mess.
Ignoring the geopolitical shift that’s adding to the global oil glut, Schiff cited the strengthening dollar to be the reason behind the falling commodity prices. For that, too, he alleged the Federal Reserve was the real culprit. Peter Schiff went on to predict that the only way the Fed can save the economy and prevent a U.S. stock market crash is to go for a fourth round of the Federal Reserve’s quantitative easing strategy (QE4). (Source: “Fed Will Reverse Rate Hike and Launch QE4,” Peter Schiff YouTube channel, January 18, 2016.)
“I think the volatility in the markets has been created by the Fed. The Federal Reserve is the reason the market is so high in the first place. They inflated it. They did it deliberately to engineer a wealth effect. It’s phony wealth, unfortunately. And when you create phony wealth with a stock market bubble, the result is, you know, substantial mal-investment.
“You encourage all sorts of uneconomic activity to take place. You get rampant speculation. And, of course, when the artificial high wears off—and that’s what’s happening now, particularly now that the Fed has raised interest rates and is posturing as if it’s going to raise them some more—the air is coming out of this bubble. And that is where the volatility is coming from.”
“You have to realize, why are commodities falling in price? It’s because of the Fed. It’s because the Fed is threatening to raise interest rates. Everybody believes that the Fed is going to be raising interest rates. That is strengthening the dollar, and it is the strength of the dollar that is undermining commodities, because commodities are priced in dollars. And if the dollar goes up, commodities become more expensive for everybody who has to pay in a currency other than the dollar.
And so this is the source of all of this instability and volatility, it is the widespread belief that the dollar is going to keep rising. But the reality is the dollar is not going to keep rising, because the U.S. economy is either already in a recession or rapidly heading to one. And so the Fed is not going to be able to continue with rate hikes. It’s going to have to reverse course, it’s going to go back to zero, maybe negative, it’s going to launch QE4, and that’s going to be a game-changer for the currency markets and the commodity markets.”
Watch the complete interview here.