U.S. Economy: Peter Schiff Issues a Dramatic Warning for Investors
The disappointing U.S. jobs data has once again sent markets downward on fears of another rate hike from the Federal Reserve. But investor and fund manager Peter Schiff is seeing a rate cut in the cards.
Schiff explains in the video why he believes that the December rate hike was the end of the tightening cycle. Schiff says that the meager performances of the manufacturing and services sectors confirm that a recession is headed our way. He adds that the financial sector now also bears signs of a recession. (Source: “Fed Blinks: Tightening Financial Conditions Will Derail Rate Hike Expectations,” YouTube, February 3, 2016.)
“All of the big banks are making 52-week lows today,” Schiff points out. “Many of these banks are down about 50% from their highs. They’re headed for their 2008/2009 lows… All these banks that were too big to fail when we bailed them out are now much bigger and they’re going to fail again, especially if the Fed continues with its rate hikes, which is another reason why it’s not.” (Source: Ibid.)
According to Schiff, the only way the Fed can save the U.S. economy from another recession is to cut rates. Schiff predicts the Fed may adopt a negative interest rate policy this year, following in the footsteps of Europe and Japan.
“Not only do I think the Federal Reserve is not going to raise rates any more, but they’re actually going to lower them. And they’re not going to stop at zero. We already have the Bank of Japan now with negative rates. They joined the ECB. The Fed’s going to be next,” predicts Schiff.
Schiff doesn’t stop here. He goes on to make the second prediction that contradicts popular belief.
“One of the big trades going on right now is all the hedge funds have shorted the Chinese yuan because they assume that China’s going to have to break its peg, not only with the yuan, but with the Hong Kong dollar.”
He predicts, “Well, I think these hedge funds are about to lose a tremendous amount of money on that bet, because I think the real move in the yuan is going to be higher, not lower, and the same thing with the Hong Kong dollar.”
Schiff concludes his video with his outlook on gold. Schiff gives thought-provoking reasoning for his thesis. He argues, “Gold has fallen for the last few years based on this false belief that everything is great and we’re going to have a return to normalcy, and the Fed’s going to shrink its balance sheet. Nothing could be further from the truth.”
“The balance sheet is about to blow up. We’re going to go up to $10.0 trillion. The national debt just surpassed $19.0 trillion officially. It’s going to be $20.0 trillion by the time Barack Obama leaves office, maybe more.”
The gold bug is seeing gold prices making new highs this year.