Why is the FED raising rates? Are they looking to simply extend and pretend the phoney confidence that exist in the markets currently, or are they looking to bring the system down? Peter Schiff discusses the FED's recent actions. - Source
The future of the dollar isn't bright, and Peter Schiff breaks down why this is a bad thing for the country in the long term. The fiat dollar is horribly flawed and destined for the trash bin of history. - Source
The improved economic outlook with the election of President Donald Trump has lead the Federal Reserve to raise interest rates for only the third time in 10 years. Peter Schiff joins Stefan Molyneux to discuss the state of the United States economy, the nature of the U.S. debt ceiling limit, why Paul Ryan's Obamacare replacement won't work, how to solve the American health care crisis and why many are salivating at the opportunity to blame President Trump for long existing economic problems.
Peter Schiff is an economist, financial broker/dealer, author, frequent guest on national news, the host of the Peter Schiff Show Podcast, the CEO of Euro Pacific Capital and the Chairmain of Schiff Gold.
Money manager Peter Schiff says, “The Fed is going to try to keep interest rates as low as possible because we have so much debt that these artificially low rates are the only way we can service it. So, the Fed, I think, is willing to sacrifice the dollar to keep propping up the bond market. Even if we launch QE4, it may not have the effect on the bond market that prior round of quantitative easing had. They may lose control of the long end of the bond market. And certainly when it comes to corporate bonds or muni bonds, or any bonds that are not being monetized, rates are going a lot higher. . . . I think the dollar is going to tank.”. . . In order for the Fed to keep the air from coming out of this bubble (in bonds), they will have to sacrifice the dollar.” Where does that leave hard assets like gold? Schiff contends, “Gold stocks were the best performing stocks in 2016, and they are already the best performing stocks in 2017. I think the bear market in gold and gold stocks ended at the end of 2015. It’s a new bull market. I think the big gains we got last year are just a small down payment on the gains we are going to get in the years ahead. Very few people are positioned properly.” Schiff goes on to say, “Donald Trump is not the cause of these problems. We’ve got a giant wound that we’ve got a band-aid on. Nobody is really looking at the wound because it is hidden by this band-aid, and it’s getting worse, and worse and worse. Maybe Trump will peel back that band-aid, and we actually get a good look at how bad we are wounded. . . . I think this has gone on so long and the bubble has gotten so big . . . . We did not get to celebrate the Dow 20,000 party, but I think that we are going to have the last laugh and do the most celebrating when the bottom drops out of the dollar and reality sets in.”
Peter Schiff shows how Trump's policies seem to be over before they even get started, and takes the New York Fed President to task for reckless advice to homeowners.
Peter said he sees the President-elect's recent comments to the Wall Street Journal about the overvaluation of the dollar as representing an unstated "falling dollar" policy - one that candidate Trump espoused his entire campaign.
"Donald Trump always talked about the overvalued dollar when he was a candidate. He didn't always say, 'the dollar is overvalued.' He would say, 'foreign currencies are undervalued,' which is basically like saying the same thing only using different words... If he wants foreign currencies to appreciate, then by definition, he wants the dollar to depreciate."
As expected, the dollar tumbled 1.2% shortly after Trump's statements. It's currently down nearly 1% against the Japanese yen and Mexican peso, according to MSN.
Trump's comments also targeted China's currency manipulation as the major cause for the dollar's strength. "Our companies can't compete with them now because our currency is too strong. And it's killing us," Trump said.
As Trump sees it, the US's trade imbalance with China stems from the valuation gap between the dollar and the yuan. Typically, the weaker a nation's currency, the cheaper and more competitive their exports will be. Nations like Venezuela are now fighting hyperinflation, after leaders made moves to devalue the bolivar for the same reasons. When mixed with huge trade deficits and artificially low interest rates, such a "weak dollar" approach could help create a similar currency crisis for the US.
Peter also took New York Fed President William Dudley to task for his recent entreaty to homeowners to leverage their equity for consumer spending. Sadly, the suggestion echoes those of Alan Greenspan's during the George W. Bush era before the housing bubble burst.
In March 2003, Greenspan admitted to a group of Independent Community Bankers of America that "the frenetic pace of home equity extraction last year is likely to appreciably simmer down in 2003, possibly notably lessening support to household purchases of goods and services."
The need for separation of healthcare and employment stemmed from Schiff's belief that workers are incentivized to accept health insurance from an employer instead of cash payments. In other words, employees don't want to receive cash from their employer because that can be taxed. Instead, employees prefer health insurance coverage because it is tax-free.
Schiff's solution: Let individuals fully deduct whatever they spend on health insurance from their income taxes.
"More people will get their health insurance the way they get their auto insurance or their fire insurance or for their homeowners insurance," he said. "Get rid of those incentives, get businesses out of the healthcare industry, and allow individuals to shop around."
The second part of Schiff's plan included specifying which circumstances were "appropriate" for insurance coverage.
"The big problem in medical care is that too many people use insurance for everyday items," he said. "We don't want you spraining your ankle and then billing it to the insurance company – things like that should be paid for out of pocket."
According to Schiff, not using insurance and paying out of pocket with cash for things that aren't life-threatening will reduce the price of healthcare for everyone over time.
"Once you have a third-party player, you no longer have free market controls on costs, and costs skyrocket," he said.
The final segment of Schiff's plan called for the termination of two programs that collectively aid over 105 million Americans, according to a 2015 report by the Kaiser Family Foundation…
Medicare and Medicaid.
According to Schiff, these programs are better left for dead because they take up "too much" time for practitioners and provide a handout for low-income Americans.
"We should be getting rid of Medicare and Medicaid," Schiff said. "Before we had any of this stuff, we had a much better healthcare system. It was more affordable, and doctors had a lot of free time. They didn't have to spend all their time filling out paperwork."
"So, to the extent that there are poor people who couldn't afford medical care, they got it for free," Schiff criticized.
While the Euro-Pacific Capital CEO continues to criticize the American healthcare system, the reality is he is not in a position to do much about it.
But one person is…
Will Trump cut Social Security benefits? That's the big question keeping more than 46 million U.S. baby boomers up at night.
Famous contrarian investor and Euro-Pacific Capital CEO Peter Schiff spoke out in his weekly web series about his pessimistic view of America under President-elect Donald Trump.
"I think a lot of this optimism is unfounded. I mean yes, there may be some regulation that gets repealed under a Trump administration, but we have been disappointed in the past," he told his viewers…
Schiff noted that under many Republican presidents, regulations have been installed that actually hurt the economy, such as the Americans with Disabilities Act under former president George H.W. Bush. "That caused all sorts of problems for small business," he said about the act.
According to the CATO Institute, the ADA actually harmed its intended beneficiaries. "The added cost of employing disabled workers to comply with the accommodation mandate of ADA made those workers relatively unattractive to firms," CATO noted in its 2000 report.
The radio personality then went on to describe the one place he believes government overreach is at its finest: the healthcare system.
Like the Bush administration's impact on costs for employers, "It was the government's intervention that's fueled the skyrocketing price in healthcare," Schiff claimed.
He then went on to outline his very own plan for healthcare reform in America…
Under Schiff's plan:
Healthcare and employment would be completely separate Insurance could only be used for life-threatening circumstances Medicare and Medicaid would be terminated
Despite voting for Donald Trump as a way to protest Hillary Clinton, one contrarian investor is warning of the new administration’s massive federal budget deficits. And this will not bode well for the nation’s fiscal future.
Writing in an op-ed on Wednesday entitled “Trump Deficits Will Be Huge,” Peter Schiff, president and CEO of Euro Pacific Capital, stated that the bloated budget deficits will have a far greater impact on investments than most on Wall Street can ever imagine.
Alluding to the fact that deficits exploded under Ronald Reagan and George W. Bush, Schiff explained that Republicans often only succeed in one of their general missions of cutting spending and taxes: tax cuts. Schiff says that when you cut taxes and continue to spend then this results in putting “a giant thumb on the Republicans’ budgetary scale.”
“Like prior Republicans, Trump has promised to cut taxes, on both corporations and individual taxpayers…even the wealthy. But unlike prior Republicans, he has not paid a word of lip service to spending cuts. He has promised to spend now, and spend big. Trump just doesn’t do the austerity thing. It’s for losers,” he averred.
“In addition to fronting the cost of building the 2,000 mile Wall (accounts receivable has a reliable address in Mexico), Trump plans big increases in military spending, both on active military and on our veterans. His reboot of Obamacare has yet to be presented, but as he has promised that no one will lose coverage, not even those with pre-existing conditions, we can be sure that Trumpcare won’t be cheap. But his big project will likely be his promised $1 trillion plus infrastructure spending plan. Most importantly, he diverges from most Republicans by promising no structural changes in Social Security and Medicare, the entitlement leviathans that are the sources of the vast majority of Federal red ink.”
He further stated that fiscal matters will take a backseat over the next two to four years, especially with a jubilant Republican Congress and Senate, which will likely pass anything Trump wants. This means fiscal prudence will be thrown out the window, and any opposition to the president’s spending initiatives will face a backlash from GOP primary voters, even those who have espoused the virtue of balanced budgets for the last eight years.
Schiff cited a Congressional Budget Office (CBO) report that projected deficit expansions every year and annual deficits of $1 trillion beginning in 2024. The CBO, however, was also positive about the country’s economic expansion, but with 92 consecutive months of expansion, even so slight, how could you have 18 years of growth?
“I believe it will be sooner rather than later that we will have another recession, which will greatly enlarge the deficits. History is clear on that point,” he added. “The Great Recession caused the deficit to triple. Even the mild recession of 2001 turned a $236 billion surplus into a $157 billion deficit in just two years. The next recession I expect to work similar magic. But, in addition to being blind to recessions, the CBO was also blind to Donald Trump.”
The bestselling author of “Crash Proof” and “How an Economy Grows” also published two interesting charts pertaining to gold, the U.S. dollar and expanding deficits.