The improved economic outlook with the election of President Trump has lead the Fed 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, CEO of Euro Pacific Capital, warns savvy investors they should start protecting their assets for a worst-case scenario because there is little hope of economic improvement as President Donald Trump near completion of his first 100 days in office.
“Donald Trump should already be disappointing a lot of people who thought we were going to get change, we were going to make America great again,” Investment Watch quoted Schiff as saying.
“We didn’t repeal Obamacare, that’s here to stay. Major tax reform is dead. We’re dropping bombs,” IW quoted Schiff as telling Future Money Trends.
“I mean it’s the same old same old right? Big government… bigger deficits… more cheap money… keep the air in the bubble. We’re headed for a major major crisis,” Schiff said.
Schiff also investors to keep an eye on the U.S. dollar, which Trump himself last week said was too strong.
“The dollar is living on borrowed time, literally. And so we just don’t know. It’s like a bomb with a fuse, but we just don’t really know how long the fuse is,” Schiff said.
“The dollar, I think is in a major bubble. I think it is in the process of topping out. I think once it completes this top it’s going down. And I think it’s going to take out the lows from 2008,” Schiff said.
“I think it’s going to go down for the count. Because the last time, what saved the dollar was the financial crisis, and that crisis resulted in everybody buying the dollar. But I think the next crisis is not going to be the same crisis that we had in ’08,” Schiff said.
“I think the dollar is going to be the crisis. I don’t think it’s going to be a bread and butter financial crisis. This is going to be a currency crisis. So it’s going to be the US government," Schiff predicted.
"It’s not going to be the mortgage markets that’s blowing up. It’s going to be the Treasury bond market that’s blowing up. It’s going to be the Federal Reserve that’s blowing up. And this is going to be a major major negative for the dollar, not a positive,” Schiff said.
Even Trump's former economic adviser cautions the president about his apparent recent policy reversal on the greenback.
Stephen Moore, one of Donald Trump's economic advisers during the campaign, said he was not concerned about most of the president’s latest policy flip-flops, but disagrees that the U.S. currency is too powerful.
“Advocating a weaker dollar is I don’t think good policy or good politics,” Moore told The Washington Post. “A strong dollar is a strong president, and a weak dollar is a weak president,” the Newsmax Finance Insider said.
Trump earlier this week said he won’t brand China a currency manipulator, retreating from core campaign promise, though he argued that a strong dollar is hampering the ability of American firms to compete.
“I think our dollar is getting too strong, and partially that’s my fault because people have confidence in me. But that’s hurting — that will hurt ultimately,” he told the Wall Street Journal. “It’s very, very hard to compete when you have a strong dollar and other countries are devaluing their currency.”
However, other respected economic gurus are much more optimistic and urge wary investors to keep faith in Trump.
David Horowitz, author of the best-selling book "Big Agenda: President Trump's Plan to Save America," told Newsmax TV that the market rally since Republican Donald Trump won the election has more room for gains as the president pushes his pro-business agenda.
Prior to the FOMC raising the Federal Funds Rate this week, the Atlanta Fed revised its estimate of Q1 GDP from 3.4% to 0.9%, an enormous downward revision that suggests Chairwoman Janet Yellen and FOMC authorities aren't as data dependent as they claim. The serious lack of economic growth indicated by the downward revision should give the Fed pause, but that doesn't seem to be the case, as Peter Schiff pointed out in his latest podcast.
"If anything, you've had a collapse in [economic] growth estimates since the last time the Fed met. Yet that collapse in GDP forecast has not done anything to alter the Fed's path because they've ignored all of the data, and they raised interest rates yet again."
The rate increase now brings the current target range to 0.75 -1.0%, a number so far from any market-set rate it's still worthless for anyone looking to earn anything from their savings.
The Fed's decision to raise rates is still another attempt to instill false hope into consumers that the economy is getting better. But more and more consumers are becoming aware of the reality of sluggish wages and an increase in prices.
"People are tapped out. People are not spending money because the economy is weak. Prices are rising, but their incomes are not," Peter explained.
Peter also criticized Janet Yellen's comments about shrinking the Fed's balance sheet. When asked about it, Yellen stated it would begin winding down the balance sheet until the rate normalization process is "well underway." When asked to clarify what the term meant, the Chairwoman wasn't able to give specific levels of interest or a general timeline.
Beginning with the 2008 crisis, the Federal Reserve began quantitative easing, meaning it began purchasing large quantities of Treasury securities and US-backed mortgage securities. The buying frenzy expanded the Fed's balance sheet from $900 billion to $4.5 trillion.
Yellen's hesitancy to define a timeline or standard for "well underway" is another example of how the Fed keeps its data dependency murky enough to wiggle out of any attempt to hold it accountable. Because higher interest rates mean higher payments on the national debt and possible default on US loans, the Fed is understandably reluctant, but it can't telecast that reluctance or motivation. Instead, it continues to feign interest in raising interest. Yellen claims she's waiting for stronger economic data to give FOMC members confidence, but it's consumer confidence that she's actually hoping to create with too-little-too-late rate increases.
Peter Schiff, a prominent investor of gold and CEO of Euro Pacific Capital, has been criticized by many analysts and experts including Brian Kelly of CNBC for describing Bitcoin as “digital fool’s gold.”
For the most part, Schiff’s ignorance towards Bitcoin stems from his responsibility to protect Euro Pacific Capital’s business model, which almost entirely relies on the performance of gold. Schiff has also found the vast majority of his career success in gold trading and thus, it is essentially instinctive for Schiff to protect gold against Bitcoin.
However, most innovative and successful investors understand that to profit from an ever-changing market, one needs to beat the market. One asset or currency which has beaten the market for three straight years is Bitcoin by outperforming all reserve currencies, stock markets and assets, something gold has failed to do.
Rarity, scarcity, decentralization
Currently, the basis of all criticisms against Bitcoin is the absence of network moderators and the origin of its value. Specifically, conventional economists struggle to understand the purpose of Bitcoin’s fixed supply, as it could theoretically lead to economic issues in the future.
Rarity, scarcity and decentralization, the three characteristics of Bitcoin which conventional economists including Schiff warn investors against, are in fact the strongest advantages of Bitcoin. These characteristics of Bitcoin are why mainstream analysts like Brian Kelly are dedicated to offering fair and balanced coverage on Bitcoin.
“For me, it is Bitcoin. Bitcoin is not just digital gold. It is a technology platform that fintech is being built on top of. It is a once in a life generation investment opportunity similar to the Internet growing just as fast if not faster. It is the Internet of money. Everyone is involved in it. The Federal Reserve released a paper on it. Bank of England is involved in it. 14 of the top 30 banks have active projects.”
Kelly’s statement is factually accurate in that Bitcoin is a technology platform and an open source protocol in which anyone can build anything on top of. Bitcoin as a base protocol is a payment facilitation tool. It facilitates payments between two users without the necessity of a mediator.
On top of that layer one technology, two-layer solutions exist as well as other technologies which will allow Bitcoin to transform itself into a settlement system, digital gold, wealth management product and virtually any financial instrument which investors and traders may need in the future.
Bitcoin’s structure isn’t a replica of gold
Schiff, however, argues that Bitcoin’s structure is a replica of gold, built to act as an alternative to fiat currencies. As mentioned above, Bitcoin isn’t a replica of gold nor the monetary system adopted by governments across the globe. It can operate as gold and a currency but it wasn’t structured to replicate either of those two.
When Schiff states that gold is a more efficient version of Bitcoin, Schiff is considering the commodity aspect of gold. Gold is a commodity and an asset. But, it is not a payment unit and a settlement network. Its value is dependent on an infinite supply, which could exponentially increase if companies manage to find massive sources of gold in the future.
If Bitcoin had a bug which could lead to the creation of Bitcoin out of thin air, Bitcoin’s value wouldn’t be where it is as of current.
If investors and citizens are frustrated with President Donald Trump, they should blame the Federal Reserve, according to Euro Pacific Capital CEO Peter Schiff.
In a recent interview with CNBC's "Futures Now,"the ardent critic of both Trump and the Fed cast doubt on the potential for future rate hikes. He also said that the central bank's easy money policies are partly to blame for Donald Trump's election.
Weak economic data "has been the primary reason the Fed has been able to keep rates so low for so long," said Schiff.
"In fact it's been these low rates that are actually one of the reasons the economy has been so weak," he added— renewing a criticism that the Fed's quantitative easing (QE) have primarily benefited banks and the wealthy.
"This benefits the financial markets, it benefits the stock market, it keeps it propped up at artificially high levels, but it undermines the real economy. That's why so many Americans are hurting and why so many voted for Donald Trump," the investor told CNBC.
According to Schiff, if the economy was really as strong as many believe, "not only would Trump have not been elected, he wouldn't have been the Republican nominee."
Shortly after the election, Schiff appeared on CNBC criticizing Trump, and predicting that his policies could actually have the Fed reversing course on possible rate hikes.
Since then, however, the stock market has continued to hit record highs, while Fed Chair Janet Yellen has suggested that two or more rate hikes may be appropriate this year. Still, that didn't deter Schiff from calling her bluff.
"What's appropriate and what the Fed is going to do are two totally different things. The Fed is going to raise interest rates as slowly as they can possibly get away with, and at some point they're going to have to come up with an excuse why they're going to stop raising rates, and why they're going to cut rates again and why they're going to go back to QE," Schiff argued.
"All of this is inevitable. But even if the Fed does nudge interest rates up a little bit more before they reverse course, it's not going to matter," he told CNBC. Meanwhile, price pressures are building in the economy, with data last week showing inflation rising at the fastest pace in almost four years.
"Inflation is headed up, not just on the consumer level but…inflation rising faster than any rate hikes we might get from the Fed," Schiff said. "So real rates are going to be falling even if the Fed raises nominal rates."
The CME FedWatch Tool currently pegs a March rate increase at 17 percent probability.
Gold has stood the test of time, and now Bitcoin is being compared to gold in many ways, especially for its safe haven qualities. Do you need to own gold, do you need to own Bitcoin? Will they weather the coming storm? Peter Schiff and David Seaman discuss. - Source
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.
Low interest rates have helped defuse the United States' debt problems so far, but that won't last for long, strategist Peter Schiff told CNBC.
Schiff, president and CEO of Euro Pacific Capital, said on Thursday "the debt bomb is going to explode."
"I think the [Federal Reserve] is going to try to inflate its way out of this problem, but it's going to inflate its way into a bigger one," Schiff said on "Squawk Alley."
He said low interest rates have allowed the U.S. to service its debt, but repaying it is almost off the table. Schiff said as interest rates rise and inflation grows, creditors are going to demand a higher premium.
Schiff's comments come as the U.S. is just weeks away from passing the $20 trillion mark in total public debt outstanding.
On Thursday, Schiff also took a stab at infrastructure spending, which President Donald Trump has vowed to increase while in office. Schiff said that is not going to help the economy.
"You don't help the economy by spending money," he said. "To the extent that we need to repair our infrastructure, that's a cost that we have to bear."
He continued: "The fact that it creates jobs, that's not a good thing because we're diverting resources that we might otherwise have been able to use more productively to make necessary repairs to our infrastructure."
Will Obamacare last under a Trump presidency, or is it destined for the dustbin of history? Peter Schiff breaks down how he see's this scenario unfolding and what the ramifications of these actions will be. Listen, learn and of course, enjoy.
Peter Schiff breaks down how hilariously wrong the stock traders got what would happen before Donald Trump took office. He then goes on to talk about the ongoing stock market rally and what he sees coming as a result of it. The bubble economy is not going anywhere and real pain is in store. QE4 is going to be huge.