Peter Schiff: Gold Is Exposing The Phony Economy
On this week’s episode, Peter covered a record setting week for gold and a stellar week for silver. With the metals nearly cresting $2800 and $35, respectively, Peter sees this price action as confirmation that the Fed’s recent rate cuts are a mistake. Politicians may love inflation, and the media is oblivious, but the metals markets know that America’s economic trajectory is unsustainable.
As Peter predicted, long-term interest rates are rising. Even though rate cuts are traditionally considered bearish for gold, gold is consistently reaching new highs and perplexing the media class:
“I said that when the Fed cuts short-term rates, that’s going to be the bottom for long-term rates, and they’re going to go up. And that’s exactly what’s happening. Long-term rates and gold prices are rising in tandem, which is the opposite of what most people think. They believe higher interest rates are bearish for gold, but gold is going up anyway. The mainstream financial media didn’t expect this. They thought when the Fed cut short-term rates, long-term rates would follow instead of going in the opposite direction.”
Why is this? The dollar is condemned to a future of continuous devaluation, and gold is the best hedge against de-dollarization.
“We still have a weak economy. That’s not why rates are rising. Rates are rising for the same reason the gold price is rising. It’s because the Fed’s rate cuts are a mistake. The inflation genie is not back in the bottle. We’re going to have rising inflation. We’re going to have skyrocketing fiscal deficits, so bigger budget deficits. We’re going to have more supply of treasuries hitting the market, which, as I’ve said, are going to be monetized.”
Peter likens gold’s moves to the pre-2008 era, when the media and financial pundits were unaware of future inflation:
“They didn’t care about gold when it was $495 an ounce. And now that it’s $2,750 an ounce, they still don’t care about it because they have no idea what it means, or if they do, they certainly don’t want their audience to figure it out. … But when the Fed showed its hand and announced QE, gold took off. Initially, people— not just me— there was a chorus of people saying, ‘This is terrible, this is going to be massive inflation. You’ve got to buy gold.”
He reminds us that inflation is an intentional policy choice that benefits the political class at the expense of consumers:
“It’s a meltdown that’s being disguised by inflation. Again, that’s one of the reasons politicians like inflation because people feel like they’re richer. Their stock portfolios are going up. They’re getting a raise. And so they think things are good because the numbers are bigger, but it’s all an illusion. They’re actually getting poorer while they think they’re getting richer. That is what the politicians want.”
The problem with inflationary policy is that it can’t last forever, and when it fails, the government will be forced to either default or fire up the money printers. So far, politicians are opting to print away their problems:
“There’s two ways our creditors are going to lose. One is through an honest default where they get fewer dollars. The other is through inflation where they get all their dollars, but they have less purchasing power.”
Turning to the approaching election, Peter is cautiously optimistic about a Trump presidency. At best, Trump will attempt to reign in government spending, and even at his worst, he’ll be better than Kamala Harris:
“We’re going to have a crisis regardless of the outcome of this election. I would just rather have Trump’s team in office when it happens than the Harris team. Not that I’m 100% confident that the Trump team is going to do the right thing; I’m just 100% confident that the Harris team is going to do the wrong thing. So that’s basically where we are, right? And so we have to take the lesser of the evils and hope for the best with Trump.”
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