Dmitry Orllov comments on Peter Schiff and the bear market

Peter Schiff: "Like all sequels, the next financial crisis will be worse"

From Dmitry Orlov, via Facebook

I think Peter Schiff nailed it. Likely sequence of events:

1. Bear market;
2. Recession;.
3. Deficits explode;
4. Return of ZIRP and QE;.
5. Dollar tanks;.
6. Gold soars;
7. CPI spikes;
8. Long-term rates rise;
9. Fed. forced to hike rates during recession
10. A financial crisis without stimulus or bailouts!

All that's missing is:

• Tax receipts plummet

• Federal and state governments default

• Military empire of bases crumbles

• Energy imports fail causing shortages

• Economy shuts down

Not sure where to slot these in. Spot on otherwise.

Stock bubble bigger than 2008 & coming crash far larger, warns Peter Schiff

Wall Street and the US economy are on the verge of recession, according to the CEO of Euro Pacific Capital, Peter Schiff, who has raised alarms after this week’s market selloff.

“This is a bubble not just in the stock market, but the entire economy,” he told Fox News. Schiff predicts a recession, accompanied by rising consumer prices, that will be “far more painful” than the 2007-2009 Great Recession.

US stocks suffer worst loss in 8 months amid rising interest rates, tech hit hardest

“I think as Americans lose their jobs, they are going to see the cost of living going up rather dramatically, and so this is going to make it particularly painful,” he said.

Stock markets sank on Wednesday and Thursday, led by a steep decline in tech shares and worries of rapidly rising rates which made investors flee the risky stocks.

Both the Dow Jones Industrial Average and S&P 500 posted their biggest one-day drops since February. The Nasdaq notched its largest single day sell-off since June 2016.

US President Donald Trump has blamed the central bank for the selloff, saying the Federal Reserve “has gone crazy.”

According to Schiff, the Fed has been acting irrationally for a long time: “What is crazy is for the Fed to believe that they can raise interest rates without pricking their own bubble.”

READ MORE: Decade after financial crisis JPMorgan predicts next one’s coming soon

Schiff added: “All bear markets start off as corrections. I think this one is probably a bear market. It’s long overdue. This is a bigger bubble than the one that blew up in 2008, and the crisis that is going to ensue is going to be far larger.”

Peter Schiff warns of an economic crisis bigger than 2008

Peter Schiff: "We're On The Precipice Of A Much Bigger Crisis Than The Last One"

Zero Hedge,

3 October, 2018

Via Greg Hunter’s USAWatchdog.com,

Money manager Peter Schiff was in a small group warning of a coming financial meltdown that happened in 2008.

Schiff says, “I was kind of a fixture on financial cable TV giving these warnings. My thought was the bubble would burst, and I knew that it would..."

"Once the housing bubble burst and we had this financial crisis, I knew it would follow along with the Great Recession. I thought the Federal Reserve would try the best it could to reflate the bubbles in the stock markets and housing markets. But my thought was that their efforts would fail. The markets would not allow it and that a dollar collapse would intervene and would prevent new debt from being issued to fully reflate those bubbles. I was actually wrong. They didn’t just try to reflate the bubbles, they actually succeeded in blowing them bigger than ever.”

Ten years later, Schiff is warning of another financial calamity bigger than the last one.

Schiff says, “The problem is now we are on the precipice of a much bigger crisis than before..."

"The next time, if they try to reflate those bubbles, which they will, it will be a spectacular failure because the markets are now prepared for the opposite. Everybody, right now, assumes the Fed is going to be able to keep raising rates. They assume they are going to shrink its balance sheet and that we have this booming economy that will never bust.

When the Fed has to reverse course abruptly, acknowledge the underlying weakness that everybody has been oblivious to and they start cutting rates and launching another round of quantitative easing (money printing), I think the dollar is going to fall through the floor. I think the inflationary fires that are already burning pretty hot are going to ignite. It’s not going to be like 2008 where the dollar went up and consumer prices inched down a little bit. I think the dollar is going to tank and consumer prices are going to soar, and it’s going to be stagflation. When the markets get a whiff of that, they are not going to like the way it smells.

It is going to create a dollar crisis. I think the Fed has put itself between a rock and a hard place. There is no way out this time... This time, you really have to be positioned because this time is going to be the end of it. This is not going to be a hat trick or third time is a charm when it comes to reflating these bubbles.”

On gold, Schiff contends, “People are going to be dumping their dollars and buying gold..."

"If you understood what the Fed was doing, you would be buying gold, but most people don’t understand. You can look at what has happened to gold prices in terms of other currencies, such as emerging markets. Obviously, gold prices in those countries measured in those currencies have gone up dramatically. So, gold has acted as a store of value and a store of purchasing power in every country where the currency has come down.

The same thing is going to hold true of the United States...We could do a reset. We could go back to sound money. We could go back on a gold standard, and we could devalue the dollar officially. I don’t know exactly how high the price of gold would have to be, $10,000 per ounce, $20,000 per ounce, who knows, but there is a price where we could go back to a gold standard. If we want to stay on a gold standard, that means the government would have to live within its means. That’s why governments hate gold standards because it provides discipline to government."

Join Greg Hunter as he goes One-on-One with Peter Schiff, founder of Euro Pacific Capital and Schiff Gold.

"Trump's Right, America Is Broke" - Peter Schiff

"This Will All Blow Up In The Fed's Face," Schiff Warns "Trump's Right, America Is Broke"

Zero Hedge,

17 April, 2016

Euro Pacific Capital's Peter Schiff sat down with Alex Jones last week to discuss the state of the economy, and where he sees everything going from here.

Here are some notable moments from the interview.

Regarding how bad things are, and what's really going on in the economy, Schiff lays out all of the horrible economic data that has come out recently, as well as making sure to take away the crutch everyone uses to explain any and all data misses, which is weather.

"It's no way to know exactly the timetable, but obviously this economy is already back in recession, and if it's not in a recession it's certainly on the cusp of one"

"We could be in a negative GDP quarter right now, and I think that if the first quarter is bad the second quarter is going to be worse"

"The last couple years we had a rebound in the second quarter because we've had very cold winters. Well this winter was the warmest in 120 years so there is nothing to rebound from."

On the Fed, and current policies, he very bluntly points out that nothing is working, nor has it worked, but of course the central planners will try it all anyway. He also takes a moment to agree with Donald Trump regarding the fact that the U.S. is flat out, undeniably broke.

"The problem for the fed is how do they launch a new round of stimulus and still pretend the economy is in good shape."

"Negative interest rates are a disaster. It's not working in Japan, it's not working in Europe, it's not going to work here. Just because it doesn't work doesn't mean we're not going to do it, because everything we do doesn't work and we do it anyway. It shows desperation, that you've had all these central bankers lowering interest rates and expecting it to revive the economy. And then when they get down to zero, rather than admit that it didn't work, because clearly if you go to zero and you still haven't achieved your objective, maybe it doesn't work. Instead of admitting that they were wrong, they're now going negative."

"The United States, no matter how high inflation gets, we'll do our best to pretend it doesn't exist or rationalize it away because we have a lot more debt. America is broke, if you look at Europe and Japan even though there is some debt there, overall those are still creditor nations. The world still owes Europe money, the world still owes Japan money, but America owes more money than all of the other debtor nations combined. Trump is right about that, we are broke, we're flat broke, and we're living off this credit bubble and we can't prick it. Other central banks may be able to raise their rates, but the Fed can't."

On how he sees everything unfolding from this point, Peter again points out that the economy is weak and it's only a matter of time before this entire centrally planned manipulation is exposed for what it is, and becomes a disaster for the Federal Reserve. He likens how investors are behaving today to the dot-com bubble, and the beginning of the global financial crisis.

"The trigger that's going to really send us into a higher gear is going to be the admission by the Fed that the economy is weak or the markets figure it out on their own. There's not a lot of stimulus left, all they've got is potentially negative rates and a huge round of quantitative easing, and this thing is going to blow up in the Fed's face."

"Investors still just don't get what's going on. For the past several years everybody has been positioned as if this recovery were real, that it was sustainable, and that the Fed could normalize interest rates and everything was going to be fine. The first quarter of this year investment returns, it was the worst quarter in eighteen years for actively managed funds."

"The federal reserve has not solved our problems, but exacerbated them."

"You've got big banks like Goldman Sachs shorting gold, telling their clients to short gold. A lot of people unfortunately listen to Goldman Sachs, and they're doing the wrong thing. A lot of times the markets are just mis-priced, because so many people don't get it. Just like all the people who were buying the subprime mortgages before the bottom dropped out of the market, or all the people who were buying thos dot-com stocks for several years before they collapsed. The same thing is going to happen now."

***

Full Interview Here

Schiff on the Fiscal Cliff

Congress Avoided The Cliff By Selling America Down The River

Peter Schiff

Business Insider,

3 January, 2013

With the possible exception of the New York Times’ editorial board (and the cast of The Jersey Shore), everyone on the planet understood that the United States Government needs to cut spending, increase taxes, or both. Instead, after months of political posturing and hand wringing, the Federal Government has just delivered the exact opposite, a deal that increases spending and decreases taxes. The move lays bare the emptiness of budget legislation, which can be dismantled far easier than it can be constructed.

One question that should be now asked is whether Moody’s Research will finally join S&P in downgrading the Treasury debt of the United States. After the Budget Control Act of 2011 (which resulted from the Debt Ceiling drama) Moody’s extended its Aaa rating, saying in an August 8 statement:

“…last week’s Budget Control Act was positive for the credit of the United States…. We expect the economic recovery will continue and additional budget deficit reduction initiatives will be put in place by 2013. The political parties now appear to share similar deficit reduction objectives.”

Now that Moody’s has been proven wrong, and the straight jacket that Congress designed for itself has been shown to be illusory (as I always claimed it was), will the rating agency revisit its decision and downgrade the United States? Given the political backlash that greeted S&P’s downgrade in 2011, I doubt that such a move is forthcoming.

For now, the real budget negotiations have been supposedly pushed later into 2013, when the debt ceiling will be confronted anew. But who can really expect anything of substance? The latest deal emerged from a Congress that is nearly two years removed from the next election. As a result, Congressmen were as insulated from political pressures as they could ever expect to be. Nevertheless, they still chose political expediency over sound policy. If Congressional leadership (an oxymoron that should join the ranks of “jumbo shrimp” and “definite maybe”) could not put the national interest in front of political interests now, why would anyone expect them to do so later? They will continue to ignore our fiscal problems until a currency crisis forces their hand. I expect deficits to approach $2 trillion annually before Obama leaves office. Unfortunately, at that point the solutions would be far more draconian than anything economists and politicians are currently considering.

In light of the extensions of the popular middle class tax rates, the loudly trumpeted tax increases on those individuals making more than $400,000 (and couples making more than $450,000) will not be enough to translate into higher tax revenues. Instead they will result in perhaps $60 billion per year in new revenue to the Federal government that will be more than offset by the new spending announced in the agreement. In fact, with the likely passage of the $60 billion Hurricane Sandy aid package, it will have taken Congress less than one week to spend all of the projected revenue.

But the tax increases will push many individuals in high tax states like California and New York into paying more than 50% of their income in taxes. While many economists are cautioning that higher taxes on the wealthy will take a bite out of spending, in my opinion it is more likely to result in lower business investment, which is far more detrimental to the economy. When faced with diminishing discretionary income, most rich people would sooner cut back on savings and investment than they would on health care, education, home improvements and vacations.

But it should be clear that the rate increases are just the opening crescendo in a symphony of tax hikes on the nation’s entrepreneurial class. President Obama has recently stated that he will consider needed cuts in spending and entitlement programs only if they are coupled with additional tax increases on the wealthy. In other words, as far as the President is concerned, the hikes included in the budget agreement that was just passed didn’t count for anything.

It cannot, or should not, be denied that Washington’s latest fig leaf will have a major impact on the markets. The New Year’s “relief rally” is understandable given the clear implications that the government will simply print its way out of trouble for as long as it can. In the past, fiscal profligacy was held in check by investors who would sell bonds and push interest rates higher whenever it appeared that the government was not serious about national solvency. But with the Federal Reserve now buying the vast majority of U.S. government debt, no such roadblock exists. With monetary and fiscal stimulus pushing up stock and bond prices, and no immediate fear of a rally-killing spike in interest rates, there is no reason to stay on the sidelines. Markets are now driven by stimulus, not fundamentals, and the stimulus is firmly at the wheel. (For more on this – see the article in the January edition of Euro Pacific’s Global Investment Newsletter). But it is important to look at the nature of the rally. Most significantly we would bring investors’ attention to the increase in gold and oil and other assets that are expected to outperform in an inflationary economy. Our new Newsletter edition also includes an analysis of some of the more promising overseas markets.

But by taking the nominal risk out of investing, the government is insuring that the risks to the U.S. economy will grow exponentially. We are now – and will remain – a debt-fueled economy for as long as the rest of the world permits this to continue. But this is no way to create real, sustainable economic growth. On the contrary, it will simply permit the growth of government, the depletion of economic vitality, and ultimately the collapse of the U.S. dollar.

In the meantime, President Obama and Congressional leaders will take credit for a tax cut that is in reality a huge tax increase in disguise. Government spending is the real source of taxpayers’ pain and it is only a matter of time before the bill comes due in the form of inflation. See our Newsletter for fresh analysis as to why inflation may already be higher than you think. Because the deficits will grow even larger, more purchasing power will be lost in this manner than would have been lost had all the Bush tax cuts been allowed to expire. In addition, though entitlement cuts were taken off the table, the real value of benefits could be slashed, as cost of living adjustments fail to keep up with skyrocketing consumer prices. That’s a Fiscal Cliff that will not be so easy to avoid.

Peter Schiff on QE3

PETER SCHIFF: The Fed Just Unleashed 'Operation Screw'

Peter Schiff, Euro Pacific Capital

Business Insider,

14 September, 2012

With yesterday's Fed decision and press conference, Chairman Ben Bernanke finally and decisively laid his cards on the table. And confirming what I have been saying for many years, all he was holding was more of the same snake oil and bluster. Going further than he has ever gone before, he made it clear that he will be permanently binding the American economy to a losing strategy. As a result, September 13, 2012 may one day be regarded as the day America finally threw in the economic towel.

Here is the outline of the Fed's plan: buy hundreds of billions of home mortgages annually in order to push down mortgage rates and push up home prices, thereby encouraging people to build and buy homes and spend the extracted equity on consumer goods. Furthermore, the Fed hopes that ultra-cheap money will push up stock prices so that Wall Street and stock investors feel wealthier and begin to spend more freely. He won't admit this directly, but rather than building an economy on increased productivity, production, and wealth accumulation, he is trying to build one on confidence, increased leverage, and rising asset prices. In other words, the Fed prefers the illusion of growth to the restructuring needed to allow for real growth.

The problem that went unnoticed by the reporters at the Fed's press conference (and those who have written about it subsequently) is that we already tried this strategy and it ended in disaster. Loose monetary policy created the housing and stock bubbles of the last decade, the bursting of which almost blew up the economy. Apparently for Bernanke and his cohorts, almost isn't good enough. They are coming back to finish the job. But this time, they are packing weaponry of a much higher caliber. Not only are they pushing mortgage rates down to historical lows but now they are buying all the loans!

Last year, the Fed launched the so-called "Operation Twist," which was designed to lower long-term interest rates and flatten the yield curve. Without creating any real benefits for the economy, the move exposed US taxpayers and holders of dollar-based assets to the dangers of shortening the maturity on $16 trillion of outstanding government debt. Such a repositioning exposes the Treasury to much faster and more painful consequences if interest rates rise. Still, the set of policies announced yesterday will do so much more damage than "Operation Twist," they should be dubbed "Operation Screw." Because make no mistake, anyone holding US dollars, Treasury bonds, or living on a fixed income will have their purchasing power stolen by these actions.

Prior injections of quantitative easing have done little to revive our economy or set us on a path for real recovery. We are now in more debt, have more people out of work, and have deeper fiscal problems than we had before the Fed began down this path. All the supporters can say is things would have been worse absent the stimulus. While counterfactual arguments are hard to prove, I do not doubt that things would have been worse in the short-term if we had simply allowed the imbalances of the old economy to work themselves out. But in exchange for that pain, I believe that we would be on the road to a real recovery. Instead, we have artificially sustained a borrow-and-spend model that puts us farther away from solid ground.

Because the initials of quantitative easing - QE - have brought to mind the famous Queen Elizabeth cruise ships, many have likened these Fed moves as giant vessels that are loaded up and sent out to sea. But based on their newly announced plans, the analogy no longer applies. As the new commitments are open-ended, quantitative easing will now be delivered via a non-stop conveyor belt that dumps cheap money on the economy. The only variable is how fast the belt moves.

Fortunately, the crude limitations of the Fed's only policy tool have become more apparent to the markets. If you must stick with the nautical metaphors, QE3 has sunk before it has even left port. The move was explicitly designed to push down long-term interest rates, but interest rates spiked significantly in the immediate aftermath of the announcement. Traders realize that an open-ended commitment to buying bonds means that inflation and dollar weakness will likely destroy any nominal gains in the bonds themselves. To underscore this point, the Fed announcement also caused a sharp selloff in Treasuries and the dollar and a strong rally in commodities, especially precious metals.

Given that 30-year fixed mortgages are already at historic lows, there can be little confidence that the new plan will succeed in pushing them much lower, especially given the upward spike that occurred in the immediate aftermath of the announcement. Instead, Bernanke is likely trying to provide the confidence home owners need to exchange fixed-rate mortgages for lower adjustable rate loans - which would free up more cash for current consumer spending. He is looking for homeowners to do their own twist. If he succeeds, more homeowners will be vulnerable to increasing rates, which will further limit the Fed's future ability to increase rates to fight rising prices.

The goal of the plan is to create consumer purchasing power by raising home and stock prices. No one seems to be considering the likelihood that unending QE will fail to lift bond, stock, or home prices, but will instead bleed straight through to higher prices for food, energy, and other consumer staples. If that occurs, consumers will have less purchasing power as a result of Bernanke's efforts, not more.

The Fed decision comes at the same time as the situation in Europe is finally moving out of urgent crisis mode. While I do not think the ECB's decision to underwrite more sovereign debt from troubled EU members will work out well in the long term, at least those moves have come with some German strings attached [For more on this, see John Browne's article from earlier this week]. As a result, I feel that the attention of currency traders may now shift to the poor fundamentals of the US dollar, rather than the potential for a breakup of the euro.

In the meantime, the implications for American investors should be clear. The Fed will try to conjure a recovery on the backs of currency debasement. It will not stop or alter from this course. If the economy fails to respond to the drugs, Bernanke will simply up the dosage. In fact, he is so convinced we will remain dependent on quantitative easing that he explicitly said he won't turn off the spigots even if things noticeably improve. In other words, the dollar is screwed.

Max Keiser interviews Peter Schiff

Max Keiser and co-host Stacy Herbert imagine a world in which US President Barack Obama pulls a “reverse Richard Nixon” and puts the US back on to a gold standard against which it could devalue its debts. In the second half of the show, Max talks to money manager, author and radio show host Peter Schiff about debt ceilings, downgrades and gold standards.