The stock market sold off nearly 800 points (Tuesday) on a day when the Federal Reserve gave the biggest interest rate cut since the 2008 financial crisis. It was a surprise .5% cut to a key rate that should have boosted stocks. Instead, the market tanked–hard. Economist and money manager Peter Schiff says, like in the movie “Jaws,” when they see the monster Great White shark they have been hunting, a freaked out crew member says, “We need a bigger boat.” Schiff says, like in Jaws, “The Fed needs a bigger rate cut,” to fight a monster economic problem.
Schiff says, “The Fed is not cutting rates because of the coronavirus.” Schiff explains, “What the Fed is worried about are two things. One is the stock market. The stock market is falling. . . . The market is going down, and the Fed is worried about the reverse wealth effect of deflating this bubble. It’s not cutting rates to stop the coronavirus. It is cutting rates to stop the stock market from falling. It wants to blow air back into the bubble. . . . The other thing they are worried about is the debt. Because of all the rate cuts and all the cheap money policies of the past, we are so massively loaded up with debt now in the federal government, state and local governments, consumers and corporations. We have so much debt that if we have another recession, we have another financial crisis because people can’t pay their bills. They can’t service the debt. The Fed is trying to get out in front of that by cutting rates to ease the burden of servicing debt. So, really, what the Fed is worried about is deflation of their own bubble.”
Schiff predicts, “I think we are at the beginning of the end of this fiat based monetary system that the world has been on since 1971. . . . I think what’s going to happen in this crisis is the dollar is going to lose its special privilege. I think gold is going to be remonetized, and I think central banks are going to start backing their paper with real money, and that is gold, again. America is going to have to do the same thing.”
So, how high could the price of gold be per ounce–thousands of dollars? Schiff says, “Well, no question. The only question is how many thousands of dollars per ounce? It’s a moving target because all gold is doing is measuring the purchasing power of fiat currency, and we are talking about dollars. There is no floor for how much purchasing power the dollar could lose. So, there is no ceiling on how high the price of gold can get. . . . If the dollar loses 90% of its purchasing power, then gold price has to increase 10 fold to reflect that.”
On silver, Schiff says, “At some point, silver is going to shine again as a monetary metal alongside of gold. At some point, silver is going to catch up and surpass gold, not in price, but the ratio. So, we are going to see a bigger move in silver than gold (on a percentage basis).”
On the stock market, Schiff says, “Everybody is a long term investor until they need the money. This is a giant Ponzi or pyramid scheme. . . . The only way people can retire from their stock portfolio is to sell shares. . . . Or if everybody is stuck in the same emergency . . . who are you going to sell your shares to? . . . I think this is the most overvalued stock market in history. It’s not the coronavirus. The market was going to go down anyway. . . . It’s not the size of the pin, but the size of the bubble. This is a massive bubble. It finally found a pin.”
Greg is the producer and creator of USAWatchdog.com. The site’s slogan is “analyzing the news to give you a clear picture of what’s really going on.” The site will keep an eye on the government, your financial interests and cut through the media spin. USAWatchdog.com is neither Democrat nor Republican, Liberal or Conservative. Before creating and producing the site, Greg spent nearly 9 years as a network and investigative correspondent. He worked for ABC News and Good Morning America for nearly 6 years. Most recently, Greg worked for CNN for shows such as Paula Zahn Now, American Morning and various CNN business shows.