The Fed Is In A Box

At some point the market is going to figure out the box the Fed is in and it will not want to hold the dollar. It will realize that it is QE infinity and when the dollar really starts to come under pressure, if it loses 10, 20 percent of its value against a basket of currencies, that is when the Fed is going to have to make a choice. A very difficult choice that is has been avoiding for years, which is going to be to dramatically increase interest rates even if the unemployment rate is rising, even though it is going to force many banks into failure, even though it might force the government to default on its debt, even though its going to bring out a very severe recession, the Fed is going to have to raise rates anyway and start selling Treasuries not buying them. Or if it does not have the integrity, or the courage to do that, then its going to print even more money and the dollar is going to crash.

Peter Schiff is an American businessman, investment broker and financial commentator. Schiff is the CEO and chief global strategist of Euro Pacific Capital Inc.