Federal Reserve: Capitulation is the Beginning of the End

Peter Schiff gives a fantastic explanation of the current state of the stock market and how the Federal Reserve has made an 180 degree on monetary policy when the stock markets crashed in the forth quarter of 2018.

Will Gold Finally Make A Comeback?

Peter Schiff recently participated in the Ultimate Gold Panel (VRIC) moderated by Kitco's Daniela Cambone. 

Panel introduction: I don't have to remind many of you that gold has been in a Dead Money trade for a long time now we were above seventeen hundred and twenty eleven but you know for the next four years we've just gone down down down and now we've been stuck in this range of 1,200 to 1,300 so the question is is 2019 the year for gold can it finally make that comeback?

Inflation Pressures Will Be Bullish For Gold

As inflation pressures start to pick up more investors are going to acknowledge the benefits of owning gold. You can watch the whole video interview with Kitco here: Peter Schiff: "More People Will Wake Up" To Gold’s Benefits

The End Of Quantitative Tightening

As I forecast from the day the Federal Reserve first announced its plan to shrink its balance sheet, it now admits it will abort the process long before it's finished. I also forecast that this policy reversal would be a precursor to a return to quantitative easing (QE). That forecast will soon come true too.

More People Are Going To Wake Up To The Benefits Of Owning Gold

We've entered a bear market and we're now in a correction, we're having a rally in a bear market in the US. But I think this is early in the bear market so as that grinds down, as we make new lows and as inflation really starts to take a toll on the real value of people's savings and their investments (not just their stocks but in particular their bonds, their savings the cash value of their insurance policies) as inflation too starts to erode away their purchasing power, more and more people are gonna wake up to the benefits of owning gold.

The Primary Trend In Stocks Is Down

Because the bubble popped we entered a bear market in the US. Right now we're having our first correction in that bear market where you get a rally.

In a bull market the corrections are down. Well, in a bear market the corrections are when the market moves up and I think we're in one of those right now but I think the primary trend in stocks is down.

2008 Was Just The Warm Up

The 2008 one was just the warm up because the central banks were able to delay the consequences until the next crisis which is the one into which we are now headed. 

I believe this bubble has already popped except the air is only just starting to leak out and I think we're headed for a much worse crisis in the United States in particular that will actually end up being a sovereign debt and currency crisis.

Powell Does Not See Any Risks Of Asset Bubbles

Chairman Jerome Powell says the Federal Reserve does not see any risks of asset bubbles, excessive debt, or inflation. Given that no one at the Federal Reserve saw those risks in 2000 or 2008, nothing has changed. Since the current risks they are blind to are much larger, they will be blindsided by a larger crisis.

A 180 Degree Turn On Monetary Policy

If you look at Fed Chairman Powell's most recent comments he's now backing off of his talk about continuing to shrink the balance sheet and maybe not raise interest rates anymore and so that's kind of reflating the bubble a bit but I don't think that's enough to do it.

I think the air is still going to come out of the bubble. The interest rate hikes that have already taken place are too much for the over-leveraged US economy to bear. so I think the Federal Reserve ultimately is going to go back to zero interest rates. It's not just about to slowing down the shrinking of the balance sheet. 

I think they're gonna blow it back up even bigger with QE4 and of course when the Federal Reserve surprises the markets by doing a complete 180 on monetary policy, I think that you're gonna see the bottom drop out of the dollar and that's when you're really going see a big bid in the gold market.

An Inflationary Recession Is Coming

First of all, they're not going to raise interest rates in 2019, they're talking about doing that but what they're actually going to do is: they're gonna take interest rates back down to zero once it's obvious that the economy is in recession and they're going to launch another round of quantitative easing.

That is going to take a very bad situation and make it much worse because it's not going to work like it did last time in that it blew up a bigger bubble. This is going to blow up in everybody's face. It's not going to cause real estate prices to go up or stock prices to go up. 

It's gonna cause food prices to go up gasoline prices it's the cost of living that's gonna rise not the level of the stock market and so this is going to be an inflationary recession.

We Are On The Precipice Of A Much Worse Crisis

It's not a volatile economy it's a bubble economy thanks to the Federal Reserve they inflated an even bigger bubble on purpose than the one they inflated by accident that popped in 2008.

The economy is in much worse shape structurally today than it was before it fell apart the last time so this is the beginning of a much greater crisis of a much greater recession than the one that we experienced back in 2008.

The Fed Will Do Quantitative Easing All Over Again

I don't think that the President has a lot of fans at the Federal Reserve but I don't know that those guys are smart enough to know how to target him. I actually think that had the Federal Reserve not raised interest rates it would be worse right now because the only reason the US Dollar hasn't imploded is because the Federal Reserve is raising interest rates and because people believe they're gonna continue to raise interest rates.

Now, I don't believe that. Before Trump is finished with this term, interest rates will be back at zero and the Federal Reserve is gonna be doing quantitative easing all over again. Except it's gonna backfire because it's not going to reflate asset bubbles, it's gonna throw gasoline on the inflation fire.