Peter Schiff recently recent sat down and talked to Daniela Cambone at Kitco News about the economy, politics, and gold. In part 1 of the interview, Peter said the Fed was not going to be finished cutting interest rates until it gets to zero. That will have serious ramifications for the US economy. With that in mind, Peter said now is the time to buy gold – before the masses figure out what’s going on in the economy and flock to the yellow metal.
Earlier this year, the yield curve inverted, sparking recession fears. The curve has since returned to normal, leading many to conclude the threat of a recession has receded. Peter said it may be delayed, but he still sees a recession looming. He said typically yield curves normalize prior to the recession. They invert initially because the central bank doesn’t see the downturn coming. In this case, the Fed has already cut rates. That unwound the yield curve.
But I still think we’re headed for a recession. I think the recession is going to be much more severe than the period we now refer to as the Great Recession. But yeah, they may have bought some time. The question is did they buy enough time to make it to the 2020 election?”
Cambone asked Peter if he thought inflation would expand as the Fed increases the money supply through QE and repo operations. Peter said it’s already expanding. Technically, the expansion of the money supply is inflation. Increasing prices are just one of the symptoms.
The Fed is doing quantitative easing again – QE 4. Now, they don’t want to call it QE 4, but that’s exactly what it is. I mean, there’s no difference between what they’re doing now and what they were doing when they did call it QE. Except when they did QE, at least there was like an official policy to do it. Now they’re just doing it. But they’ve actually assured the markets that even though it’s not QE, they’re going to keep doing it, pretty much indefinitely.”
Peter noted that the Fed has effectively changed its mandate when it comes to inflation. It used to be a 2% inflation target. Now the Fed says it needs inflation above 2% to make up for the years it was below 2% — so-called “symmetrical” inflation.
It’s all a bunch of nonsense. But I’ve been saying for years that this is what the Fed was going to do. They can’t fight inflation. They have surrendered to inflation.”
Peter said that when the markets figure this out, the dollar will tank and gold is going to take off.
Keep in mind, this time last year, the Fed was signaling at least three rate hikes this year. Instead, we got three cuts. Even so, the dollar didn’t fall very much. Gold is up this year with the cuts, but Peter said the yellow metal would have gone up even more if the dollar had actually priced out all of those rate hikes that were priced in. That hasn’t happened – yet.
But I still think that’s coming. I think a big decline in the US dollar is coming. And in that environment, that’s when you’re going to see the price of gold really take off. Of course, not just in terms of dollars, but in terms of every currency in the world. It’ll just make an even bigger move in terms of dollars.”
Peter said he doesn’t know exactly what the price of gold will do in 2020. He said if you had asked him 10 years ago what the price of gold would be today, he would have thought it would be higher.
It’s always hard to know. I think the price of gold is going up next year, so I want to own it. But I don’t know how much it’s going to go up. But I do believe that once we really start to take off, I mean, gold could go from $1,500 to $2,000 very quickly. It can go from $2,000 to $3,000 or $4,000 very quickly. Because I think when a lot of people suddenly realize what they should have known for years, and you see the herd all at once scrambling to try to buy some gold because hardly anybody owns it now, the price can go up very, very rapidly. So, the key is to own your gold before that stampede, so you don’t get trampled as everybody else is bidding it up.”
Peter and Daniela also talked about bitcoin. Peter said a lot of people have been fooled into thinking its digital gold.
As I’ve said, it’s simply fool’s gold.”
Peter said he doesn’t think bitcoin will be an “alternative” to gold. It was originally intended to be an alternative to dollars or euros. Now they’ve tried to reinvent it as a store of value – as ‘digital gold.’
But there is no value in bitcoin, so you can’t store what you don’t have. Gold is a store of value because it has a lot of value. And gold can also function as a medium of exchange. It’s not functioning as one now, but it has in the past and it could again in the future.”
Peter said he feels sorry for people who correctly identify that there is a problem with fiat money and that they need to hedge against inflation, but then make the mistake of thinking bitcoin is going to provide that hedge.
It’s not going to do it. It’s gold.”
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