Schiff: Fed Pushing Oil Prices Higher

March 17, 2011

Never mind Libya, the Fed’s the real reason oil prices are rising, Peter Schiff says.


Peter Schiff, president and chief global strategist of Euro Pacific Capital, is as harsh on the Federal Reserve as he’s ever been. He still sees the central bank leading the world’s largest economy down a path of currency debasement and high inflation through its easy money policies. And, oil prices are at the center of that inflationary pressure, Schiff said.

He told Managing Editor Olivier Ludwig that the turmoil in the Middle East is almost incidental to the upward pressure that has been on crude prices for months. And, as always, he counseled investors to steer clear of dollar-denominated assets, and look to gold, commodities, as well as foreign stocks and bonds.


Ludwig: What’s your take on all that’s going on in Libya as it relates to spiking oil prices?

Schiff: Oil prices were going up regardless of the events in the Middle East, so it was bound to happen anyway. It was a catalyst, but if it wasn’t that, it would have been something else. Oil prices have been trending up for a while, and so are other commodities. And that’s going to continue.

It’s a result of the Federal Reserve, and of other central banks that are following the Federal Reserve’s lead. Monetary policies around the world are too loose. Central banks are printing a lot of money, and so prices are going to keep rising.

Ludwig: Is it possible that the rising prices of oil and other commodities basically do the Fed’s work by creating brakes on an economy by making food and fuel prohibitively expensive?

Schiff: The economy is in trouble for a lot of reasons. But rising oil prices are not why the economy is in trouble. Oil prices are rising because the Fed is creating inflation. And that’s part of the problem. Interest rates are too low and the Fed is printing too much money. So, we see the results of our bad economy in rising prices.

But it’s not that the rising prices are going to cause problems for the economy. It’s the problems in the economy that are causing oil prices to rise. Part of the problem is that we’re not producing enough oil. There’s a lot of the government policy that’s discouraging oil and gas exploration offshore and up in Alaska. Government is involved in many ways. They limit our ability to produce oil, and then they create a lot of money, increasing demand.

Ludwig: You don’t see a real supply and demand type of dynamic that’s getting expressed in this price?

Schiff: Well, the new demand is coming from all the new money that everybody has. There’s demand, but it’s the result of the inflation.



Find your next ETF