Peter Schiff, president and chief global strategist of Euro Pacific Capital, never deviates from his message. He thinks the Fed Reserve’s cheap-dollar policies are as corrupt as anything going on in the private sector and, more to the point, he believes the Fed will eventually run the U.S. economy into the ground.
Schiff, who will speak at IndexUniverse’s “Inside Commodities” conference on Oct. 10 in Chicago, says a breakout of responsibility by the Fed could put an end to gold’s rally and set the global economy on the difficult path of true healing. But since he doesn’t think that’s in the cards, he sees gold climbing to at least $5,000 an ounce, and considers commodity-related equities the only way of staying ahead of inflation.
Ludwig: I wanted to hear what you had to say about all the recent loosening of monetary policy. Let’s start with the Chinese. Do you think their recent rate cuts are healthy and warranted?
Schiff: I think it’s all unhealthy and it’s all inflationary. All the central banks are trying to prevent economies from restructuring along the lines that would produce lasting, healthy, sustainable growth. We’re all going to pay a price for this reckless behavior. All they’re concerned about is postponing short-term pain, even if it’s a healing type of pain. It’s the equivalent of swallowing some bad-tasting medicine that cures us. But because the cure doesn’t taste good, they don’t want us to have to take it.
Ludwig: The market doesn’t seem to fully buy into the possibility of the Fed doing another round of quantitative easing. I presume you’re not in that camp?
Schiff: No. I think they’re going to do it. The Fed always does the wrong thing, and QE3 would be the wrong thing, so they’re going to do it. If you look at what the Fed says, they say we’re going to do QE3 if the economy needs it, and the economy is going to need it, from their perspective, because without QE, the economy will lapse into a worse recession than the one we just finished. That’s because we still have a lot of problems to correct because the last recession was cut short by the stimulus.
So the stimulus interfered with the market’s attempt to correct all the imbalances that were built up over the phony boom that was a function of prior Fed mistakes. If you understand that the economy is basically floating on a sea of stimulus, then when the stimulus goes away, we’re back in recession. The Fed saying we’re only going to do QE if the economy needs it is like a heroin addict saying he’s only going to take more heroin if he needs it.
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