“We are near the endgame…And Trump’s Gonna be the FallGuy” said Peter Schiff CEO and chief global strategist of Euro Pacific Capital Inc.
Peter Schiff is known for not mincing his words and he has long held the view that the financial crisis of 2008 was just the opening act for a coming Depression.
Peter Schiff sets the bearish narrative right at the very beginning of his latest interview.
“The economy is going to blow up like a bomb and when that happens, Donald Trump will take all of the blame,” he said.
But Peter Schiff takes no schadenfreude (damage-joy) in his gloomy outlook “It’s not a good thing” that the economy is going to crash and burn. “Unfortunately, that’s what Trump has inherited from Obama. But it’s not even really just Obama, it’s the federal reserve. It’s the monetary policy that has been passed like a baton from Clinton to Bush to Obama and now to Trump. And we’re near the end of the game and unfortunately, Trump’s gonna be the fall guy. This thing is all gonna collapse while he’s president” said Peter Schiff.
“We are near the endgame…And Trump’s Gonna be the FallGuy”
But what about Trump’s recent tax cuts?
“The tax cuts are not going to make a difference… they are Gimmicky tax cuts” said Peter Schiff.
Peter Schiff is pessimistic about the recent Trump tax cuts. He argues that slashing taxes without cutting government expenditure will blow up the US budget deficit which has already surpassed 20 trillion dollars.
Peter Schiff’s is not alone in believing that the recent tax cuts could wreak fiscal havoc on the ballooning US budget deficit. IMF chief Christine Lagarde has recently warned that Trump’s tax cuts could destabilize the current economic recovery, especially given the boom in stock markets in the past year.
“While the US tax reforms certainly will have positive effects in the short term, for the US and other countries around, it might also lead to serious risks” Lagarde told the World Economic Forum in Davos.
“The tax cuts are not going to make a difference… they are Gimmicky tax cuts”
Trump’s recent success in the passing the tax cuts bill through the house should not be construed as evidence of political divisions narrowing, according to Peter Schiff.
Instead, he argues that the Democrats are playing Machiavellian politics. “The tax cuts will give Democrats a reason to blame the collapse all on the Republicans, says Schiff. And we are getting close to this collapse,” he adds.
So are we near the end-game, has Trump (“the stable genius” in his words) been set up to be the fall guy?
A devaluating USD is a clear signal of troubling times ahead argues Peter Schiff.
“Last year was the first year in five years that the dollar went down and it was the biggest decline in 14 years. We have the biggest drop against the Chinese Yuan in nine years, and in fact, I think this year we’re gonna fall to an all-time record low against the Yuan. I think we’re gonna hit record lows against other major currencies like Euro and the Yen maybe by 2019 or 2020”, said Peter Schiff.
He also sees collapsing bond prices as yet another signal that we are near the end-game.
Moreover, the CEO of Euro Pacific Capital cites a rising US twin deficit (the trade deficit and budget deficit) as further evidence that we are near the end-game.
“The tax cuts will give Democrats a reason to blame the collapse all on the Republicans” – Peter Schiff
Indeed, the US trade deficit with Mexico and China has actually worsened during the first year of a Trump administration.
So President Trump’s most hated number just keeps getting bigger.
The trade deficit in goods and services was $463 billion from January through October, up 12% from a year ago, according to the latest statistics from the US Commerce Department.
The data makes dismal reading for the Trump administration, bearing in mind that the gap between Trump’s two favorite trade targets Mexico and China just keeps widening.
To be precise the overall trade deficit with Mexico is up 11% this year, and the deficit with China is up 7%.
When you throw into the equation rising cost-push inflation triggered by a depreciating USD which will push up input costs of commodities and wages what do you think the Fed is going to do?
Peter Schiff reckons its clear-the Fed rate hikes will be more aggressive than previously thought.
“Here’s how it’s gonna go down. So, what’s gonna happen is interest rates are gonna keep rising, commodity prices are gonna keep rising, the dollar’s gonna keep falling, so you’re gonna start to see pick-ups in the official inflation rate.
And so, rising consumer prices and rising interest rates are gonna start to be a powerful headwind for the economy because Americans are gonna be spending a lot more money on basic necessities if they have an adjustable rate mortgage…costs are going up.
Credit card debt, auto loans, all this cheap money is gonna be gradually going away and the economy is going to be weakening. And as the economy is weakening, unemployment is gonna start to pick up.
Now the Fed is gonna see this. The Fed is gonna see the economy slowing down, and if they continue to raise rates, it will go into recession.”
“The overall trade deficit with Mexico is up 11% this year, and the deficit with China is up 7%.”
“Trump promised a lot-he talked big.” He (Trump) campaigned and said [the stock market] was a bubble. It wasn’t his bubble. Now it’s his bubble; that’s the problem.”
Peter Schiff also cites unfunded liabilities such as social security and Medicare.
“China doesn’t have any of those,” he said The Chinese rely on themselves, have disposable income, and save 30% of their income and taxes are almost nothing to keep businesses booming. While Americans pay a lot of taxes, save only 3%, live paycheck to paycheck, and rely on the deeply indebted government. Becoming self-reliant and preparing yourself for this crash will give you a hand up in during the dollar’s collapse.”
So Peter Schiff is betting on a dollar collapse, in other words, the end game.
You are betting against America said, Jones.
“I’m not betting against America. I’m betting against the socialists and central bankers who have destroyed America. In the long run, maybe America’s gonna come back. But first, we’re gonna have to pay the piper,” replied Peter Schiff.
But Peter Schiff’s view that we are near the end-game is in stark contrast with Bill Miller’s 30% Stock Market Melt-Up.
So who will be on the money?
Dan Loeb targets Sony. Dan Loeb is an activist investor and founder of Third Point, which oversees about $14.5 billion in assets.
Last year the activist investor viewed Campbell soup as a bargain when Third point reported that the soup maker could fetch a takeover value of $52 to $58 per share.
A year later and the activist investor Dan Loeb targets Sony
Dan Loeb's activist hedge fund Third Point is raising an investment vehicle to generate between $500 million and $1 billion so it can continue to buy Sony shares, according to a recent report in Reuters.