Peter Schiff sees a US dollar crash by the end of this year, which will be a catalyst for the fall of the US.
Peter Schiff believes that the new historic and record-breaking fall in gross domestic product numbers coupled with soaring unemployment and the Federal Reserve’s excessive money creation will cause a dollar collapse. “Once that happens, the entire house of cards that is the United States will fall” said Peter Schiff.
“Once that happens, the entire house of cards that is the United States will fall”
Peter Schiff sees a US dollar crash imminent is a continuation with what the Perma dollar bear and gold bug has been saying for the last decade
In a piece entitled, “Peter Schiff, warns Fed will wipe out investors” the ardent critic of the Fed’s endless currency creation, to keep asset prices propped, warned about the adverse impact such a policy would have on the US dollar.
“The Fed is willing to print as much money as they want and they are asking Congress to spend as much as they want and monetize an infinite amount of government spending” said Peter Schiff.
“Sure, stock will go up, but if you are pricing them in worthless currency there is a limit to how much the Fed can print, and that is when the US dollar collapses in value, money that doesn’t buy you anything” added Peter Schiff in May.
And just a few months later the greenback suffered its worst month in July in a decade. In the last three months, the US dollar index is down 6.03%.
“the Fed is willing to print as much money as they want ”
Peter Schiff sees a US dollar crash and recommends to prepare for a fall of the US, according to a report by RT.
“The ignorance of Americans is still present. People are not waking up, unfortunately. That ignorance is likely to remain the case until the fall becomes a crash, which I don’t think will begin until the Dollar Index breaks 80” wrote Schiff in a Tweet.
Dollar bears believe that at the current rate of decline the Dollar Index breaking 80 could be reached before year-end perhaps election day
Peter Schiff has lately made a string of good calls regarding the trajectory of the Fed fund rates. Back in late 2018 most believed that the Fed would pursue its monetary tightening policy, that there would be a series of rate hikes. Moreover, the consensus was that the Fed would reduce its ballooning balance sheet of asset purchases, known as quantitative tightening QT. However, Peter Schiff argued the contrary, despite the Fed hiking interest rates four times to a new band of 2.25%-2.5% in 2018. Fed fund rates were at their highest level since 2008.
“there will be more QEs than Rocky movies” – Peter Schiff
Peter Schiff argued a contrarian view that the economy was in worse shape than what most people believed it to be and that the Fed would have to go back to monetary easing.
He argued that QE4 is coming, “that there will be more QEs than Rocky movies” and that the Fed will have to reverse its course of rate hikes.
In December of 2018, the Fed’s final rate hike along with QT triggered the worst December for stocks since the Great Depression. America’s trade war with China, interest rates hikes, and uncertainty in government policy all helped to create a loss of more than 10 percent, as of December that year. The Fed was forced to abandon its monetary normalization policy and continued along with emergency monetary policy, of historic low rates, and more QE.
Peter Schiff sees a US dollar crash based on an ongoing emergency monetary policy, near-zero interest rate policy and QE to infinity, which is debasing the US dollar
But could Peter Schiff sees a US dollar crash view also be overdramatic and overplayed?
For gold to continue to rally faith in the US dollar as a store of value needs to be eroded. Dismal bond yields, near-zero interest rates in cash accounts, and a stock dividend drought reduce the opportunity cost of holding alternative haven assets, particularly precious metals.
“More than 60% of the world’s reserves are held in US dollars” – The Wealth Training Company
All credit to Peter Schiff sharp monetary policy forecasting and gold rally which he predicted would ensue. But Peter Schiff also likes to make over bullish headline-grabbing statements about gold.
Here is Peter Schiff’s gold to $5,000 in two years interview in 2012, instead gold prices fell to almost 1,000 USD per ounce.
Peter Schiff sees a US dollar crash view discounts the influence the Fed still has, through its open market operations to affect asset prices, including gold
The Fed has endless dollars to influence the price of any asset class through the derivatives market. So, the US dollar could be propped up with calls, equally gold could be hit with massive puts actioned by the Fed or its agents.
Peter Schiff sees a US dollar crash view also underplays the huge influence the US dollar still has in global finance and trade today
US dollar is a juggernaut in global trade with nearly a fifth of all trade deals outside the US invoiced in the currency.
Most of the world’s valuable commodities are priced in US dollars.
Moreover, in the $6.6 trillion daily currency market, 88% of deals are traded against the greenback, according to the Bank for International Settlements.
This limits central banks’ ability to diversify from US dollars. More than 60% of the world’s reserves are held in US dollars.
Peter Schiff sees a US dollar crash but there is currently no viable alternative to the US dollar
China is no longer viewed as the biggest threat to US dollar dominance since its financial system remains subject to capital flow restrictions. So, the renminbi cannot play the part of the global reserve currency.
In short, Peter Schiff sees a US dollar crash could be an exaggeration, similar to the one he made when he said gold would reach $5,000 in 2012.