Peter Schiff sees dollar demise continuing into 2021.
For Peter Schiff, CEO and chief global strategist of Euro Pacific Capital Inc, the single most important event last year was the US dollar depreciation illustrated by the US dollar index down by 7% in 2020.
“But the decline is even more significant if you look at it from the peak last spring when the dollar index climbed to about 103” said Peter Schiff in his latest podcast. Indeed, as the COVID pandemic unfolded in the first half of 2020 there was an anticipated rush into perceived risk-off currencies, particularly the US dollar.
“For Peter Schiff, CEO and chief global strategist of Euro Pacific Capital Inc, the single most important event last year was the US dollar depreciation”
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Yet Peter Schiff sees dollar demise continuing into 2021, so what happened?
The US dollar rally in the first half of 2020 was a head-fake and wouldn’t last, according to Peter Schiff.
But the dollar sell-off in the latter part of 2020 was probably more a case of the central bank Put, which switched market sentiment from risk-off to risk-on, thereby pivoting capital flows from safe-haven assets and currencies to riskier assets. In other words, the US dollar sell-off was more a case of the central banks to the rescue, whereby the central banks pumped trillions of dollars into assets which provided investors with a sense of security that assets would be kept propped up.
So, in an environment where central banks are eliminating risk because they have investors’ backs covered with their asset programs, then piling the chips sky-high on risk assets becomes a no-brainer play. Think about it. Who would not want to own volatile assets if the only way for prices is up? So, in the final quarter of 2020, capital flights were heavily weighted towards risk-on assets away from safe-haven assets, including precious metals and safe-haven currencies in the second quarter of 2020.
Could that trend be quietly reversing heading into 2021?
“The US dollar rally in the first half of 2020 was a head-fake and wouldn’t last according to Peter Schiff”
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It is the loss of the US dollar safe-haven status, which is why Peter Schiff sees dollar demise continuing into 2021
The announcement of new lockdown measures and political friction in the US saw a pivot of hot (speculative) money to haven assets on the first trading day of 2021. So, the Dow fell over 500 points, precious metals rallied, the US 10-year treasury note yield fell slightly to 0.91%. But the dollar index barely moved higher at around 89.6 and that is unusual.
“the dollar is set for freefall, that’s when it’s going to get a lot scarier”
– Peter Schiff
Peter Schiff sees dollar demise continuing into 2021 due to the brief period that USD held safe attraction in the lockdown pandemic crisis last year
The pandemic which is showing no sign of abating, albeit in the first half of the year.
“The dollar’s safe-haven status maybe lasted for a month, a little bit more, and then it was gone. And it was a shadow of the type of rally the dollar enjoyed following the 2008 financial crisis. So, I thought the fact that it was such a small safe-haven bounce was a harbinger of some bad things to come for the dollar if that was the biggest rally it could muster given how bad things looked at the time and how small the rally ultimately ended up being” said Peter Schiff.
The dollar index closed the year slightly under 90 and is holding onto the 89 handle.
In 2008 the dollar index fell to 71, but it has not fallen below 70.
Peter Schiff sees dollar demise continuing into 2021 and accelerating if the dollar index takes out the double bottom, the handle below 70
“Then we were really in no man’s land, and the dollar is set for freefall, that’s when it’s going to get a lot scarier” said Peter Schiff.
Peter Schiff thinks the double bottom of the US dollar in another year or two away. “So, I think for a while, people are going to start to enjoy the dollar’s decline because at least it’s going to help push up asset prices like stocks. But eventually, people are going to realize it’s too much of something that never was a good thing, and we’re going to have a real crisis in the dollar” said Peter Schiff.
“We’re already seeing the impacts of a weakening dollar. For instance, import costs have doubled and in some cases tripled. Commodity and agricultural prices are up” – Peter Schiff
Peter Schiff sees dollar demise continuing into 2021 which he believes will stoke uncontrollable inflation
“We’re already seeing the impacts of a weakening dollar. For instance, import costs have doubled and in some cases tripled. Commodity and agricultural prices are up” he said.
“We are really going to reap the whirlwind of the inflation winds that we have been sowing for years, but particularly ever since COVID” he added.
In August 2020 we wrote a piece entitled, “Peter Schiff sees a US dollar crash” by the end of 2020.
As we wrote this piece the USD Index is down 4.32% in the last three months and down 7.59% on the year.
Peter Schiff notes the USD decline is even more dramatic when measured against precious metals
“As weak as the dollar was against other fiat currencies in 2020, it was even weaker in terms of real money. Gold was up about 24% on the year and silver was up against some 48%.
You need more dollars if you want to buy euros or if you want to buy Swiss francs, or Japanese yen or Australian dollars, or any of these other fiat currencies. But if you want to buy an ounce of gold or you want to buy an ounce of silver, well then you need even more money. Because all fiat currencies are losing value. It’s just that the dollar is losing it even faster than most of the other ones. And that is the trend that is really going to accelerate in 2021” said Peter Schiff.
Peter Schiff sees dollar demise continuing into 2021 because he believes that the President-elect Biden will be unlikely to slow down the borrowing and spending