Peter Schiff sees unprecedented inflation coming, and he strongly recommends investors build inflationary hedges into their portfolios
Inflationary hedge narratives have captivated headlines recently as commodities have outperformed amid supply chain shocks and unprecedented monetary and fiscal stimulus policies.
Peter Schiff sees unprecedented inflation, and he believes inflationary hedges are a shield against rising prices
We prefer to call it stagflation because prices are rising as economic activity simultaneously contracts, similar to the 70s and 20s.
The two largest economies, the US and China, have had their GDP revised downwards. Meanwhile, inflation forecasts are being revised upwards.
“Peter Schiff sees unprecedented inflation coming, and he strongly recommends investors build inflationary hedges into their portfolios”
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What are inflation hedges or protections as Peter Schiff sees unprecedented inflation?
An inflationary hedge is an asset that protects the decreased purchasing power of a currency that results from the loss of its value due to rising prices.
Higher prices can be caused by higher input costs or the debasement of a currency due to massive money creation, or excessive demand due to a booming economy. In other words, there are two types of inflation; demand-pull or cost-push inflation.
Demand-pull occurs when aggregate demand in an economy rises more rapidly than productive capacity. So, a booming economy experiences demand-pull inflation, and it is this type of inflation, which is less concerning to monetary policymakers. Why?
A robust economy can shoulder tighter monetary policy to rein in spiraling inflation. So, policymakers can tighten without worrying about triggering a recession or depression.
But cost-push inflation, the type of inflation currently playing out, is driven by suppliers cutting capacity due to weaker demand. For example, crude oil prices are rising due to OPEC+, an oil cartel, keeping output tight. Sea freight rates are spiraling higher as cargo ships cut capacity as the global economy slows. Put simply prices are rising due to capacity being cut, as the global economy decelerates and unemployment rises.
“An inflationary hedge is an asset that protects the decreased purchasing power of a currency that results from the loss of its value due to rising prices”
WEALTH TRAINING COMPANY
The Federal Reserve, the world’s central bank by default, will keep pedaling the temporary inflation narrative because they know if they tighten monetary policy to fight inflation, they will be hit with a tsunami of bad loans. So, tightening monetary policy with global debt at sky-high levels as government deficits continues to surpass all records and as the global economies contracts would make the 2008 financial crisis look like a picnic.
Global debt is fast approaching a record $300 trillion. Moreover, in the wake of the lockdowns, the economic recovery has not been robust enough to reduce the debt, according to the Institute of International Finance.
Why would the Fed, a banking cartel, demolish the house by tightening monetary policy to fix a broken pipe.
If they do it, we will see a crash in asset prices which would only be reversed if monetary policy reverts to easing.
“Ultimately, a negative rate environment, no matter how negative, should be bullish for gold and silver” – Peter Schiff
But emergency monetary policy, quantitative easing to infinity is also unsustainable. Fed chair Powell has even admitted this on stage. So, we believe at some point a controlled demolition of the system with the banking cartel still in charge could also play out.
Think of the Build Back Better mantra.
Meanwhile, Peter Schiff sees unprecedented inflation coming, and we believe he could be bang on the money
Two of the biggest names in Canadian mining – the former chiefs of Goldcorp, David Garofalo, and Rob McEwen predict investors will catch on soon that global inflationary pressures are far less transitory and more intense than central bankers and hedonically-adjusted consumer price indexes suggest.
Peter Schiff sees unprecedented inflation coming is not a voice in the wilderness.
The Perma gold bull thinks that owning precious metals today will protect wealth in an era of currency debasement. Peter Schiff noted that the opportunity cost in owning precious metals is zero.
“The knock-on gold and silver have always been that you forgo interest. Higher interest rates increase the opportunity cost of owning the metals. For example, if interest rates are 10% and you own gold, you’re giving up 10% interest on the money you have in the yellow metal.
When rates are negative, it doesn’t matter,” said Peter Schiff.
“If they’re negative 2% or negative 10%, nobody wants a negative yield. So, as long as yields are negative, you want to get out of bonds. It doesn’t matter how negative. Once you’re losing, it’s a loss,” he said.
“Ultimately, a negative rate environment, no matter how negative, should be bullish for gold and silver,” added Peter Schiff.
In short, Peter Schiff sees unprecedented inflation coming and he believes precious metals, particularly gold, at current prices, represent a good inflation hedge.
Peter Schiff thinks gold will outperform fiat currencies, including the US dollar going forward.
“The reaction tends to be immediate and violent when it does happen. That’s why I’m quite confident that gold will achieve $3,000 an ounce in months not years” – Rob McEwen
Former gold mining chief of Goldcorp, Rob McEwen also believes that the global monetary and debt expansion to cope with the pandemic, as well as secondary drivers associated with supply disruptions, could cause people to go back to traditional methods of protecting wealth.
“The reaction tends to be immediate and violent when it does happen. That’s why I’m quite confident that gold will achieve $3,000 an ounce in months not years,” said McEwen.
Peter Schiff and McEwen have a long-term prediction of $5,000 an ounce for gold
Here is the zinger Peter Schiff sees unprecedented inflation coming and gold as a great shield of wealth.
“Oil prices are rising as a result of inflation. Gold should also be rising as a result of inflation. It should not be falling because investors expect the Fed to fight inflation. Again, if the Fed could fight inflation, they’d be fighting it right now. The reason they’re not fighting it, the reason they’re pretending that it’s not a problem, and so there’s no need to fight it, is because they can’t. But they’re never going to admit that. That would be a complete disaster. So, they have to pretend that it’s transitory, that it’s not a real problem, but also pretend that if it ever becomes a real problem, well, they’re going to do something about it. But of course, they can’t do anything about it. So, they won’t,” said Peter Schiff.
Time to back up the truck and buy gold at a bargain?
