Peter Schiff warns of greenback doom as the US dollar index falls below 101. The perma dollar bear gold bull habitually has been playing the dollar demise narrative for decades, like a broken record, every time the dollar exchange rate falls against a basket of currencies.
Could the USD be experiencing another bear market, making Peter Schiff’s warning of greenback doom clickbait fiction?
Speculation about an imminent Fed pivot from a restrictive to an accommodative policy with a 50 basis point rate cut in September is on the cards. The US unemployment rate rose for the fourth straight month in July at 4.3%, according to the official statistics,
As household demand is squeezed, with restrictive monetary policy and demand-pull inflation dead in the water, policy attention has shifted from inflation to rising joblessness.
“Peter Schiff warns of greenback doom as the US dollar index falls below 101”
PETER SCHIFF
So, with jobless claims rising by 4,000 to 232,000 for the week of Aug. 17, Fed Chair Powell said last week “that the time has come” for the central bank to adjust its monetary policy.
A September rate cut marks the end of the Fed’s tightening cycle.
All other central banks have started cutting rates
The European Central Bank ECB cut its rate by 25 basis points from 4% to 3.75% in June, its first rate cut in five years.
Bank of Canada also cut its rates in June to 4.75% from 5%. Central banks in Sweden and Switzerland also have trimmed rates this year.
Bank Of England rate cut is also imminent.
The start of a rate-cutting cycle typically marks the end of a secular bull market in the currency.
So a pending September Fed rate cut sending the US dollar Index to its recent all-year low of $100.92 is nothing unusual.
But could things be different this time, bearing in mind the spiralling National Debt has now surpassed 35 trillion dollars and is growing by 1 trillion dollars every one hundred days, leading to an imbalance in the market for Treasuries.
Peter Schiff believes that the USD is on the ropes, and when it goes down, this time, it will stay down.
“It looks like it’s on the verge of a total collapse. When that happens, you’re gonna see some serious shit,” said Peter Schiff
“All other central banks have started cutting rates”
WEALTH TRAINING COMPANY
The spiralling national debt, US is broke, chant is the crux Peter Schiff warns of greenback doom
But there is a flaw with Peter Schiff’s reasoning that Greenback is doomed.
Gold, since time immemorial, has been the oldest store of wealth, and when local currencies implode, reserves flow into the reserve currency, the USD. But if the USD fails as a store of value to protect wealth, then reserves could indeed move into precious metals, particularly gold.
Currencies are under pressure due to rising national debts, geopolitical instabilities and rising domestic tensions.
World foreign reserves have flown into gold and, in a few cases, Bitcoin, with El Salvador moving Bitcoin reserves to a cold storage Vault.
Weaponizing the USD by sanctioning and seizing assets of those countries who refuse to play by the hegemon world order rules could accelerate an alternative to the USD, thereby weakening global demand.
But, the USD remains the most traded currency globally, with more than 60% of global trade conducted in dollars.
Moreover, the US Bullion Depository has most of the gold, with 8,133 tonnes valued at $628 billion. Approximately half of the gold reserves are stored with the US Bullion Depository known as Fort Knox, an Army installation in Kentucky. So the Fed has been busy buying gold to give the reserve currency more backbone. If confidence in the Fed’s monetary policy collapses, gold becomes the bedrock of the dollar.
Germany ranks second with 3,351 tonnes, followed by Italy with 2,452 tonnes. With most of the world’s gold sitting on a US Army base, the reserve currency, the dollar sits on a golden throne guarded by a military nobody wants to mess with.
“If the ECB, BoE or BoJ decide to make more aggressive rate cuts than the Fed, we may not see even a dollar bear market” – Wealth Training Company
Is Peter Schiff’s warning of greenback doom wrong again?
If you are a country needing to store large reserves, why store it in gold within your sovereign borders and become a target of an invasion?
The Fed tightening is complete, and a potential series of rate cuts could trigger a treasury bond market rally. The opportunity cost of holding gold is the forgone income on treasury bond yields and USD cash deposit accounts.
If global demand for treasuries shifts because investors anticipate more Fed rate cuts in the pipeline and capital flows into treasuries also increases demand for USD because demand for both are complementary.
So we believe Peter Schiff warns greenback doom is less likely than other weaker currencies, which don’t benefit from reserve currency status with large gold reserves.
The second most globally traded currency to the USD is the Euro, with already global gold reserves exceeding euro reserves in late 2023.
Central banks operate a coordinated monetary policy, so the extent to which USD remains under pressure from a more Dovish Fed losing cycle depends on whether other central banks mirror Fed rate cuts.
If the ECB, BoE or BoJ decide to make more aggressive rate cuts than the Fed, we may not see even a dollar bear market.
“The US Dollar Index just tanked to a 13-month low. The ‘strength’ of the dollar is the main reason YoY inflation fell from 9% to 3%. Ironically, the Fed is using ‘low’ inflation as an excuse to cut rates, but cutting rates will send the dollar tanking and inflation soaring,” Peter Schiff wrote in a recent X post.
Peter Schiff warns of greenback doom, or the very least, a secular bear market does have some audience.
The possibility that the dollar is ready for the next secular bear market is worth considering, said Morgan Stanley Chief Investment Officer Lisa Shalett in a note in March. She premised the expectation on the following:
- Appreciation in the value of most commodities, denominated in the dollar
- Escalating tensions between the US and China will drive the latter to reduce its reliance on the dollar, which in turn will drive down the currency’s demand
- The Bank of Japan’s move away from its ultra-loose monetary policy
What should investors do if Peter Schiff warns of greenback doom playout?
Increase exposure to tangible assets, real estate, gold, commodities, energy and energy power-related infrastructure. Stocks also tend to perform well when the currency falls.
