Peter Schiff warns of stagflation in his recent October podcast.
He cites a decelerating economy, slowing employment, and rising prices that are already appearing on the economic landscape.
“We got the highly anticipated employment report on Friday. It came in far below expectations. But despite weak economic data, bond yields are rising, along with the price of just about everything,” said Peter Schiff.
The US economy added 194,000 jobs last month, according to the September Labor Department report. The projection was for around 500,000 new jobs.
Peter Schiff noted that a big decline in government jobs helped drive overall job growth down. As Peter noted, that’s not necessarily a bad thing.
“We got the highly anticipated employment report on Friday. It came in far below expectations. But despite weak economic data, bond yields are rising, along with the price of just about everything”
“The only way to pay government workers is through taxes. So, if government workers are not employed, that is a benefit for the taxpayer because they’re relieved of the burden of paying their salaries. And of course, a lot of the government work that’s done interferes with productivity. We’re better off without those workers because the workers are simply getting in the way of the productivity of everybody else,” said Peter Schiff.
Peter Schiff is a strong supporter of the Austrian School of economic thought, which was introduced to him by his father, Irwin.
In a backdrop of slowing employment Peter Schiff warns of stagflation and he believes monetary easing will continue
Peter Schiff thinks that the markets are misinterpreting the data. “When you add up plunging bonds yields, soaring oil prices, and weak economic data – that equals stagflation,” he said.
“When you add up plunging bonds yields, soaring oil prices, and weak economic data – that equals stagflation”
Peter Schiff noted that last month’s US employment report was “highly anticipated because Jerome Powell specifically said the September job numbers would be instrumental in the Fed’s decision as to whether or not to start the quantitative easing taper.
“If this was the number the Fed was hanging its hat on for confirmation that the data supported a taper, well clearly, now that this number is out, if the Fed was basing a decision to taper on this number, well, it’s not going to taper, which is basically what I’ve been saying all along — that the Fed is just bluffing when it comes to any movement to take the punch bowl away,” said Peter Schiff
“Every time we see more evidence of higher inflation, gold gets hammered because investors assume that the Fed’s going to do something” – Peter Schiff
But despite job creation in the world’s largest economy coming on far below expectations unemployment also fell from 5.2% to 4.8%. Peter Schiff noted that on the surface that seems like a positive. But he cited one of the reasons that unemployment came down is that people simply left the workforce. In other words, people were statistically eliminated from the unemployment rate.
If you zero in on labor participation rates, in our opinion far more useful for gauging the level of employment in the economy, you will notice that the labor force participation rate went down from 61.7% to 61.6%. Peter Schiff believes this is another reason the Fed won’t likely taper. Powell has said he’s looking at participation.
“The fact that the rate went down is just another reason why the Fed is not going to taper before the end of the year. And of course, if it’s not going to start the taper, when’s it going to start raising rates? Because again, Powell has already said that the rate-raising process — liftoff — that’s not even going to happen until tapering is completed,” said Peter Schiff.
The crux to Peter Schiff’s warns of stagflation view is declining worker participation rates and rising input costs, particularly energy
Meanwhile, oil prices pushed above $80 a barrel. This is the first time we’ve seen oil this high since 2014. Peter said he thinks rising oil prices, along with rising commodity prices more broadly, spooked the bond market. Normally, weak economic data would send bond prices rising and yields.
Peter Schiff cites rising bond yields due to rising inflation. “They’re not rising because of a strong economy, but higher inflation. That is not negative for gold. Inflation driving bond prices down should also be driving gold prices up. The only reason it’s not is that the market still expects the Fed to fight inflation. Every time we see more evidence of higher inflation, gold gets hammered because investors assume that the Fed’s going to do something,” he said.
“A weakening dollar with rising consumer prices, rising bond yields, and weak economic data – that spells stagflation. I mean, stagflation is here” – Peter Schiff
The writing is on the wall as Peter Schiff warns of stagflation
“A weakening dollar with rising consumer prices, rising bond yields, and weak economic data – that spells stagflation. I mean, stagflation is here,” said Peter Schiff.
For those of you who still believe that markets are free from central bank manipulation, you may be perplexed as to why gold is not five times its current value.
Peter Schiff warns of stagflation will come as no revelation to those reading this blog or even those who shop for groceries
So, in our opinion gold is probably the most undervalued asset as stagflation bites.
Our view is that central banks can’t fight stagflation without causing a financial meltdown. In a fiat debt system if the debt is money and the central banks destroy the value of debt by raising rates that would triggers a tsunami of sovereign debt defaults. But that would also destroy the value of the currency.
For central banks, it is damned if they do and damned if they do not, which means gold prices should rise in any scenario.
But who wants to own an asset like gold which, is so obviously rigged to the downside?
Central banks are snapping up gold as Peter Schiff warns of stagflation
Global central bank reserves increased by a net 28.4 tons in August, according to data compiled by the World Gold Council.
Gross central bank gold purchases came in at 30 tons.
India led the way, adding another 12.9 tons of gold to its holdings. It was the third straight month of significant gold purchases by the Indian central bank. Last August, there were reports that the Reserve Bank of India (RBI) was considering significantly raising its gold reserves.