Peter Schiff’s we’re in a Fed built house of cards view was put forward in a recent phone interview with Market Watch.
Peter Schiff CEO and chief global strategist of Euro Pacific Capital is a permabear and an outspoken critic of the central bank’s massive monetary easing policy which was implemented post-2008 financial crisis.
“This isn’t a bear market. We’re in a house of cards that the Fed built”
“I’m watching the U.S. economy implode from the beach” Schiff told MarketWatch during a recent phone interview. “We’re in a lot of trouble”.
“This isn’t a bear market” he says. “We’re in a house of cards that the Fed built”.
Peter Schiff’s we’re in a Fed built house of cards view is a continuation of his bearish view he held back in January, 2018 when stocks kept breaking their all time high level. So the final stage of the longest cyclical bull market in living memory was indeed of the Fed’s making it was the Fed’s Trojan horse for the incoming Trump administration. No president has tied themselves closer to the stock market than Trump.
But while most were fanchanting the Dow rally as it kept smashing new resistance levels the contrarian investor Peter Schiff had another view.
“I’m watching the U.S. economy implode from the beach”
“We are near the endgame…And Trump’s Gonna be the Fall Guy”, said Peter Schiff.
So Peter Schiff’s we’re in a Fed built house of cards view suggests that we could be on the cusp of a systemic crisis similar if not greater than the previous financial crisis of 2008.
“Unfortunately, that’s what Trump has inherited from Obama. But it’s not even really just Obama, it’s the federal reserve. It’s the monetary policy that has been passed like a baton from Clinton to Bush to Obama and now to Trump. And we’re near the end of the game and unfortunately, Trump’s gonna be the fall guy. This thing is all gonna collapse while he’s president” said Peter Schiff.
“This is not just a financial crisis this is an economic crisis our entire phony economy is collapsing around us” – Peter Schiff (before 2008 financial crisis)
So how does Peter Schiff’s we’re in a Fed built house of cards view stack up in terms of current stock valuations
Despite recent attempts to rebound, the Dow Jones Industrial Average DJIA, -1.81% is on track for its worst year since 2008 down by about 3.5% when the financial crisis brought global markets to their knees, according to Dow Jones Market Data.
Moreover, the S&P 500 index has clocked its worst year in a decade, with it being down 4% decline thus far this year.
Peter Schiff’s we’re in a Fed built house of cards view could have legs, bearing in mind that Peter Schiff not only forecasted the 2008 financial crisis he also correctly spotted that it would emanate from the housing market.
“This is not just a financial crisis this is an economic crisis our entire phony economy is collapsing around us” said Peter Schiff just before the 2008 financial crisis.
So what should the government do?
Peter Schiff’s answer is controversial, debatable and maybe insensitive to some readers. “They should get out of the way and let it happen…”, said Peter Schiff.
“We are going to have to build a viable economy where we save our money and make stuff again”, said Peter Schiff which makes more sense and we can see how this led to rise in Trump.
You are what you make. It is no coincidence that the economies of China and Germany have a solid manufacturing backbone and are today the world’s largest exporters. The idea that as an economy developed its economic activity moves from manufacturing into service industry was the greatest con taught in economics. When a nation’s manufacturing sector is abandoned its economy is decimate too.
Peter Schiff’s we’re in a Fed built house of cards view also sheds some light on the economic shift from the West to the East
China has experienced 15 years of sustained economic growth. It has been the world’s fastest growing economy for more than a decade. The world’s factory, China is rapidly moving up the economic foodchain. China is no longer content with making low skilled cheap products.
As it stands the US is already losing the technology war with China reports Forbes.
“AI/machine learning/deep learning are the new digital weapons”.
The Chinese have a very public, very-deep, extremely well-funded commitment to AI. Air Force General VeraLinn Jamieson says it plainly: “We estimate the total spending on artificial intelligence systems in China in 2017 was $12 billion. We also estimate that it will grow to at least $70 billion by 2020”.
Moreover, China today already publishes more articles about deep learning than the US.
In short, the rise of China and the pivot to the East is the greatest geopolitical event of the century and a potential threat to USD hegemony.
“I think what’s going to happen is the Fed is ultimately going to take rates back to zero” – Peter Schiff
Peter Schiff’s we’re in a Fed built house of cards view could also signal the battle for the 21st century
The Fed’s monetary policy fuelled a speculative bubble which diverted valuable capital from the productive economy into the speculative economy. It is as if the West overdosed on decadence and the East got smart.
When start-ups which are unable to turn a profit were valued at multibillion dollars that is an economy in fairyland, a Fed built house of cards
So what will the Fed do next if Peter Schiff’s we’re in a Fed built house of cards view turns out to be correct.
“I think what’s going to happen is the Fed is ultimately going to take rates back to zero” said Peter Schiff.