Next Crisis Will Be Much Harder on All Americans (Audio)

Peter Schiff spoke with the X22 Report earlier this week and covered the gamut of economic analysis. They first discussed the latest economic data and why the United States is likely heading into a fresh recession in 2016. They compare the coming crisis to 2008, looking at the long-term collapse of the dollar and what it could mean for everyday Americans. The only question now is will the government eventually cut its spending and cop to the role it played in creating the biggest economic mess in the country’s history, or will it go all-in on socialism?

Highlights from the interview:

“I think the effect [of the Fed rate hike] is actually minimal. I think the air was already coming out of the Fed’s bubble, whether they raise rates or not. I think the data clearly shows that the US is reentering recession. I think the Fed ignored that data and raised rates anyway in the waning weeks of 2015, just to kind of prove that they could. To try to convince the markets that the economy was strong enough to withstand a rate hike, even though it clearly isn’t. So I think we’re heading into recession, and I think the Fed is going to be reversing that rate hike relatively soon. They will be trying to blow more air into the deflating bubble in the form of zero-percent rates, maybe even negative rates. I think they’re getting ready to do QE4, which I think will be bigger than QE1, 2, and 3. Of course, it won’t work. It’ll be just as ineffective as the prior rounds, but I think the markets will ultimately figure out the game the Fed is playing and that’s when the music is going to stop…

“The economy is going back into recession. I don’t think it even left the recession. I don’t think we’ve been measuring it properly. Even if you accept the government’s numbers at face value, we’ve had a very, very mild and very long recovery. This is the weakest recovery ever, and it’s one of the longest recoveries ever. It has required the largest dose of monetary stimulus in history to produce it. The Fed has already withdrawn a lot of that stimulus. They’re no longer doing quantitative easing, and now they’re raising rates. And when stimulus giveth, it taketh away. I said a long time ago, ‘You live by QE, you die by it.’…

“The Fed’s policy didn’t solve any of the underlying problems the economy had. It simply prevented those problems from being solved, we kicked the can down the road. Now we’re catching up to the can, and now we’re going to find out that the problems that led to the 08 economic crisis are now bigger than they were prior to that crisis. So now we’ve got a larger crisis that is about to unfold as a direct consequence of what the Fed did to delay the pain. I still believe they haven’t learned their lesson. When they’re facing another crisis, they will prescribe the same medicine. Which is cut interest rates and print money…

“Going into the holiday season, the inventory to sales ratio, which is how much stuff businesses have on their shelf relative to what their customers are buying – that level was the highest since the great recession. What does that mean? Businesses bought too much stuff, because they overestimated the ability of their customers to afford what they were stocking up on. But a lot of the GDP growth we got last year was the result of the inventory build. Obviously, that was a mistake, because businesses should never have accumulated those inventories, which means most of that GDP growth never should have happened. In 2016, companies are not only going to stop buying, but they’re going to start liquidating these inventories, which means GDP could collapse. In fact, I think there’s a good chance that the GDP in the 4th quarter of last year could come in below 1%… I think there’s a good chance the first quarter could come out negative, which means we’re already technically in another recession…

“You have to put everything in perspective. When gold started this bull market in 1999, it was below $300 an ounce. By the time it peaked out in 2011, 2012 at about $1900, we had a spectacular rise. We’ve now had a 3 year, 4 year correction. No gold is $1080, around there. People just look at the last few years and say, ‘Well, gold didn’t skyrocket like everybody thought.’ Very few people, when gold was below $300 thought it would be above $1,000 in their lifetimes. Well, here we are. I think the reason gold has had this correction, this pull-back, is because everybody has been so optimistic over the last few years about the success of the Fed’s programs. Everybody believes they’ve nursed the economy back to health and that everything is going to be great. When they realize they haven’t nursed it back to health, they’ve just given it poison and it’s about to die from that – when they realize how much worse the economy is now, that the Fed hasn’t solved the problems but made them worse – I think gold is going to have another leg up. I think gold is going to many thousands of dollars an ounce. I’ve said $5,000 as a target, and I think that is probably conservative relative to where it might go… Rather than complaining about gold going down, I think people should be embracing the opportunity to buy more…

“I do think for the United States, in general, it will be much worse than 2008. In 2008, the pain was mitigated by all the bailouts and all the stimulus. The consequence of that was the problems got worse, not better. This time around, I think we’re going to have to deal with the full force, and there’s going to be no way to medicate the pain away, because the government is not going to be able to bail anyone out. The crisis, I think, is going to be in government with our currency and our debt. So the way it impacts the average American is going to be much greater. Certainly, if you were speculating in real estate or in the stock market, 2008 was a very painful year… But if you didn’t have any stocks, and you didn’t have any real estate, it wasn’t that bad. Not everybody lost their jobs… Stocks got cheaper if you wanted to buy them. Real estate prices went down a bit if you wanted to buy a house. Meanwhile, the dollar got stronger…

“The standard of living is going to go down. The question is – what is the government going to do? Is the government going to accept responsibility for creating this mess and help us get out of it by dismantling a bunch of government? By cutting government spending, eliminating government programs, lowering taxes, so that we can dig our way out of this government hole. But there’s also a good chance, judging by the popularity of people like Bernie Sanders, that we’re going to go all in on socialism. They’re going to blame this on too much capitalism and too much greed, and we’ll have even more government. Which means we’ll never get out of the hole…

“I’m afraid that another thing the government might do as the dollar really starts to weaken and as prices really start to go up – they’re going to put in price controls for things. That means shortages. That means there’s going to be rolling blackouts, long lines at gas stations, and maybe even at super markets. If the government tries to stop prices from going up legislatively, then they just create government shortages. Then you have black markets. Then if you want to buy anything, you have to buy it illegally…”

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