Will the Federal Reserve raise rates in June?
Peter Schiff says it’s immaterial.
Peter appeared on CNBC’s Fast Money and created a firestorm when he said he sees this as a repeat of what happened at the end of last year and suggested everybody knows the Fed is at the end of its tightening cycle.
You know, the Fed launches a trial balloon, they raise the possibility of a rate hike, and they wait to see how the markets react. And the markets are basically acting positively, just like they did in December last year. Everybody was convinced there was a rate hike, but the markets were rising anyway. And I think it was the increase in the markets that gave the Fed the false confidence to actually raise rates. But as soon as they did, the markets sold off. We had the worst start to a year in history, and I think the same thing will happen if they raise rates in June. I think the market is going to sell off. I think gold is going to rally again. And I think the dollar is going to sell off. Because these rate hikes are too little too late.”
Although it seems to be almost a foregone conclusion in most circles at this point, not every analyst believes the Federal Reserve will hike rates in June, or if they do that it means a long-term upward trajectory.
Jim Rickards recently appeared on RT’s Boom Bust and said he thought a rate hike was unlikely, and if the Fed does act, it will spur a nasty market crash. In his most recent podcast, Peter Schiff agreed, saying even if the Fed does nudge the rate up a quarter point next month it isn’t going to matter. That will be the end of it, then the Fed will cut. [Scroll Down to listen to the podcast.] And Earlier this week, Jim Grant weighed in on Fox Business and said the Federal Reserve probably won’t raise rates because the economy is just slogging along:
The Federal Reserve will not act. The Fed I think it wants to. I think it would love to normalize things, but I think it has missed its chance. As they say on Wall Street, it missed its market…I don’t want to dogmatize too much, but my opinion is no rate hike.”
Grant went on to engage in a wide-ranging discussion focusing on how central bank policy distorts the economy. Low interest rates accelerate consumption and defer problems. Companies and individuals can take advantage of easy credit and push things into the future. But eventually, this piling on of debt catches up and the whole thing comes crashing down.
The intellectual framework by which the Fed directs our monetary fortunes has been shown to be ineffective at anticipating the future, which they say they are in the business to do.”
Fed watching has become an obsession. Every day, talking heads parse and dissect the words of central bankers, trying to read the tea leaves and figure out if the Federal Reserve will or will not raise rates next month.
But a well-known mainstream market analyst says Fed-obsessed pundits miss the bigger picture. It’s not all about the Fed – especially when it comes to gold.
Lindsey Group chief market analyst Peter Boockvar appeared on CNBC’s Futures Now and talked about gold. He said now is the time to get in, whether you think the Fed will hike rates in June or not. He said analysts and investors focused only on Fed policy completely miss the bigger picture. They need to think beyond June, and recognize policies of other central banks matter too. Boockvar said we shouldn’t forget we have entered a negative interest rate world:
In order to be bearish on gold, you have to believe that the Fed is going to embark on 100 to 200 basis points of hikes over the next couple of years, which I think is completely unrealistic. And also you have to look at gold not just what the Fed may do, but what’s going on with interest rates around the world. We all know that trillions of dollars of sovereign bonds have negative yields… I think this is the beginning of a new bull market in the metals.”
A June interest rate hike is the talk of the town. Jim Rickards doesn’t think it will happen, but if it does, he says, “Look out below.”
Rickards appeared on RT’s Boom Bust to explain why. First, he makes the case that we shouldn’t listen to every word that comes out of every Fed regional bank president’s mouth. He suggests they are likely “testing the waters.” As for the constant harping on jobs numbers, Rickards agrees with what we’ve been reporting. The employment outlook isn’t really all that good:
It’s nowhere near full employment because obviously a lot of the jobs are part-time. Some of the people are working two jobs, so they get counted twice. Labor force participation went down in the last jobs report. So there is plenty of slack in the economy.”
So, Rickards doesn’t think the economic factors warrant a rate increase. But he says if the Fed does make the move, it will send the stock market into a spiral and spark another round of currency wars:
Peter Schiff appeared on Fox Business this week and the first thing he did was talk about how good gold investments are doing, saying they are “the best…doubled or more.”
He then launched straight into the reason why. The economy is a mess.
If this economy wasn’t a disaster, Trump wouldn’t have the support that he does. Neither would Bernie Sanders. This is a phony recovery.”
Peter pointed to the horrible year retailers are having to boost his case, hit on the “auto bubble,” and went on to talk about what’s going to happen when the Federal Reserve is finally forced to acknowledge that we are in a recession.
Capitalism appears to be falling out of favor. Socialism is in vogue. Or at least that’s the impression one gets when talking to millennials in America. A recent Harvard University poll shows that more than half of Americans in the 18-29 age bracket oppose capitalism.
Ron Paul appeared on RT America’s Boom or Bust show earlier this week to address this issue and pointed out the problem isn’t a failure of capitalism per se. The problem is that so few people actually understand what capitalism is. In fact, Paul argues that America’s economic system isn’t really free market capitalism:
I think the problem is all in semantics. When they say they oppose today’s capitalism – I oppose today’s so-called capitalism. I don’t even like the world capitalism, I like free markets. But if you say free markets and capitalism together, we don’t have that. We have interventionism. We have a planned economy. We have a welfare state. We have inflationism. We have central economic planning by a central bank. We have a belief in deficit financing. It is so far removed from free-market capitalism that it’s foolish for people to label it free market…”
Paul went on to say people are right to reject the system in America as it operates today because “it’s designed to fail,” but embracing socialism certainly isn’t the solution.
People should reject what we have, but they shouldn’t reject liberty and freedom and sound economic policies, because that is not the problem. The problem is we don’t have enough free markets.”
Doug Casey: Gold’s 18% Rise Is a Small Move – Peter Schiff’s Gold Videocast with Albert K Lu (Video)
Gold has gone up more than 18% this year, but Doug Casey told Albert K Lu this is just a small move. He sees gold going much higher in the next year:
I think there’s going be a panic into gold and out of paper currencies. So this small up-move that we’ve gotten here since the beginning of the year, that’s just a harbinger. I think this time around, we’re looking at $2,000, $3,000 an ounce. I think it’s going be incredible.”
The question is why? Casey explains his bullish outlook on gold – and how silver could hit $100 an ounce – in Lu’s latest Gold Videocast.
Peter Schiff has been saying for months that the US is probably already in a recession. In fact, during his April 4 podcast, Peter made the case that the “very massive recession,” Donald Trump predicted has already begun (Scroll down to listen.):
Everybody is saying he is nuts because the economy is great. Look at the numbers. The numbers tell a different story. And I believe that Trump is wrong. I don’t think we’re headed for a massive recession. I think we’re already in a massive recession.”
Mike Maloney agrees with Peter, and he recently released a video that highlights four sets of data showing the “robust” economic recovery was all smoke and mirrors created by the Federal Reserve, and the US economy is likely already in recession:
I have a feeling that when the Federal Reserve, and the people who put all this data together, when they finally declare a recession, we’re going to find out that we’re already in a recession – right now.”
Jim Grant appeared on CNBC’s Closing Bell to discuss the Fed’s latest non-move in interest rates, noting that “it seems awful familiar.”
Grant offered a stinging indictment of the Fed’s role in the world, pointing out that central planners simply can’t juggle all of the varying factors in the economy. Every move the Federal Reserve makes to “fix” a problem brings about another set of unintended consequences.
The Fed is in the business of making things worse as it seeks to make things better.”
Grant went on to discuss the notion that sovereign debt is some kind of “risk free” investment. “Of course it has risk,” he exclaimed, noting that in 2005, mortgage debt was the favored asset of the cycle.
The asset of the cycle now is sovereign debt yielding just about nothing.”
With the Federal Reserve preparing for another meeting, pundits are talking interest rate hikes. Even AP is speculating that a rate hike is unlikely this go-around, blaming problems the “global economy.”
The US job market is healthy. The stock market is up. Home prices are rising. Yet as the Federal Reserve prepares to meet this week, it seems in no mood to resume raising interest rates from ultra-lows. With the global economy struggling and US inflation still below the Fed’s target rate, many economists see little likelihood of a rate increase even before the second half of the year.”
But James Rickards appeared on Bloomberg and said it isn’t just about the world economy. He pointed out that the US economy is “hanging by a thread,” and an interest rate hike would likely throw the country into a full-blown recession. Rickards reminded Bloomberg’s Francine Lacqua that the small hike last December sent the stock market into 10% free-fall, and he said the only reason the market is climbing again is because everybody knows the Fed isn’t going to normalize rates. That, Rickards says, is good news for gold.
The reason stocks are going up is Janet Yellen has gone full-dove. She’s sprouted wings and flies around the room. There is nothing the stock market doesn’t like about free money, and maybe negative interest rates are on the table for the next year or so. That is sort of bullish for stocks, but it’s also bullish for gold.”