US Can’t Survive Quantitative Tightening (Video)
In his latest Schiff Report, Peter Schiff tears into the latest non-farm payroll jobs report, which everyone claimed could be the deciding factor for the Federal Reserve to raise interest rates. Peter also discusses the new phenomenon of quantitative tightening, which is the process of foreign central banks selling the US Treasuries they’ve accumulated.
[These countries have already started selling their US Treasuries.] Now you’ve got people in the media who have labeled this ‘quantitative tightening.’ Quantitative easing was when the Fed was reducing the supply of Treasuries by printing money. If foreign central banks are going to be increasing the supply of Treasuries by dumping theirs, how is the US economy going to deal with quantitative tightening? In fact, it can’t.”
Highlights from the video:
“We released, I guess, the most important non-farm payroll report ever. Or at least, that’s the way the media was hyping it. In fact, there was a Wall Street Journal article that basically said that this jobs report could seal the deal on rate hikes. The August employment report could make or break the case for the Federal Reserve raising interest rates. This was supposed to be it. This was the jobs report that was going to be the deciding factor. Can you believe that? Interest rates have been at zero for almost seven years. The Federal Reserve has been contemplating lift-off for years. And it all boiled down to one jobs report? How could that possibly be? If the Federal Reserve was really about to raise interest rates in two weeks, this jobs report shouldn’t make a difference…
“Janet Yellen specifically answered the question by saying, ‘Before we can consider beginning to raise rates’ – there are two things she wanted to see. She wanted to see more people entering the labor market. She was concerned about labor force participation, and so she wanted more people participating. She was also concerned about the number of people working part time that wanted to be working full time. She wanted to see an improvement there too. She wanted more full time jobs and fewer part time jobs, and an increase in labor force participation. These are the two things she wanted to see, before beginning to raise rates. Those numbers have gone in the wrong direction. The Fed is further away from its goal. Since Steve Liesman originally asked that question, those numbers have gone the opposite way. Labor force participation has gone down. Part-time employment has gone up. Everything that the Fed says they want to see happening is not happening. Why is nobody point this out? …
“Why do foreign central banks, why do these emerging markets, why do they have so many dollars? They started buying dollars in the aftermath of the Asian economic crisis, 1997. They wanted to make sure they had enough dollars in reserve to defend their currencies if their currencies started to fall. Well, that’s happened. So now, maybe they’re going to start drawing on those massive reserves. They’re going to start selling their US dollars and US Treasuries to try to shore up their currencies. In addition, the vast majority of the accumulation took place after the Fed launched QE1…
“[These countries have already started selling their US Treasuries.] Now you’ve got people in the media who have labeled this ‘quantitative tightening.’ Quantitative easing was when the Fed was reducing the supply of Treasuries by printing money. If foreign central banks are going to be increasing the supply of Treasuries by dumping theirs, how is the US economy going to deal with quantitative tightening? In fact, it can’t. If you look at the magnitude of the US Treasuries held in China, Saudi Arabia, Brazil, countries all around the world that bought up all these dollars and Treasuries when their currencies were strong and they were foolishly trying to restrain that growth – well, now they’re going to be liquidating. China has already liquidated a substantial number, but they have a long way to go. This is just the tip of the Chinese iceberg when it comes to Treasuries…“