Swiss News Could Mean Carnage for US Dollar (Audio)

In his latest podcast, Peter Schiff provides more in-depth analysis of how the Swiss National Bank’s monetary policy could affect the US dollar in the long-term.

Highlights from Peter’s podcast:

“In a surprise move that sent shockwaves throughout the foreign exchange markets, the Swiss National Bank finally did something right. They abandoned their 1.20 peg with the euro. They effectively surrendered in the currency war. The Swiss people are now victorious, because they finally won. Because Switzerland is giving up the inflation ghost, the debase your way to prosperity, the inflation at any cost. This, of course, is the first good thing the Swiss National Bank has done in a long time. But if you listen to the media reports, it’s like this is the dumbest thing they’ve done. Most of the headlines have to do with the fact that this is bad for Switzerland because now their currency is going to go up, and it’s going to hurt their exports, and they’re going to have deflation. Prices are going to go down. In fact, oil prices are plunging for the Swiss now. Gee, I really feel bad for the Swiss. They get to spend so many fewer francs to fill up their cars…

“The stupid thing that the Swiss did was adopting this peg in the first place. That was one of the dumbest things ever. Giving it up is one of the smartest things the bank of Switzerland has done. Dennis Gartman himself said, ‘You know, the Swiss are going to lose tens of billions of francs. This was so dumb, they’re going to lose all these francs.’ That’s because they have a balance sheet now of better than 500 billion francs worth of euros and dollars, and the Swiss franc surged today against every currency on the planet, not just the euro. Now the Swiss have tens of billions in losses. If they’d continued the peg, they’d have had hundreds of billions. The longer they maintained the peg, the more euros and dollars they were going to buy and the more money they would ultimately lose when they abandoned the peg. Dennis Gartman said they should have just done it forever, because it cost them nothing. They could just print all the Swiss francs they want. Sure, it doesn’t cost money to create Swiss francs out of thin air. But that doesn’t mean the action is without cost. The Swiss people bear a huge cost in a reduction in the purchasing power in their savings and their wages. So their standard of living takes a hit for every Swiss franc the bank of Switzerland creates in order to provide a massive subsidy to the eurozone…

“The conventional wisdom [is summed up by] Goldman Sachs [saying], ‘Aha, you better be ready for shock and awe when it comes to European QE.’ You know, I wouldn’t be so sure. I think without the Swiss help, it makes it even less likely that Europe can do QE, because they need the Swiss to buy up all the euros and to support the currency. I think without the Swiss as an ally, if the Swiss basically say, ‘Hey, you do this, you’re on your own. We’re abandoning this peg.’ Now Germany is going to say, ‘We don’t have the Swiss anymore, we cannot do this.’ The Germans have got to be nervous about seeing the euro plunging against the Swiss franc… I think this might mean that Germany can dig in their heels, and maybe instead of QE in Europe we get some actual economic reforms instead…

“Now the Swiss franc is surging against gold, but it’s the only currency that is. In US dollars, gold is now up better than $30 today. We’re above $1260. We’ve blown through new highs in the euro. We’re approaching 1100 for the euro price of gold. Gold is breaking out… I think the Swiss should be buying gold. I think this sell-off in Swiss-priced gold is only temporary. I think you’re going to see a big move up, an explosive move up in gold. It will be a bigger move up against the dollar and against the euro than it will be against the Swiss franc, but it’s still going to move up against the Swiss franc…

“If you look at the economic data that came out today, it continues the trend of horrific economic data on the US economy since the end of the third quarter. We got weekly jobless claims that came out this morning. They went up to 316,000. The biggest jump in four months. They also revised last week’s claims higher a bit. This is now the highest number of unemployment claims since June of last year…

“The worst number of the day was the Philadelphia Fed number… It was supposed to come out at 20. Instead, it crashed all the way down to 6.3. This is the lowest level in almost a year, since February of 2014. It was the biggest miss on expectations since some time in 2011. If you look at their employment sub-index… That sub-index plunged to its lowest level since June 2013. So very bad news on the labor front…

“I think it is premature to conclude that because the Swiss have done this, it’s out of fear for an enormous European QE. Granted, there’s no way they can go down with that ship. I was warning how ridiculous it would be for the Swiss to continue their peg in the face of QE. I thought the Swiss, together with Germany, might stop Draghi and the forces of QE. But now the Swiss have basically left the Germans standing their all by themselves. The Swiss have effectively left the eurozone, even though they never officially joined it…”