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Blame Market Volatility on the Fed, Not Commodities (Video)

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Peter Schiff spoke with CNBC World last night. Just like Futures Now and Yahoo! Finance, the anchor questioned whether or not the Fed is really to blame for market volatility. He thought commodity volatility – particularly oil – played a big role. Peter disabused him of this theory and explained why he expects the Fed to launch QE4 in 2016.

Why are commodities falling in price? It’s because of the Fed… Everybody believes that the Fed is going to be raising interest rates. That is strengthening the dollar, and it is the strength of the dollar that is undermining commodities, because commodities are priced in dollars. If the dollar goes up, commodities become more expensive for everybody who has to pay in a currency other than the dollar. This is the source of all this instability and volatility.”

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Highlights from the interview:

“This morning, Jim Bullard came out again and threw the market a lifeline. He hinted at maybe a more dovish outlook from the Fed for rate hikes. But rather than acknowledging the weakening US economy, I think Bullard wants to preserve the phony narrative that we have a real recovery. So he really couched his dovishness by saying it was the low oil price that caused the Fed to rethink its monetary policy and maybe slow down the pace of tightening until the oil market turns around. I think that’s what rallied the market…

“I think the volatility in the markets has been created by the Fed. The Federal Reserve is the reason the market is so high in the first place. They inflated it. They did it deliberately to engineer a wealth effect. It’s phony wealth, unfortunately. When you create phony wealth with a stock market bubble, the result is substantial malinvestment. You encourage all sorts of uneconomic activity to take place. You get rampant speculation. Of course, when the artificial high wears off – and that’s what’s happening now, particularly now that the Fed has raised interest rates and is posturing as if it’s going to raise them some more – the air is coming out of this bubble. And that is where the volatility is coming from…

“You have to realize, why are commodities falling in price? It’s because of the Fed. It’s because the Fed is threatening to raise interest rates. Everybody believes that the Fed is going to be raising interest rates. That is strengthening the dollar, and it is the strength of the dollar that is undermining commodities, because commodities are priced in dollars. If the dollar goes up, commodities become more expensive for everybody who has to pay in a currency other than the dollar. This is the source of all this instability and volatility. It is the widespread belief that the dollar is going to keep rising. But the reality is the dollar is not going to keep rising, because the US economy is either already in a recession or rapidly heading to one. The Fed is not going to be able to continue with rate hikes. It’s going to have to reverse course. It’s going to have to go back to zero, maybe negative. It’s going to launch QE4, and that’s going to be a game changer for the currency markets and the commodity markets…”

Blame Stock Volatility on the Fed, Not Commodities (Video)

Peter Schiff spoke with CNBC World last night. Just like Futures Now and Yahoo! Finance, the anchor thought volatility in commodities was a major factor for market volatility and instability. Peter disabused him of this theory and explained why he expects the Fed to launch QE4 in 2016.

Why are commodities falling in price? It’s because of the Fed… Everybody believes that the Fed is going to be raising interest rates. That is strengthening the dollar, and it is the strength of the dollar that is undermining commodities, because commodities are priced in dollars. If the dollar goes up, commodities become more expensive for everybody who has to pay in a currency other than the dollar. This is the source of all this instability and volatility.”

Highlights from the interview:

“This morning, Jim Bullard came out again and threw the market a lifeline. He hinted at maybe a more dovish outlook from the Fed for rate hikes. But rather than acknowledging the weakening US economy, I think Bullard wants to preserve the phony narrative that we have a real recovery. So he really couched his dovishness by saying it was the low oil price that caused the Fed to rethink its monetary policy and maybe slow down the pace of tightening until the oil market turns around. I think that’s what rallied the market…

“I think the volatility in the markets has been created by the Fed. The Federal Reserve is the reason the market is so high in the first place. They inflated it. They did it deliberately to engineer a wealth effect. It’s phony wealth, unfortunately. When you create phony wealth with a stock market bubble, the result is substantial malinvestment. You encourage all sorts of uneconomic activity to take place. You get rampant speculation. Of course, when the artificial high wears off – and that’s what’s happening now, particularly now that the Fed has raised interest rates and is posturing as if it’s going to raise them some more – the air is coming out of this bubble. And that is where the volatility is coming from…

“You have to realize, why are commodities falling in price? It’s because of the Fed. It’s because the Fed is threatening to raise interest rates. Everybody believes that the Fed is going to be raising interest rates. That is strengthening the dollar, and it is the strength of the dollar that is undermining commodities, because commodities are priced in dollars. If the dollar goes up, commodities become more expensive for everybody who has to pay in a currency other than the dollar. This is the source of all this instability and volatility. It is the widespread belief that the dollar is going to keep rising. But the reality is the dollar is not going to keep rising, because the US economy is either already in a recession or rapidly heading to one. The Fed is not going to be able to continue with rate hikes. It’s going to have to reverse course. It’s going to have to go back to zero, maybe negative. It’s going to launch QE4, and that’s going to be a game changer for the currency markets and the commodity markets…

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One thought on “Blame Market Volatility on the Fed, Not Commodities (Video)

  1. […] What we have is what Peter Schiff has called a “phony wealth effect.” […]

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