Fox Business: Idea That Fed Could Weaken the Dollar Is “Way Out There” (Video)

Deirdre Bolton of Fox Business’ Risk and Reward asked Peter Schiff about the alternative investments he recommends for protecting yourself from a crash in US stocks. They discussed foreign markets and gold investment, and Peter laid out his forecast for what the Federal Reserve will do next. She smiled and called his prediction of more quantitative easing and ongoing zero-percent interest rates leading to a collapse of stocks and the US dollar “way out there.”

Follow along with this transcript:

Fox: Where should investors think about diversifying? [Where should they be] putting some of their money instead of US stocks?

Peter: There’s a whole world out there. In particular, certain countries that don’t have anywhere near the enormity of the problems that the United States does. In fact, if I were as convinced as everyone else that the Fed was actually about to raise interest rates sometime this year, I would be even more negative on the US stock market than I am. I think the Fed is going to rescue the US stock market with QE4, but when they do that they sacrifice the dollar.

Fox: Wait, you’re the only person I’ve heard say that. Doesn’t mean you’re wrong…

Peter: I’ve been saying that for a long time. But more and more people are going to be waking up to this reality. My point is, in order to save the markets, they’ve sacrificed the dollar. I think that is the real concern investors need to have. Not just the US stock market going down, but the dollar. The way to protect yourself from that, but still have exposure to markets is to invest in the countries against which the dollar is going to be falling. So we’re buying stocks in New Zealand… There are parts of Europe I like. I like Switzerland. I like Scandinavia. But I was saying I like New Zealand, I like Singapore, I like Hong Kong, certain emerging markets…

There are a lot of currencies that have gone way down because speculators have bet that the Fed is going to raise rates and that has suppressed the value of those currencies. Rather than taking a vacation in these countries to take advantage of a cheap hotel room, use your overpriced dollars to make some strategic investments in their stock market.

Fox: So let’s say the Fed just stays on hold. Your QE4 plan does not come to pass, but even just the Fed stays on hold where it is [and] doesn’t tighten, doesn’t raise rates. Is it still a good time to look at commodities?

Peter: Well, if the Fed doesn’t raise rates, that is in effect an easing, because everyone has anticipated higher rates. If they have to come to terms with the fact that rates aren’t going up, that’s going to be like an easing. Yes, it will be good for commodities. It will be good for gold. It will be negative for the dollar. But it’s my point that if the Fed doesn’t deliver QE4, we will be in a recession. Of course, if we go into recession, the only arrow in their quiver is QE4, because they can’t cut rates, because they never lifted them from zero.

Fox: To what extent then, in your scenario, is the Fed responsible if [the stock market doesn’t gain anything for investors this year]?

Peter: I think the Fed is responsible for a lot of the problems that we have. In fact, it’s made all of the problems worse in its effort to solve them. But the stock market is going to be trapped between two diametrically opposing forces. One is going to be the recession that is going to weaken corporate earnings, and therefore weaken the value of US stocks. The other [force] that is going to be supporting the market is the extra liquidity – all the inflation they create by launching QE4. So the net effect, maybe the stock market goes sideways, but the real value of those stocks is going to plummet because the dollar is going to fall. The way investors guard themselves against that purchasing power loss is by investing abroad.

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