Peter Schiff: People Will Be Wiped Out By the Inflation Tax

The printing presses are running at full speed as the Federal Reserve creates money out of thin air at an unprecedented rate. Peter Schiff recently appeared on Kitco News to talk about the impact of all money-printing, borrowing and government spending. Somebody has to pay for this and we all will. In fact, a lot of people will be wiped out by the inflation tax.

US stock markets have generally been rising despite dismal economic data. Any optimistic news about coronavirus, such as the recent promising vaccine trials sends stocks up. Peter said he thinks people are looking for an excuse to buy, but what’s really driving stocks is the Federal Reserve.

Powell on 60 Minutes [Sunday] night basically committing to print an unlimited quantity of money and urging Congress to borrow and spend as much money as they want and that the Fed is standing ready to monetize an infinite amount of government spending. So, I think people think that’s good for the market but it’s not. It’s a disaster for the economy. It will destroy the value of the dollar. And sure, that means stocks will go up, but so what, if you’re pricing them in worthless currency?”

Peter said that there is a limit to how much money the Fed can print.

That’s when it collapses in value. What’s the point of printing money that doesn’t buy anything?

So what should the Fed do? Peter said if the central bank had been doing the right thing all along, the economy would have been strong enough to withstand the pandemic and do what it really needs to do  – dramatically reduce government spending. The problem now is nobody has any money. Everybody is broke and leverage to the hilt because the Fed has made one mistake after another to inflate one bubble after another.

This particular bubble was already deflating before the coronavirus pin put a gaping hole in it. And now the air is coming out much faster and all they can think of is how can we fill it back up again? How can we reflate a bubble? And it’s going to be impossible.”

Ultimately, the Federal Reserve will destroy the dollar.

The thing people really need to be vaccinated from is the massive inflation that the Fed is going to unleash.”

Peter said the dollar is already defying gravity and once it begins to really fall, it is going to implode. But a lot of mainstream pundits insist inflation isn’t a problem. After all, CPI is low. But as Peter pointed out, the level of inflation right now is unprecedented. Inflation, by definition, is the expansion of the money supply and it grew at a record rate in April.

Inflation is a tax and it’s the most vicious tax because it hits the most vulnerable. It hits the lower class, the working poor, people who have savings. It destroys the value of a lifetime of savings. It destroys the value of the wages and salaries that people earn.”

Peter said we’re about to see price inflation that takes out the levels we saw in the 1970s. We could even potentially see hyperinflation.

So, where should investors be going? Peter said gold is a safe haven and so is silver. As far as speculative money, Peter said mining stocks offer the best risk-reward.

I think most people are going to get wiped out with the inflation tax. All of this government is not free. This incredible increase in the size of government is going to cost somebody. Somebody has to pay the bills for all the bailouts and all the stimulus. And if we’re not raising taxes, then how are we doing it? We’re financing it through inflation. And that doesn’t mean we get it for free. It just means that anybody who is foolish enough to hold US dollars, either in savings or in the form of bonds or other fixed-income investments, or even any income-oriented investments where the income is US dollars – you are going to suffer.”

And how do you avoid the suffering? Get rid of the dollars.

Use them to accumulate real money – gold and silver.”

All currencies are losing value right now and you can see that in terms of gold. In fact, gold has reached record highs in nearly every major currency except the dollar.

I think the dollar is going to win the race to the bottom, which is a race you don’t want to win. But I think once we take the lead in that race, that’s when you’re really going to start to see the gold price moving. Because gold does a lot better when the dollar is the weakest of the currencies. So, if gold is this strong when the dollar is less weak than its rivals, imagine how much stronger it’s going to be when it’s the weakest one.”

Peter said ultimately he thinks the dollar will lose its status as the reserve currency and the world will return to gold as the primary monetary reserve.