Peter Schiff: The Fed Will Wave the White Flag at Inflation

Peter Schiff recently appeared on RT Boom Bust to talk about inflation, the Fed and gold. He said a lot of people still think the Fed will soon tighten monetary policy to deal with rising inflation pressure. But they’re wrong. Ultimately, the Fed is going to surrender to inflation without a fight. When the markets realize this, the dollar is going to crash through the floor and gold is going through the roof.

Gold had a little bit of a rebound late last week before giving back some of those gains on Friday. Is this a sign that gold has bottomed? Peter said he wasn’t sure.

I don’t know if we’ve seen the lows in gold but I know for sure we haven’t seen the highs. So, when this correction is over, the price of gold is going much, much higher.”

Peter has said that the Federal Reserve is between a rock and a hard place. It couldn’t fight inflation even if it wanted to. Doing so would collapse the stock market and the broader economy.  So, how long will Jerome Powell keep promising to hold interest rates down? Peter said rates will have to stay low “indefinitely” because the entire economy is a bubble.

It’s not a legitimate recovery that we’re enjoying. It’s simply the spending of borrowed money — and more literally printed money. We’re running massive deficits. The federal government is spending over $8 trillion per year but collecting less than $3.5 trillion in taxes. The difference is pretty much being supplied by the Fed and Americans are spending all of this money. That’s why our trade deficits are skyrocketing right now.”

In a nutshell, the Fed is printing money, the government is handing it out and American consumers are spending it on stuff they did not produce.

The goods trade deficit grew to $83.7 billion in January, up from $83.2 billion in December, according to the most recent Commerce Department data. Imports of consumer goods climbed to a record $62.8 billion. Import shipments of food and beverages also reached a new high of $13.8 billion.

Peter said the only things keeping this house of cards from imploding are zero percent interest rates and Federal Reserve quantitative easing.

So, the Fed is not going to pull the rug out from under this bubble. But it has to pretend that if it ever sees an inflation problem that it’s got the tools to fight it even though it’s bluffing. Because even if it had the tools it would never use them because the tools would destroy the house of cards that they’ve erected.”

Peter was asked if he thinks gold and precious metals will catch up to inflation expectations if inflation fears keep growing. He said “absolutely!”

Right now, the markets sense that inflation is going to be moving higher. And maybe even higher than what the Fed is acknowledging. But I think the markets still believe the Fed — that the Fed will be able to contain the inflation problem before it really runs out of control. So, it’s the expectation that the Fed’s going to fight inflation by raising rates — that’s what’s pressuring gold. But the markets are wrong. The Fed is not even going to attempt to fight inflation. It’s going to surrender. Inflation is going to win without a fight. And when the markets realize that the Fed is all bark and no bite, and that inflation is going to be an even bigger problem that is going to be uncontrollable, then the bottom’s going to fall out of the dollar and gold’s going through the roof.”