Peter Schiff: The Dollar Is Tanking; Gold Is Soaring; Nobody Cares
The dollar continued to tank Wednesday, hitting a 3-year low after Treasury Secretary Steven Mnuchin said he welcomed a weakening dollar.
The dollar index measuring the greenback against a basket of six major currencies slipped below 90 for the first time since December 2014. Meanwhile, gold climbed, hitting its highest level since August 2016.
Mnuchin said a weaker dollar was “good for us as it relates to trade and opportunities.” According to Reuters, the markets saw the comments as a departure from traditional US policy and as a signal Pres. Trump is getting more aggressive with China and other trading partners. Mnuchin later tried to walk back his comments.
I thought my comment on the dollar was actually quite clear yesterday. I thought it was actually balanced and consistent with what I’ve said before, which is, we are not concerned with where the dollar is in the short term.”
Head of FX Strategy at Saxo Bank John J. Hardy had a different take.
USD [was] thrown under the bus. It is taking fire on all fronts.”
In his latest podcast, Peter Schiff said Mnuchin was trying to talk up and encourage investment in America. But if the dollar is weak, the last thing you want to do is invest in the US.
This supposedly is supposed to make foreign investors feel better about investing in America? I mean, you’re basically telling foreign investors if you invest in America, you’re going to lose because you’re going to lose on the foreign exchange.”
Peter said the real impact of this weak dollar policy would be felt in the bond market, which is already showing signs of trouble.
Basically, what the Treasury secretary was doing by basically saying we have a weak dollar policy was telling everybody around the world, ‘Do not buy our bonds!’ Well, he’s the guy that’s supposed to be selling those bonds. Did he not get that memo?”
Peter said the fact that the dollar and bond prices are falling together is a very, very bad sign that everybody is ignoring. The bond yields aren’t high enough to offset the losses in the foreign exchange. People think they are going to get more economic growth because rates are going up. But what if they’re just going up because we’re going to get more inflation?
Even if it was the result of growth, we won’t have the growth if we have higher interest rates because we owe too much money. The debt is much too big for us to have a growing economy that is burdened by all of this debt.”
Peter kept emphasizing that nobody seems to be paying attention to what is really going on.
The dollar is tanking. Gold is soaring. All these forecasts that I’ve been making, or that I used to make, are starting to come true and nobody cares.”
Regardless, Peter thinks the stock market is heading for a crash and that’s going to set off a chain reaction.
The US stock market is going to stop going up and start going down. It has to. Because higher inflation, higher interest rates are going to weaken the economy. They are going to undermine corporate earnings. This whole euphoric rise is going to end with a crash. It has to. And then, it’s going to usher in a bigger crash in the dollar because we know what the Fed is going to do. When the market is going into recession, when the stock market is tanking, they are going to reverse course.”
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