Peter Schiff: Nobody Is Prepared for the Long-Term Pain That’s Coming
The stock market continued its yo-yo ways on Friday. After three straight days of healthy gains, the Dow Jones Industrials fell 572 points to end the week, closing below 24,000. The Nasdaq also plunged, dropping 161 points.
Peter Schiff has been saying for weeks this is a bear market. Well, now even Pres. Trump has said investors may see some short-term pain in the stock market. But the president says it will all be worth it because we will get long-term gain, referring to the benefits we’ll reap when we win the trade war. In his most recent podcast, Peter said that’s not how it’s going to play out.
We’re going to have short-term pain and then the pain is going to get worse in the long-run.”
The big problem is, nobody is really ready for any pain at all.
Peter said this is pain for no reason because these policies are a mistake. Not that some short-term pain wouldn’t be beneficial. But policymakers aren’t willing to take the real steps necessary to reap long-term benefits – cut government spending, cut entitlements, cut defense spending, and shut down government agencies and government departments.
There would be some short-term pain that would deliver some long-term gain. How about if the Fed normalizes interest rates and lets the bubbles collapse, lets people lose money, lets the markets restructure? That is short-term pain for long-term gain. That is what a real free-market recession is like. Let the government get out of the way. Let the central bankers get out of the way, and let the free market correct the imbalances and create a good foundation where we can build a lasting, sustainable, viable recovery.”
But Peter says that’s not what Pres. Trump is all about. He’s about avoiding the short-term pain by kicking the can down the road.
Peter also noted that even while stocks are falling, there is no flight to the dollar. When stocks fell in 2008, people ran to the dollar, but this time, the greenback is not a safe haven. He said the dollar is consolidating for its next big leg down. It’s the opposite for gold.
Gold is getting ready to blow through the roof.”
But right now, people are still complacent. They still believe the fundamentals are good. Peter repeated something he said in a previous podcast – in a sense they are right. The fundamentals haven’t changed. They were lousy when the market was going up and they are lousy as the market is coming down. But the key thing to understand is that the fundamentals are actually getting worse.
This is a time bomb. The debt keeps going up. Every day we’re closer to the crisis. Every day there is more and more debt, right? And so, every day that goes by, we’re one day closer to the debt imploding.”
Peter went on to break down the most recent jobs report and highlighted some other bad economic news that didn’t get much play in the mainstream media.
He also talked about what will happen if the Fed doesn’t follow through with interest rate normalization. The market certainly isn’t prepared for that.
Normally the markets are forward-looking. They discount things that they think are going to happen. Well, if you don’t think something is going to happen, how can it be discounted? So, it’s when the markets are blindsided, when they’re surprised, that’s when you see the biggest moves because they didn’t get discounted in advance. You can’t buy the rumor and sell the fact if you’ve never bought the rumor because you don’t know there’s a rumor or you don’t believe it. So when the fact happens, nobody is positioned for it. Nobody is prepared for it. And that’s where we are in the gold market. That’s where we are in the gold stock market, in the bond market, in the US stock market. Nobody is prepared for any of the things that are going to happen because nobody believes that they are going to happen.”
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