Peter Schiff: Rate Hikes Are Over; Fed Will Ease Next (Video)
The Federal Reserve made its much-anticipated move yesterday, nudging up the key interest rate by a quarter point.
Peter Schiff did an interview with The Hard Line on Newsmax TV a short time later, reiterating what he was saying before the Fed’s announcement – the rate hike does not indicate confidence in the US economy.
In fact, Peter argued the economy is about to enter into another recession, and may in fact already be in the early stages of a downturn:
The only reason the Fed is raising rates is to try to show that they have confidence in the economy, but the reality is they have no confidence in the economy and they’re trying to cover up those fears with this symbolic rate hike. But they’re going to have to figure out how to reverse course, unfortunately. They’re going to be doing QE4 next year. They’re not going to be raising rates again.”
Last week, Peter explained how the Fed had backed itself into a corner and left itself with little choice but to raise the rate as a symbolic gesture. But economic data simply doesn’t support a rate hike. There is no improving economy. Peter noted last week that the Fed was already walking back its rhetoric and downplaying the prospect of increasing rates over the long-term. Pundits have called this first rate increase “the liftoff,” but Peter likens it to a hoverboard. He reemphasized this point to Newsmax:
I don’t think this is the beginning of the hiking cycle. This is the end of it. See, normally when the Federal Reserve begins to raise interest rates, they do it early in the recovery. The economy still has a lot of upward momentum, but the Fed has waited so long, this recovery is almost over. I mean we’re still practically at zero and that shows you how little confidence the Fed has in the economy that after supposedly seven years of recovery, that’s all we get. And again, we’re going to go back to zero very quickly.”
Meanwhile, the price of gold and silver fell on the Fed’s announcement, but not nearly as much as many analysts expected. Spot gold was down 0.6% Thursday morning in European trading, according to the Wall Street Journal:
However, the reaction in metals was more muted than some market participants had anticipated, partly because the rate rise was widely expected. ‘It’s been priced in,’ said Robin Bhar, head of metals research at Société Générale SA . ‘The markets were pretty well prepared for the expected.'”
Mainstream analysts are playing catch-up to what Peter has been saying for more than a month – the gold price already had rate hike expectations baked into it. Peter made this very point on his November 12 Gold Videocast:
Gold has already fallen substantially based on the fact that the Fed is going to be raising interest rates. So I think most of the downside, in fact probably almost all of the downside in my opinion, is already here. The gold market has already discounted the rate hikes.”
In his Newsmax interview, Peter was emphatic that the rate hike won’t stick. He even suggested we could see negative rates down the road:
That’s what might be in our future. Not only negative real rates, which we’ve already had because the rate of inflation is higher than the rate of interest, but we might actually have negative rates the way they have them now in parts of Europe and again, they’re going to do another round of quantitative easing. It’s unfortunate…We don’t have a real recovery. All we have is a bubble and that bubble prevented a legitimate recovery and so now the U.S. economy is in much worse shape economically than it was just prior to the 2008 financial crisis and so now the next financial crisis, which the Fed has created, is going to be much worse than the last one.”
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