Peter Schiff: Stagflation Is Coming

The Dow Jones was up Friday, avoiding it ninth consecutive down day. As Peter Schiff noted on his most recent podcast, such a long stretch of declines is pretty rare. Eight straight down days has only happened  43 times since the Dow launched in 1896. The last time we had nine straight days of Dow Jones decline, Jimmy Carter was president.

Peter said this is a little ironic because he sees another Carter-era phenomenon on the horizon – stagflation.

As a result, he thinks Trump is going to do for the Democrats what Carter did for the Republicans.

The conservatives rode to power because of the problems that were blamed on Carter. Well, the socialists are going to rise to power in America based on the problems that are going to be blamed on Trump.”

Of course, it’s not really going to be Trump’s fault. But that’s the way the political class plays the game. Whoever happens to be in office when things go south gets the blame. But the real culprits are the central bankers.

Stagflation is a combination of high inflation and negative economic growth. We saw it under Carter, and Peter thinks we’ll see it again as the Trump administration progresses.

Peter has been talking a lot about inflation in both the eurozone and the US, but the mainstream isn’t paying a bit of attention.

Inflation, of course, is not just going to be a problem in the eurozone. It is going to be a bigger problem in the United States. I think the difference is while the Europeans are going to ultimately raise interest rates to fight their inflation, especially since there’s going to be a lot of pressure from the Bundesbank on the ECB to do that,  the United States is just going to surrender. We’re not even going to bother to battle inflation because there’s no way we can win. And so inflation is going to be a bigger problem here in that it’s going to get even more out of control in the eurozone. But it is going to do damage worldwide, and it’s amazing that you have such a massive inflationary threat looming on the horizon and as far as the central banks are concerned, the possibility of that isn’t even something they can imagine.”

Peter said when he looks at all of the data, he sees looming stagflation.

It’s so obviously what is coming … But you know who can’t see stagflation? Anyone at the Federal Reserve.”

The Fed announced the results of its bank “stress tests” last week. Unsurprisingly, every bank passed.

If the teacher gives a test and everybody gets an A, then the test was too easy. Clearly, the Federal Reserve designed this test so that everybody would pass.”

Peter did an in-depth breakdown of the stress test and explained exactly what the Fed claims to be testing. The common denominator – in all of its adverse scenarios, inflation falls.

What is the Fed missing? The elephant in the room – stagflation.”

In essence, the Fed is preparing for the last war. All of its adverse scenarios look a lot like the 2008 crisis. But as Peter put it, what happened in 2008 was a Sunday School picnic compared to what is coming. They didn’t even bother testing a scenario where inflation rises during a recession. If they had, most of the banks would have likely failed.

But Peter says this is what is ahead – a breakout in inflation, a breakdown in the bond market, rising interest rates, and rising consumer prices as the economy declines.

You know, Murphy has a law. Anything that can go wrong will go wrong. Well, stagflation is something that can go wrong, and it will go wrong, and we should be prepared for it. But we can’t prepare for it, so we want to pretend that it doesn’t even exist.”

In this podcast, Peter also discussed the Supreme Court’s ruling allowing states to collect sales tax from online retailers, Trump’s proposed “Space Force” and what’s going on in the world of cryptocurrencies.

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