Peter Schiff: It’s Not Going to Be Fine

We just wrapped up the worst first quarter in the history of the US stock market. Think about that in context. Even during the dark days of the Great Depression, there has never been a worse start to a year for the US stock market than 2020.

Nevertheless, there are still a lot of people out there who think this is going to be a short bear market. As Peter Schiff put it in his podcast, that’s because they’re still fixated on the pin.

They’re still looking at the fact that ‘Oh, this is man-made.’ I keep hearing people saying, ‘We did this to ourselves. This is not a real bear market. This is not a real recession.’ You know, because we decided to shut down the economy. So, all we have to do is decide to start it back up again and everything is going to be fine.”

Further driving this myth is the notion that as long as the Federal Reserve can print up enough money between now and then to bail everybody out, everything will be OK.

This is all wishful thinking. It’s all part of the delusion. It’s not going to be fine. Because it wasn’t fine before the crisis. We didn’t have a solid economy. We had a bubble. That’s the problem. And the bubble has been pricked. There is no way to go back to where we were. It’s like trying to unscramble an egg. It can’t be done.”

The markets and the economy are scrambled. You can’t put it back the way it was.

In an interview on the Tom Woods show, Doug Casey argued that what we’re seeing today is really an extension of the 2008 financial crisis.

The financial crisis that started in 2008, view it as entering the leading edge of a gigantic hurricane. And we went through that leading edge and you’ll recall, it was quite scary and unpleasant in 2008 and 9 and 10. And we’ve been in the eye of the storm since then. Big hurricane, big eye. But now we’re entering into the trailing edge of the storm, and it’s going to be much longer-lasting and much worse and much different than what we had back in 2008, 9 and 10.”

Casey went on to make the exact same point as Peter.

I’m sorry that this is all going to be blamed on the current coronavirus hysteria, however, because that’s just the accidental pin that broke the bubble.”

Peter summed it up this way.

It doesn’t matter that the wound was self-inflicted. We’ve still got the wound. And we can’t heal it because we didn’t wound a healthy economy.”

Now some people will argue the Fed and the government managed to put it back together after the 2008 crisis. With more than a decade of easy-money policy, they were able to reflate the bubble. But that merely created the eye of the storm. It’s didn’t make the storm go away. In fact, the Fed’s cure actually made the storm worse.

Regardless, the mainstream is hailing the Federal Reserve and the US government”t as the “savior of the economy. Peter said that the idea is ludicrous.

They think these guys are saving the economy. Just like there was that famous Atlantic magazine cover – Ben Bernanke. They said he was the savior of the economy. He didn’t save the economy. He set us up for this collapse. It’s the free market that would have saved the economy. Not these central planners. I mean, do you think the way to save capitalism is to have the government micromanage and centrally plan that recovery? To pick the winners and losers? To funnel bailout money to whoever they want? Is that it? Does central planning work? It’s never worked.”

They can’t save the economy. But they’re trying to save the bubble. Peter said that is a mistake. In fact, it’s exactly what they did before and that brought us to where we are today. Furthermore, Peter says he doesn’t think they can reflate the bubble again.

It’s impossible. They’re not going to do it. They’re going to destroy the dollar in the process and we’re going to have this massive inflation.”

in other words, all of the Fed’s efforts to “help” are actually hurting. In an earlier podcast, Peter said that hyperinflation has gone from the worst-case scenario to the most probable scenario.