It’s been a tough week for gold and silver and a record week for stocks because of — you guessed it — optimism about a trade deal. In this episode of the Friday Gold Wrap podcast, host Mike Maharrey breaks down the news of the week. Along the way, he also compares fickle investors obsessed with the latest trade war headline to a delusional sports fan who can only fixate on his team’s most recent game.
The stock market keeps hitting new highs and employment reports continue to look good. President Trump and central bankers at the Fed like to point to this and tell us that the economy is doing good. But as Peter Schiff explained in his latest podcast, the markets aren’t making highs because the economy is good. It’s making highs because of the Federal Reserve’s easy-money policies.
Despite the fact that the economic data is deteriorating. Despite the fact that corporate earnings are falling, it is the Fed that is pushing this market to new highs by cutting interest rates, by indicating to the markets that they don’t have to worry about rate hikes no matter what happens with inflation. The Fed’s not going to raise interest rates. Oh, and by the way, they’re doing quantitative easing, and they’re going to print as much money as they have to keep the markets going up and to keep the economy propped up.”
In a recent article published at the Mises Wire, Ryan McMaken adds another layer of analysis. He says that despite the Fed’s positive rhetoric, it’s actually worried about liquidity and growth. In fact, McMaken believes it is operating from a position of fear.
The Nasdaq and the S&P 500 closed on record highs Friday after a stronger than expected jobs report. But in his podcast, Peter Schiff said that the stock markets aren’t surging because of a great economy. They’re surging because of bad monetary policy.
As expected, the Federal Reserve cut rates for the third time this year. We’re now down to 1.5%. The Fed hinted that cuts are likely on pause for now. But should we believe it? Was this the end of a mid-cycle adjustment? Or should we expect more moves by the central bank? In this episode of the Friday Gold Wrap podcast, host Mike Maharrey breaks down rate cut 3.0 and what it could mean for the precious metals markets.
As expected, the Federal Reserve cut interest rates another 25 basis points on Wednesday.
The mainstream read the post FOMC meeting comments to be relatively hawkish, saying Powell and Company seemed to indicate that future rate cutting is on pause.
Peter Schiff opened up his podcast reminding us that just one year ago, the Fed was raising rates and telling us it would continue to do so through 2019. It also claimed that quantitative tightening was on “autopilot.”
Last Tuesday, the S&P 500 made a record high as markets anticipated another Fed rate cut. Some analysts say the big risk is that we’re seeing a boost in asset prices but no real uptick in the actual economy. Peter Schiff appeared on RT Boom Bust to talk about it. He said investors buying onto all of this Wall Street hype are in for a painful awakening.
As I write this, the Federal Reserve is in the midst of its October FOMC meeting. The central bank is widely expected to cut interest rates another 25 basis points. If the Fed follows through, it will be the third cut in three meetings, totaling 75 basis points since July.
Although the Fed continues to call this a “mid-cycle adjustment,” Peter Schiff called the rate cut in July the first one on the road to zero. There’s nothing so far to cast any doubt on that view.
But the Fed is not alone. It joins the majority of the world’s central banks on a race to lower rates and inject more easy money into the world’s economy. As of this month, a total of 54 central banks in both developed and emerging markets have cut their policy/base interest rates.
President Trump recently took aim at the Federal Reserve once again, accusing the central bank of “holding back” America’s economy. The president was responding to a FOX Business Varney & Co. segment about negative interest rates in Europe and Japan.
Trump said the Fed should follow the lead of European and Japanese central banks into the world of negative rates.
Foreign central banks have been stocking up on gold for months. According to the World Gold Council, a dozen central banks have increased their gold reserves by at least 1 ton through the first eight months of 2019. This continues a trend we saw through 2018. In total, the world’s central banks accumulated 651.5 tons of gold last year. The World Gold Council noted that 2018 marked the highest level of annual net central bank gold purchases since the suspension of dollar convertibility into gold in 1971, and the second-highest annual total on record.
Peter Schiff has talked about central bank gold-buying. He has noted that the US went off the gold standard in 1971, but he thinks the world is going to go back on it.
Years ago, markets used to pay a lot of attention to the money supply and trade deficits. Now, these numbers barely get a passing mention. In his latest podcast, Peter Schiff said he thinks what is old will become new again and trade deficits and money printing will once again come front and center.