Peter Schiff is CEO of Euro Pacific Capital Inc. His portion of the Opening Remarks is called "When Is a Recovery Not a Recovery?" (His talk was all doom and gloom.)
Peter Schiff starts off by saying the conventional wisdom is often wrong and never so than now. Most people did not see the disaster of 2008 coming. We have an even bigger disaster coming. People are saying that the US is recovering and that the Fed's policy is working. However, the Fed cannot raise interest rates and they cannot reverse the QE.
Who are going to buy the US Bonds held by the Fed? The US economy seems to be growing because of the Fed, but really the Fed is inflating a bubble. In the 1990's individuals invested in stocks. In 2000 individuals were invested in Real Estate. We now have a problem with institutions like Hedge Funds.
Unemployment is down because people are leaving the workforce. UI is stopping so people are taking low paying jobs. Retirees are taking part time jobs to meet their financial needs. Under Obama care, full time employees get Health Care, but part-time employees do not. So people are being hired for part-time work and more are being hired because you need more part-time employees than full-time employees.
The problem with QE is that you cannot get off QE. QE 3 is not the end. There will be a QE 4. The Fed cannot raise rates because the US economy will go into a recession and bear market. The US$ is going up.
QE cannot end because it did not work, not because it did. The US has much more debt today than before. Our corporations are heavily into debt. That is because corporations are doing Buy Backs financed by debt.
If the stimulus is taken away, thinks will implode. Usually we have a recession every 5 years. It has been 5 years since the last recession. But interest rates are still so low. Usually the Fed raises interest rates between recessions. That has not happened this time. There has been no GDP growth even with QE. So take it away and what will happen?
Real Estate may drop again 10 to 20% next year. The stock market is falling now. The Fed is like a drug addict that has been on heroin so long that he thinks he can stopped taking it and he will still stay high. This is not going to happen. QE is the same. There is no way out of QE. We are so broke we cannot even afford 1% interest rates. There is no exit strategy. QE cannot end. When we realize this there will be a big crash.
Politicians want inflation so that they can pay off the debt through inflation because they cannot pay it the debt off honestly. Only inflation can bring the QE to an end. This will occur in a time of crisis. The US borrows to pay for imports. Other countries have to support the US's massive trade deficit. Today we are in a bigger bubble and heading for a bigger crash than 2008.
On my other blog I am today writing about Equitable Group Inc. (TSX-EQB, OTC-EQGPF) ... continue ...
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