Peter Schiff hit a number of subjects in his most recent podcast, including bitcoin, the stock market, wealth inequality, the Fed and the voting age. He also said we should be thankful for capitalism.
Stock markets hit record highs again this week. Some of it was due to more optimism about a trade deal. Peter said he underestimated the impact of QE4 on the markets.
I mean, I knew QE4 was coming. I was 100% sure of that. I knew the Fed was going to cut rates, and they’ve been doing that. I just kind of underestimated how much upward pressure it was going to put on the US stock market. I actually thought that the dollar would be falling as a result of the Fed surprising everybody by doing exactly what I expected, which was cutting rates and going back to QE. Well, they did exactly what I expected, except the dollar hasn’t gone down. But I just think I want to add ‘yet.’ The dollar hasn’t gone down – yet. Because it is going to go down and when it falls, it’s going to drop like a stone. And I don’t think that’s going to be a positive for the US stock market or the US bond market, and we’re going to see a much bigger move up in the price of gold.
Peter said a lot of people who are making money in the US stock market think they’re smart, but they’re not.
If they were smart, they wouldn’t be in the stock market. Or if they’re in it, they’re simply in it as a momentum trader that say, look, I know this is BS, but hey, they’re a bunch of idiots buying stocks, so I’m going to buy stocks now so I can sell to these idiots, and I’m going to get out the door before they realize the market has turned.”
Peter also talked about Minnesota Fed President Neel Kashkari. He is one of the most dovish central bankers at the Fed. In a recent speech, Kashkari suggested that the central bank might be able to use monetary policy to address wealth inequality.
I really thought that was rich because one of the reasons we have a widening gap of wealth inequality is because of the Fed and because of the policies that Neel Kashkari advocates.”
Creating inflation – debasing the money – is a transfer of wealth from savers to debtors. When Peter says debtors, he doesn’t mean the typical American consumer. He means people who have levered up to buy real assets.
When you buy an asset and you incur debt, inflation makes you rich because it wipes out the value of the money you borrowed and now you’re left with the real asset that you purchased. But who gets wiped out? The savers. Who are the savers? The average guy who’s got a 401K or a pension. He’s got an annuity. He’s got cash value in life insurance. He’s got bonds. He’s got some savings — he’s getting wiped out. And so the people who levered up to buy assets, which are generally richer people, have gotten richer, and the people who haven’t done that, who aren’t as sophisticated, don’t have the incomes or the assets to do that, you know, they’re just trying to save their money. Well, they’re getting eviscerated.”
Fed policy also transfers wealth from wage-earners to speculators. And it encourages consumers to take on debt by flooding the market with cheap money.
I think it’s really ridiculous for the Fed – I mean, this is about the pot calling the kettle black – the Fed saying they’re going to do something about income inequality when they’re the reasons that we have more income inequality than would normally be the case.”
Of course, you can’t really have income equality in a free society. And even if you are going to embark on this misguided notion of “fixing” income inequality, how is the Fed going to do it? All it can do is print money!
Peter also talked about bitcoin and Michael Bloomberg entering the presidential race, and the voting age.