Stock markets have settled down after an awful couple of weeks earlier this month. On Feb. 5, the Dow Jones suffered its largest-ever drop in terms of points. It was down 1,600 at one point and ultimately lost 1,175.21 points, a 4.6% drop that day. At one point during that week, the Dow was off 10% in correction territory. But everything is calm now and most of the mainstream is once again feeling bullish and optimistic.
Peter Schiff spoke at the Vancouver Resource Investment Conference 2018 last month before the market tanked. But his message remains relevant in the aftermath of the plunge and the subsequent recovery because the dynamics in the market remain pretty much the same. Conditions are still ripe for a 1987-style market crash.
Investors have not been this optimistic...since 1987. They are even more optimistic than they were at the height of the technology bubble, the dot-com bubble, the new era. Of course, 1987 didn’t end well, right? We had a stock market crash, and there’s a lot about what’s happening today that reminds me about what was happening in ’87.”
Highlights from the Speech
“The economy has not improved under Trump. We don’t have a booming economy. I mean, Trump keeps telling us we have a booming economy, but nothing is booming.”
“When Donald Trump was a candidate for president, he said that the unemployment numbers were phony. They were fake. They were a fraud. They were a con. He said the real unemployment rate is 30%, 40%. Now, every time there is an unemployment number that comes out, he’s tweeting about how great it is we have this record low unemployment and we should all give him credit for it.”
“Now, the tax cuts, are they going to grow the economy? No! Because they didn’t cut government spending. See, you don’t get government for nothing. Taxes pay for government. But if you cut taxes and you don’t cut government, how do you pay for that government?”
“I believe the debt and inflation we have to create to finance the tax cuts will be a bigger drag on the economy than the tax cuts are a boost.”
“Where there will be growth is in the budget deficits and that kind of is where I see some of the similarity now in the 1980s – 1987 – because these big budget deficits are going to be a big problem.”
“Rather than having continuous economic growth, I think the economy is going into recession. Now, I believe that had Donald Trump lost that election, the US would already be in recession. I think we were clearly headed to recession before he won. And when he won, he created this huge burst of misplaced optimism that probably postponed the onset of that recession by another year or two.”
“The most recent trade deficit hit the highest level I think in six years... The trade deficit is heading much higher and so is the budget deficit. You have these twin deficits. And the last time they were a big problem was 1987.”
“I believe that this year, the dollar is going to hit an all-time record low. I think we’re going to crack below 6-to-1 in yuan.”
“If the dollar is going down, why would anyone outside the United States want to buy a 10-year Treasury yielding 2.6%?”
“Here’s the problem. America’s broke. America has more debt than ever before … The debt has more than doubled since the financial crisis. Why did we have a financial crisis? We had too much debt!”
“What has really been propping up the US economy is cheap money and cheap gas.”
“Here is the self-perpetuating spiral that we’re in. As the deficits go up, now we have to sell more bonds. Well, that puts more downward pressure on bond prices and more upward pressure on interest rates. So, as rising interest rates create bigger deficits, those bigger deficits create rising interest rates.”