The huge amount of inflation that the Fed is creating by printing money will be like a tax and it will severely damage the working class, according to broker, investor and precious metals dealer, Peter Schiff.
“I think most people are going to get wiped out by the inflation tax,” Schiff said in an interview with Kitco News. “All of this government is not free. This incredible increase in the size of government is going to cost somebody. Somebody has to pay the bill for all the bailouts and all the stimulus, and if we’re not raising taxes, then how are we doing it?”
Schiff predicts that this “tax” is going to devalue fiat currencies. Investors should be holding onto physical gold and silver, he said.
Schiff is known for being bearish on the U.S. economy. He is chairman of SchiffGold, a precious metals dealer based in Manhattan. He also owns Euro Pacific Asset management and is chief economist and global strategist for Euro Pacific Capital, a division of Alliance Global Partners.
Many crystal-ball gazers predict that gold prices could reach record highs this year as investors seek safe havens from pandemic-hit economies. Right now, however, gold is almost 3 percent below its mid-April high — including a 1.5 percent decline on Thursday of this week alone.
“So while there is more money sloshing around the economy, we’re less likely to spend it,” Mark Hulbert wrote for Marketwatch. “It therefore shouldn’t be particularly surprising that the additional stimulus hasn’t translated into higher inflation expectations and gold prices.”
Schiff is doubling down on his efforts to sell sell sell.
“So what you’ve got to do to mitigate the damage, your share of that inflation tax, is before the dollar collapses, get rid of your dollars and use them to accumulate real money, gold and silver or to buy quality income-producing assets in other countries,” Schiff told Kitco.
Schiff said he predicts that gold will eventually supplant the dollar as it loses value, becoming the de facto global reserve currency.
The central bank has flooded markets with money in order to avoid a full-on recession, Federal Reserve Chairman Jerome Powell said during a recent interview with 60 Minutes.
“We want, you know, people to be buying and selling. And so, you know, it felt like we really needed to act. And we did,” Powell said. By “act,” he means quantitative easing, QE — printing money. QE risks currency devaluation and the creation of bubbles.
Schiff thinks we’re headed for the abyss.
“You had Powell on 60 Minutes basically committing to print an unlimited quantity of money and urging Congress to borrow and spend as much money as they want and that the Fed is standing ready to monetize an infinite amount of government spending,” he said.
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Stimulus on this level will further destroy the economy and devalue the dollar, Schiff added.
“There is a limit to how much money the Fed can print, and that is when it collapses in value. What’s the point of printing money that doesn’t buy anything? I think we’re going to find out pretty soon,” Schiff said.
So Schiff is sticking to gold.
“For more conservative investors, in addition to having an allocation of physical gold and silver, you should invest in countries that have much sounder economies, that aren’t destroying their currency to the degree that we are so that you’re able to get a more reliable income stream, and a lot of these dividend-paying stocks in some of the good markets around the world have come down due to the covid-19 related crisis,” Schiff told Kitco.
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