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Peter Schiff: Fed Hot Air Pumped Up Phony Stock Market Bubble; Payoff is Gold
In the following video, Peter Schiff appears on CNBC where he is calling the Fed’s bluff once again about “alleged” future Fed rate hikes this year. Some will claim Schiff is wrong now because he said the same thing all last year, and look what happened in December. The Fed raised rates. It’s true, Peter said all last year that there was ZERO chance the Fed was ever raise rates in 2015, and they did. What those same critics fail to mention, is the rest of what Peter said. Peter only said rates would never go up because he was giving Janet Yellen the benefit of the doubt she wouldn’t make such an idiotic mistake, however Peter ALSO said EXACTLY what would happen if she did raise them:
1) The U.S. stock market would go way down, and we’re off to the worst start in history;
2) Gold would go up, and it has; and
3) The U.S. Dollar would go down, and this last week the Dollar hit a new low on the year at 96
So, before listening to Peter’s critics, look at his FULL track record. Anyway, in the video below Schiff doubles down. He reminds people what happened the last time the Fed raised rates in December, so once again he’s giving Yellen the benefit of the doubt that she isn’t dumb enough to make the same mistake twice. All the talk about potential rate hikes is intended to mislead people into thinking the Fiction Obama is Peddling About a Recovery is Actually True, All While Unemployed Americans Just Topped 100 Million People.
Obama is doing what Obama does, which is LIE. Since it’s an election year, he’s just doing it even more (if that’s possible). Need proof? If the economy really was healthy, why didn’t they raise rates last week? Case closed.
NEW: THE FOLLOWING TWO POSTS FEATURE BOTH PETER SCHIFF AND DR. JIM WILLIE:
Dr. Willie and Peter Schiff Together: Total Currency Collapse and Reset Coming
Peter Schiff and Dr. Jim Willie Warn Investors About Timing Fed Market Rally
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The mainstream financial media is like a stopped clock. Every once in a while, it stumbles into being right.
Last week, we had a veteran trader on CNBC Futures Now telling everybody to buy gold as long as central banks continue their expansionary monetary policy, all the while swearing he isn’t a “gold-bug.”
This week, we have analysis appearing on Yahoo Finance showing that the Federal Reserve has created a stock market bubble.
Of course, Peter Schiff has been saying this for months. In an interview on CNBC World Now last January, Peter explained how Fed monetary policy inflated a stock market bubble and engineered a fake wealth effect. He went on to argue that the December rate hike, small though it was, pricked the balloon, causing the volatility we continue to see today:
“I think the volatility in the markets has been created by the Fed. The Federal Reserve is the reason the market is so high in the first place. They inflated it. They did it deliberately to engineer a wealth effect. It’s phony wealth, unfortunately. When you create phony wealth with a stock market bubble, the result is substantial malinvestment. You encourage all sorts of uneconomic activity to take place. You get rampant speculation. Of course, when the artificial high wears off – and that’s what’s happening now, particularly now that the Fed has raised interest rates and is posturing as if it’s going to raise them some more – the air is coming out of this bubble. And that is where the volatility is coming from.”
By the way, Peter didn’t pull that out of thin air. In the post titled, Former Federal Reserve President Makes Shocking Confession on TV, former Federal Reserve President Richard Fisher was a guest on CNBC back in January and he made some absolutely shocking remarks. While everyone kept talking about how the market crash in China was causing the U.S. markets to also crash, Mr. Fisher said that was nonsense, and that it was the Fed causing the state of U.S. stock markets. Mr. Fisher also said:
“It is not China,” it is The Fed that is at fault: “What The Fed did, and I was part of it, was front-load an enormous market rally in order to create a wealth effect… and an uncomfortable digestive period is likely now.” He concludes there simply can’t be much more accommodation. ”The Fed is a giant weapon that has no ammunition left.”
“In my tenure at The Fed, every market participant was demanding we do more… It was The Fed, The Fed, The Fed… and in my opinion, people got lazy… Everyone was looking for the Fed to float all boats… Now we go back to fundamental analysis, the kind of work that USED to be done, analyzing which companies are going to grow their bottom line on their OWN, increase their shareholders value, and be priced accordingly… and as [The Fed] tide recedes we are going to see who is wearing a bathing suit and who is not…”
In the video below, you can watch the interview for yourself where the former Federal Reserve President revealed all. For some reason, the audio didn’t match up with the video, but you can still see his demeanor and hear every word he says.
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Over the weekend, Yahoo Finance reported on analysis that proves Peter’s contention, showing that 93% of the entire stock market move since 2008 was caused by Federal Reserve policy:
The bull market just celebrated its seventh anniversary. But the gains in recent years – as well as its recent sputter – may be explained by just one thing: monetary policy…The S&P 500 doubled in value from November 2008 to October 2014, coinciding with the Federal Reserve Bank’s ‘quantitative easing’ asset purchasing program. After three rounds of ‘QE,’ where the Fed poured billions of dollars into the bond market monthly, the Fed’s balance sheet went from $2.1 trillion to $4.5 trillion.”
Economist Brian Barnier’s work reveals the correlation between QE and the stock market. He said it’s not just coincidence, but a case of cause and effect. The Fed’s monetary policy did exactly what Peter said it did – created a false wealth effect:
As the financial crisis reached a fevered pitch in 2008, the Federal Reserve took to flooding the financial market with dollars by buying up bonds. Simultaneously, interest rates fell dramatically, as bond yields move in the opposite direction of bond prices. Barnier sees the Fed as responsible for over 93% of the market from the start of QE until today. During the first half of 2013, the Fed caused the entire market’s growth, he said.”
So, if the Fed created the stock market bubble, what happens when it stops pumping air into the balloon?
It deflates.
That’s exactly what we’ve seen happen over the last few months, and it’s one of the main reasons Peter has been saying the Fed will not continue raising rates, but will instead drop them back to zero and launch another round of quantitative easing. He made this very point just a few weeks after the rate hike:
“I also said that I didn’t think the stock market could handle a rate hike, that the market had stopped rising based on the absence of quantitative easing. But if the Fed actually increased rates, the air would come out of the bubble a lot faster. I mean, it was seeping out, but once the Fed put a hole in it by actually raising rates, I thought it would go down a lot faster. So I thought that the Fed wouldn’t raise rates, because I knew that if they did, the markets would tank. So with the economy going down and the stock market going down, I knew that if the Fed raised rates, the next thing they would do is reduce them back to zero and launch QE4, and they would look like complete fools.”
Once again, we see mainstream analysis catching up to what those with a basic understanding of economic principles easily predicted.
All of this goes to show that no matter how badly it might want to, the Fed can’t raise rates without totally bursting the balloon. Between the need to keep the stock market bubble inflated and the fact that economic data points to a looming recession, it seems almost a certainty that any talk about raising interest rates is nothing but a bunch of hot air.
PROTECT YOUR FAMILY BEFORE THE CRASH!
STOCK UP ON FOOD SUPPLIES WHILE THERE IS STILL TIME!
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FOR MORE GREAT MATERIAL FROM JIM WILLIE:
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Jim Willie: Both Our Allies and the American People Absolutely Hate Our Government
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Peter Schiff: Obama “Peddling Fiction” As Unemployed Tops 100 Million People
Peter Schiff: Recovery Fantasy Persists Despite Recession Evidence
Peter Schiff: Here Comes the Great, Great, Great, Great Recession!
Peter Schiff: “Whatever Obama Was Calling Recovery… is OVER!”
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Peter Schiff and Reagan Advisor: Complete Economic Collapse Immediately Ahead
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