Schiff w/ Nawfal: Oil is Breaking the Economy

In a recent interview with Mario Nawfal, Peter explains why investors have the gold trade backwards, arguing that rising rates are actually bullish for the metal rather than bearish. The duo connects America’s economic weakness to Trump’s sagging approval numbers and explores how China’s gold accumulation and US policy blunders are accelerating the world’s move away from the dollar.

Peter opens by pushing back on the conventional wisdom that has traders spooked. He argues the market has the relationship between interest rates and gold completely backwards:

I think again, investors have got this trade wrong. They keep looking at rising bond yields. They look at the Fed and the fact that the Fed is going to raise rates. And all this is seen as being bearish for gold. And so traders are selling gold based on the idea that the Fed’s going to hike rates because inflation is too high. But inflation is too high because the Fed lacked the ability to raise rates high enough to contain it.

Peter continues this thought, explaining that no matter what the Fed does from here, it’s already too late to catch up with inflation. He sees this as the real setup for gold and silver to keep climbing:

Doesn’t matter if the Fed hikes race, it’s too little too late. Inflation is going to keep rising. The Fed is going to fall further and further behind the curve with each hike. So gold’s going to new highs. So is silver. So people should be buying now before investors figure out what they already should know.

Peter then connects the dots between a struggling economy and Trump’s declining approval ratings. He insists that no amount of spin can paper over what Americans are experiencing at the checkout line:

The U S economy is in the process of breaking. You know, when that is going to accelerate into a crisis, it’s hard to say, but we’re certainly heading in that direction. But I think the main reason, yeah, I think the main reason that Donald Trump’s popularity continues to hit new lows is because the economy is weak and all of the talk about the strong economy is, is just talk. The reality is that the economy is weak and prices are rising.

From domestic politics, Peter turns his attention overseas to China, whose central bank has been quietly stacking gold for years. He speculates about what Beijing is ultimately trying to accomplish:

I think their strategy is to replace their dollars with gold to have a much stronger backing for their currency, whether they ultimately want to recreate an alternative reserve currency to the dollar, one that would be backed by gold, maybe even redeemable in gold. I don’t know, but I know the Chinese recognize that they have to have some backing for their currency and gold makes a lot more sense than the dollar, especially since China is now moving to have a smaller trading relationship with the United States.

Returning to the Fed’s predicament, Peter explains why hotter than expected inflation numbers should be read as a buy signal for gold, not a reason to sell. The core issue, he says, is that America’s debt load has made any real inflation fight impossible:

The fact that inflation is a lot higher than the Fed thought, that’s a reason to buy gold, not a reason to sell it. You know, it doesn’t mean that the Fed just has to fight a little bit harder to win. It means that it’s already lost. And the reason it lost is that it can’t fight hard enough to win because we have so much debt that the rate at which interest rates would have to be to really bring inflation back down, it’s too high for the US economy to bear.

Peter closes by tying together the themes of reckless spending, inflation, and the consequences of alienating trading partners. He argues that Washington has only sped up a process that other countries were already inclined to pursue:

We gave the world a kick in the ass that they really shouldn’t have needed. They should have just wanted out of the dollar anyway, just because of our budget deficits and our inflation. But then we gave them another reason to do what they should have been doing anyway.