Peter Schiff: Fed will 'wipe out' many investors; gold to return as reserve currency
The Federal Reserve is going to create an inflationary environment that is like a tax that will hurt society on all levels, according to Peter Schiff, chief executive officer of Euro Pacific Capital.
“I think most people are going to get wiped out by the inflation tax. 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 told Kitco News.
This “tax” is also going to devalue fiat currencies, and investors should be holding onto physical gold and silver, he continued.
“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,” he said.
As the dollar loses value at an ever faster pace, gold will eventually supplant it as the de facto global reserve currency, he noted.
Schiff also recommends diversifying assets geographically.
“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,” he said.
As well, gold stocks have the best return-to-risk profile, he said.
“I really think that that’s where the speculative money should be at this point, in these mining stocks and junior mining stocks, in particular where you have the most upside if you know what you’re doing,” he said.
However, U.S. stocks are still overvalued, according to Schiff.
On stock markets rallying this week following news that Moderna has released positive results from its phase one COVID-19 vaccine trials, Schiff noted that what investors really responded to was continuous monetary stimulus from the Federal Reserve.
“I think what’s really driving the market is the Fed. You had [Fed Chair Jerome] Powell on 60 Minutes [Sunday] 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.
Stimulus on this level will only destroy the economy further and devalue the dollar, he 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,” he said.
The huge amount of inflation that the Fed is creating is going to hurt the working class severely, Schiff said.
“The amount of inflation that the Fed is going to be creating in the weeks and months ahead is actually going to be greater than the amount that it’s already created. This is never a good thing. Inflation is a tax, and it’s the most vicious tax because it hits the most vulnerable, it hits the lower class, the working poor, people who have savings, it destroys the value of a lifetime of savings. It destroys the value of wages and salaries that people earn,” he said.