With much of the general public and mainstream media reporting on the so-called fiscal cliff that is scheduled to occur in the new year when automatic spending cuts take place and tax cuts for 90 percent of American households expire, Peter Schiff, President of Euro Pacific Capital, sees Federal Reserve Chairman Ben Bernanke as a much more dire threat.
Speaking on CNBC’s “Futures Now” on Wednesday, the former Republican Connecticut Senate candidate explained if it wasn’t for the Fed’s quantitative easing policies then the United States wouldn’t have had to head off the fiscal cliff and instead eventually a much bigger fiscal cliff.
Although many are concerned over the fiscal cliff, Schiff told viewers that the U.S. needs a much bigger fiscal cliff, which consists of a lot larger cuts to the federal budget instead of cuts to future spending increases.
The author of “The Real Crash” and “Crash Proof” said that a deal will most likely be made because politicians in Washington want to portray themselves as saviors of the masses and not allowing a crash to transpire.
“If we avoid the cliff, that is very bullish for the gold market because that means that trillion dollar-plus deficits will perpetuate, and these big deficits are what’s undermining the dollar because the Fed has to print money to finance them,” said Schiff. “The more money they create to buy up the bonds that nobody wants, the higher the price of gold is going to go.”
Despite the rally in the stock market, Schiff is cautious because he says that all of the increases are due to inflation and not because of real economic growth or earnings are improving. This means that the U.S. dollar is eroding and that investors need to own something other than Federal Reserve bank notes, such as gold, if they want to evade “destruction.”
“The problem is the more money central banks have to print to keep buying up these Treasuries the less the Treasuries are ultimately worth because you’re destroying the value of currency that they’re denominated in. This is very bullish for gold,” stated Schiff.
“The politicians are trying to scare us with a fiscal cliff. All the fiscal cliff means is we have to start paying for all this government. What’s really scary is all the government we have. If politicians want to spare us from the fiscal cliff, cut government spending so we don’t have to pay for it.”
Economic Collapse News reported that Schiff foresees gold hitting $5,000 per ounce and he reiterated his stance, but noted that he doesn’t know if it’s going to be in a couple of years or not.
“I do believe gold will ultimately eclipse $5,000. I don’t know how high it’s going to go because there’s no ceiling on how low currencies can go. There is no intrinsic value to the dollar, there’s no intrinsic value to any fiat currency. There’s no limit to how much money central banks will print,” added Schiff.
He cited the Fed chairman, who noted that he is considering stepping down in Jan. 2014, as saying he will print as much money as possible until the economy recovers. However, as Schiff has repeated numerous times, printing money does not generate economic growth nor does it produce jobs.
“It’s going to prevent the economy from recovering; it’s going to destroy jobs. So he’s going to print money indefinitely, so there’s no bottom on the dollar and there’s no ceiling on the price on gold,” concluded Schiff.
In a speech delivered to the Economic Club in New York on Tuesday, Bernanke forecasted a very good year in 2013 for the U.S. economy, but only if the fiscal cliff is avoided. Bernanke also said that the Federal Reserve does not have the necessary tools to offset the negative impacts of the fiscal cliff.
“In contrast, cooperation and creativity to deliver fiscal clarity — in particular a plan for resolving the nation’s longer-term budgetary issues without harming the recovery — could make the new year a very good one for the American economy,” stated the Fed Chairman.
Furthermore, it appears that Schiff isn’t the only goldbug on the mainstream financial scene. MoneyNews.com reported that the Soros Fund Management increased its gold holdings by 49 percent in the last quarter, while Paulson & Co. owns $3.66 billion of SPDR Gold Trust, which holds physical gold.
At the time of this writing, gold is up $3.10 at $1,731.30. The price of silver is also up $0.015 at $33.37.