The stock market in the United States inches higher each day – some say it’s in bubble territory because of the Federal Reserve – but that won’t stop the U.S. dollar from making its inevitable collapse, says Peter Schiff, president of Euro Pacific Capital.
Speaking with CNBC during the Thursday trading session, Schiff said that he expects stocks to climb a bit higher but that the greenback won’t experience the same thing and instead the dollar will suffer from a diminished value thanks to Fed Chair Janet Yellen.
“Although I don’t think there’s a lot more upside in the stock market, I’m not looking for a collapse,” said Schiff. “But what I am looking for is a dollar collapse, so that even if the market continues to move higher, it’s nominal highs only. It’s not real highs adjusted for a loss of purchasing power in the dollar.”
Reiterating past positions, Schiff argued that it will be the Fed’s stimulus that will help spell doom for the dollar because as it prints more money it will persist in inflating asset bubbles and reduce the value of the dollar.
This week, Yellen announced that the central bank will lower its monthly bond-buying acquisitions again and hinted that fed fund rates could increase sooner than initially projected to. Despite this, Schiff still believes Yellen will not back away from stimulus efforts because the markets rely on “the punch bowl.”
“I do not believe that the Fed is going to take away the punch bowl. They’re going to keep spiking the punch bowl until the patient dies of an overdose of drugs,” stated Schiff. “That’s what’s going to happen. The economy’s going to completely pass out at some point and it’s not going to matter how much stimulus the Fed gives us.”
Due to his stance on the Fed and the eroding dollar, Schiff would not short the stock market because it’s akin to longing the dollar.
Nevertheless, the rising stock market will not serve as a hedge to the falling dollar. Instead, investors should be purchasing gold and other commodities as well as putting their money overseas, argued Schiff.
At the time of this writing, gold is trading in positive territory at $1,336, while silver is down bordering the $20 threshold.
Former Texas Republican Congressman and three-time presidential candidate Ron Paul told the business news outlet this week that no matter what the Fed decides it should refrain from touching interest rates because that’s too much of a powerful tool for one person to have control of.
“It’s an illusion. I don’t think any one individual knows how to plan the economy by manipulating interest rates. Interest rates are so important that if you give this power to one small group or one individual, there will be distortion,” said Paul. “So sometimes you have housing bubbles and sometimes you have housing busts, then you have housing bubbles and bond bubbles that’s all [the] result of the manipulation of interest rates, which is my real objection to it.”