Peter Schiff vs. Paul Krake: A battle over gold, inflation and QE

If the Federal Reserve ends quantitative easing then the United States is back in a recession and a bear market, at least according to Peter Schiff.

On Tuesday, another contentious interview between Schiff and a different anti-gold establishment investor took place on CNBC’s “Futures Now.” This time it was about gold, which Schiff made the case that central banks’ inflationary actions will allow gold to reach $5,000 per ounce, a prediction that he has made for the past few years.

Although gold suffered its worst trading day of 2014 by dropping two percent, Schiff still believes there is strong evidence that the yellow metal will reach all-time highs in the future, especially if the Federal Reserve keeps the printing presses on.

“Central banks are creating too much money, there’s too much inflation, interest rates are too low, and so I want to store my purchasing power in something that central banks can’t print,” Schiff said. “I think we’re headed much higher because they are not going to stop the presses. They are going to run them into overdrive.”

Schiff argued that if the central bank persists in its tapering of its monthly quantitative easing program and eventually ends it then the United States will head back into a recession, which will then cause the stock and real estate markets to become bear.

“And then what is the Fed going to do to respond to that? The only thing it can do is print more money and restart the presses and do more QE,” Schiff added.

Paul Krake of View from the Peak countered that notion by pointing out gold had the worst year in 2013 even though the Fed maintained the largest balance sheet in history.

The president of Euro Pacific Capital responded: “Did you ever trade anything? Buy the rumor, sell the fact? Gold rallied for over a decade in anticipation of that. We shook out some of the weaker players. Meanwhile, gold is outperforming all other assets in 2014.”

Krake retorted by calling it “a lame argument.”

The quarrel continued but this time on inflation. Krake thinks inflation is low, while Schiff holds the viewpoint that inflation is running rampant (this fact we have reported on several times on Economic Collapse News).

Schiff stated that inflation is the expansion of the money supply and QE is simply a “euphemism for inflation” and that central banks worldwide are inflating. He further explained that the gold market is indifferent towards the consumer price index because “it cares about real inflation” rather than “government propaganda.”

Krake accused Schiff of being “miles off base” and began to cite CPIs across the world that are at multi-year lows. “To say there’s inflation, to say there’s pricing pressures globally, is incorrect,” noted Krake.

After asking how he would know where prices in China would be if the government wasn’t printing money, he concluded by laying out his economic outlook of inflation:

“A productive economy lowers prices,” Schiff espoused. “Lower prices are the result of economic growth. And if prices aren’t falling the way they’re supposed to, if consumers are denied the benefit of falling prices because governments have created inflation and stolen that benefit away from them, you can’t say there’s no inflation.”

Who will Schiff do battle with next?

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  1. How can it be proven that gold price has predictive qualities?

    Can the buys and sells ON PAPER be ignored and only the buys and sells of actual physical gold be charted and correlated to historic and present events?

    And in this way, when the desirability of physical gold alone is gauged, is there a reliable signal.

    Everyone always says that the integrity of gold is being stripped from it by paper manipulators; deceivers if you will. So, chart it. Chart gold and exclude the influence of the deceivers to the best of your abilities.

    Let’s call it, in honor of John Williams:

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