The situation between Russia and Ukraine is on the cusp of accelerating. With Western and European pressure being placed on Moscow, and Russia responding with its own set of sanctions, one of the biggest victims in this incident may be the United States dollar, says Peter Schiff, president of Euro Pacific Capital and bestselling author of “Crash Proof.”
Speaking in an interview with Yahoo! News, Schiff said the primary focus of investors right now is the Federal Reserve, and with the heightened geopolitical risks in Eastern Europe, the central bank may have an excuse to postpone its taper and rate increases. Schiff noted that this is something the stock market wants, and is the only aspect that is allowing the market to roar.
As the U.S. central bank continues to keep its federal funds rate at a record low of zero to 0.25 percent, the largest “wild card could be the dollar.”
“We’re flexing a lot of muscle that we don’t have. We’re irritating a lot of people that we need to suck up to,” stated Schiff. “We’re creating extra incentive for people to move away from the dollar. That could ultimately be the biggest problem for the [stock] market. A big drop in the dollar and acceleration of inflation would put pressure on the Fed to raise rates.”
If the Fed does in fact increase rates then stocks would decline, a scary prospect for traders who have been relying on quantitative easing injections, suppressed interest rates and a swelling balance sheet to amplify their bottom lines.
Whatever the case is, Russian President Vladimir Putin would certainly appreciate the greenback to lose its international reserve status and the currency of choice for countries and investors all over the world.
Even though investors are keeping their eyes on Russia, the tech bubbles and the Fed’s minutes, the real focus should very well be honed in on the dollar.
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