Peter Schiff, CEO of Euro Pacific Capital, says the economy is heading into a free fall, but this time it will be worse than the recession of 2008. This time around Schiff says the Feds will cut interest rates to zero and restart Quantitative Easing, or the purchasing of Treasuries to pump up the economy. This is what he had to say Wednesday after the bell, “The dollar is going to go through the floor and it’s going to take the bond market with it and the next crisis, it’s not subprime mortgages, it’s going to be in the Treasury market.”
There were a lot of doomsday-er’s that came out after Wednesday’s 800 point drop in the Dow. Much attention was given to the 10s and 2s, or the inversion of the more people buying 2 year Treasuries than 10 years. As one commentator explained, this is an important indicator in that it shows people feel better about the short term investment than the long or 10 year outlook.
This is how Schiff claims the free fall would impact the President: “There’s no way out and it’s a political disaster for Trump because the recession is going to start before he finishes this term.” Read Fox Business article
Trump, this week, has also slammed the Feds claiming that they waited too long to start cutting interest rates. If the economy was so healthy, then my question is why is President Trump and Wall Street calling for the Feds to start the stimulus again. One economist that was instrumental in authoring Regan-omics back in the 80s, said that by taking credit for the “booming economy” Trump has bound himself to it. In other words, if the economy is his claim to fame, then when it tanks he is done!
Don’t get me wrong, I think the president has done some things right in regards to the economy, but think back to what led up to the Dow at 25,0000. There were four rounds of quantitative easing. What we are seeing is a highly stimulated economy already. I am no economist, but I do listen to knowledgeable ones when they sound the alarm. It is as if Wall Street is on drugs and needs another fix. Watch the reactions on Wall Street to China trade talks or stimulus from the Feds. I remember as the markets were weaned off of four rounds of QE, some economist made the predictions that if Feds had to go four rounds of QE and lower the rates to near zero to get the car back on the road, then the next time this happens those measures would not work again. I mean, think about it, zero percent interest is already driving with your gas pedal to the floor.