Inflation Chickens Will Come Home to Roost
The comments below are an edited and abridged synopsis of an article by Greg Hunter
According to money manager Peter Schiff, all sorts of bad policies happened because of the monetary excesses applied by central banks. Now the inflation chickens are coming home to roost. It will not be in stocks, bonds or real estate prices, but in old-fashioned consumer prices. Food, energy and the things that we need to live are going to get more expensive.
Schiff says the Fed has overlooked problems ahead, citing rising unemployment, a recession, and consumer prices and long-term interest rates that go up at the same time. The Fed doesn’t think that’s possible, but actually it’s probable. And when real inflation rears its head, there is nothing central bankers can do about it. If they try to fight inflation by tightening up on monetary policy, it’s like slamming on the brakes. They will have to jack up interest rates, and everything will start imploding: The credit bubble will collapse; stock markets will tumble; bonds will default. There will be bankruptcies, layoffs, bank failures, and governments will have to start defaulting on their obligations and payments on social programs, or even interest on principal. A massive crisis is coming if the Fed fights inflation, but there will be an even worse crisis if they don’t.
Inflation will be out of control, and this is why people need to buy gold, says Schiff. Paper currencies will lose a tremendous amount of value. To preserve the purchasing power of your savings, you need to save real money (gold), and not fiat currency. Once the market sees that we are never going back to normal, that interest rates are going to stay negative forever, that the Fed has no ability to raise rates, that all the new currency that has been created will never be destroyed, that the Fed balance sheet will grow in perpetuity so liquidity will never be removed, then the dollar will fall drastically.
Schiff predicts another bull market in gold and silver, which has probably already started. “I don’t think we have ever had a gold bull market that didn’t include silver,” he said. In every gold bull market, silver has outperformed gold (on a percentage basis). So there is a lot of upside in silver.