U.S. Inflation Is Bullish for Gold and Bearish for the Dollar – Ep. 293
The Peter Schiff Show Podcast18 Okt 2017

U.S. Inflation Is Bullish for Gold and Bearish for the Dollar – Ep. 293

Inflation Higher Than Expected
Today we got the hotter than expected news on prices - on inflation. We got the import/export prices. Import prices were supposed to be up 0.5%, which in and of itself is a pretty big jump, but they were up 0.7. Export were also up; (we would want export prices to go up, because that means we are getting more for what we export) they were expected to rise 0,4%, and instead they rose by 0.8. Double the expectation.
Import/Export Index Methodology More Accurate
Year over year, import prices are up 2.7%. As of last month, the year over rise was just 2.1%, so that's a pretty big jump in the year over year gain. Export prices were up 2.9% year over year. Averaging these out, you get 2.8% as the average increase in 1 year of the price of the stuff we import and export. That's a broad based increase - well above the supposed 2% level the Fed is looking for. They are looking for consumer prices, measured by the CPI, but the Import/Export index represents things the consumers consume, and I would think these numbers are going to be more accurate than the CPI because there is less subjectivity in there. I think the methodology is more accurate than the methodology on the CPI. I think soon we're going to see year-over-year increases import and export prices with a 3 handle.
Markets Working Counter-Intuitively
When this news came out, the immediate reaction was to buy the dollar and sell gold. Why? Why is higher inflation bad for gold? The main reason to buy gold is as an inflation hedge. If you think there is going to be more inflation, then you buy gold. Perversely, the way the markets work now, you sell gold if you think there's going to be more inflation, in fact, you buy the currency of the country that is experiencing more inflation, which is counter-intuitive. Inflation by definition, is the currency losing value. If the currency is losing its purchasing power, why would you want to buy more of it? You would want to get rid of it to avoid that loss.
Will Higher Inflation Produce a Tighter Fed?
But the thinking is, if there is more inflation, as measured by these price indexes, that the Federal Reserve is now going to have to fight the inflation, that they are going to be more likely to raise interest rates, to raise them sooner, to raise them more, in the face of higher inflation. So it is the expectation that these higher numbers will produce a tighter Fed - that is what rallies the dollar, That is what hurts gold - the anticipation of higher rates to fight off the inflation.
Fighting Inflation vs. The Bubbles
Reality is that the Fed will ignore the higher inflation numbers and do nothing. Whatever it is going to do with rates, it will do it regardless of these numbers. Ultimately, if the Fed has to make a choice between fighting inflation and unemployment (because the Fed believes in the Phillips Curve trade-off between employment and inflation), the Fed will always choose to fight unemployment. It will prop up the labor market and sacrifice its inflation goal. It is more concerned with maintaining asset bubbles, propping up the U.S. government so it does not have to default on its debt.
Letting Inflation Burn
The reality is, higher inflation is not going to produce a tighter monetary policy. The Fed is going to have to ignore higher inflation, which means the inflation is going to get even worse. It is almost like the Fed has to ignore a fire, and because it ignores the fire, it is just going to get bigger, it's not going going to try to put it out because it is afraid that putting it out is actually worse than letting it burn. If traders understood this, then they would be dumping the dollar and buying gold.
Real Inflation vs. Nominal Inflation
Even if the Fed ultimately raises rates, they're not going to get out in front of the inflation curve. Our Sponsors: * Check out Infinite Epigenetics: https://infiniteepigenetics.com/GOLD * Check out Justin Wine and use my code SCHIFF20 for a great deal: https://www.justinwine.com Privacy & Opt-Out: https://redcircle.com/privacy

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Central Banks Wage War Against Low Prices – Ep. 46

Central Banks Wage War Against Low Prices – Ep. 46

* Big action from the Central Banks this week * Bank of Canada lowered rates from 1% to .75% * The ECB announced the launch of first QE program * The Euro plunged against gold * Central Banks' goal is to raise the level of inflation to guard against falling prices * Falling prices accelerate economic activity * Regulations and taxes slow down economies * QE in Europe lets the politicians escape the consequences of regulations and taxes * QE will send European money abroad * Inflation is an obstacle to economic growth Our Sponsors: * Check out Infinite Epigenetics: https://infiniteepigenetics.com/GOLD * Check out Justin Wine and use my code SCHIFF20 for a great deal: https://www.justinwine.com Privacy & Opt-Out: https://redcircle.com/privacy

23 Jan 201523min

Gold Rally Continues, Yuan/Dollar Peg Explained – Ep. 45

Gold Rally Continues, Yuan/Dollar Peg Explained – Ep. 45

* Biggest 7-day surge in Gold prices since 2011 * U.S. GDP will be lower than in Canada this year * Canadian gold production will rise in 2015 * Gold is rising against most currencies except the Swiss Franc * The IMF still believes the U.S. economy is recovering * Outlook for gold in Australia is also positive * The Yuan will probably be the next peg to go, allowing it to rise against the dollar * The American workforce is being rewarded for incurring large debt to engage in unproductive careers Our Sponsors: * Check out Infinite Epigenetics: https://infiniteepigenetics.com/GOLD * Check out Justin Wine and use my code SCHIFF20 for a great deal: https://www.justinwine.com Privacy & Opt-Out: https://redcircle.com/privacy

21 Jan 201522min

Will China Pull a “Switzerland” on the U.S. Dollar?

Will China Pull a “Switzerland” on the U.S. Dollar?

* Thursday, January 15, will be remembered as the day Switzerland abandoned its peg to the Euro * The Swiss defended their policy to peg to the Euro, but suddenly reversed, limiting their losses * They admitted they were wrong * Although the Swiss stock market went down in their currency, it was up in every other currency * Gold is up against everything except the Swiss franc * The news in the Swiss market will be a tremor compared to the earthquake if the Chinese abandon their peg both to the Hong Kong Dollar and the Yuan * America will win the currency war to the detriment of the American people Our Sponsors: * Check out Infinite Epigenetics: https://infiniteepigenetics.com/GOLD * Check out Justin Wine and use my code SCHIFF20 for a great deal: https://www.justinwine.com Privacy & Opt-Out: https://redcircle.com/privacy

17 Jan 201524min

Switzerland Loses Currency War Swiss Win – Ep. 44

Switzerland Loses Currency War Swiss Win – Ep. 44

* The Swiss people have given up the inflation ghost to win the currency war * Media reports negative on the news: "silly decision" * Oil down against the Swiss Franc * Swiss stocks up in U.S. dollars * Wall Street expects Eurozone QE, but without Swiss, QE might be less likely * Gold up against other currencies * Franc surging in value against the dollar * This move may signal economic reform * Unfortunately Janet Yellen is not going to get this memo * Volatility from Swiss move is nothing compared to consequences of a U.S. QE 4 * This move is bearish for the U.S. market * Buckle up, it's going to be a bumpy ride Our Sponsors: * Check out Infinite Epigenetics: https://infiniteepigenetics.com/GOLD * Check out Justin Wine and use my code SCHIFF20 for a great deal: https://www.justinwine.com Privacy & Opt-Out: https://redcircle.com/privacy

15 Jan 201517min

Denial Runs Deep From Wall Street To Bitcoin – Ep 43

Denial Runs Deep From Wall Street To Bitcoin – Ep 43

* Dow down 600 points in between Tuesday high and Wednesday low * Stock market and real estate are pillars of the phony recovery * Loose government lending standards encouraging mortgage defaults * Dollar down and gold up on low retail sales numbers * Fed not likely to sit out a U.S. recession, trading support for Wall Street over the dollar * The next QE could be bearish for bonds and the dollar * Demise of the recovery illusion will also hurt stocks * Bitcoins down on more bad news * Price does matter as investors seek value * Irredeemable digital currencies will never be money Our Sponsors: * Check out Infinite Epigenetics: https://infiniteepigenetics.com/GOLD * Check out Justin Wine and use my code SCHIFF20 for a great deal: https://www.justinwine.com Privacy & Opt-Out: https://redcircle.com/privacy

15 Jan 201533min

Jobs Up But Earnings and Participation Down – Ep. 42

Jobs Up But Earnings and Participation Down – Ep. 42

* December jobs report up; unemployment down * Average hourly earnings dropped * Labor force participation hits new low, except for older Americans * Fewer young workers supporting the Social Security system * Most credit comprised of student loans and auto loans * Auto delinquencies highest since 2008, indicating a bubble * Obama's plan to make community college free will further inflate costs * Charles Evans calls for more inflation before raising interest rates * Denies relationship between cheap money and bubbles * The term "patience" indicates no timeframe for higher rates * Gold stocks very strong and gold prices continue to rise in face of rising dollar Our Sponsors: * Check out Infinite Epigenetics: https://infiniteepigenetics.com/GOLD * Check out Justin Wine and use my code SCHIFF20 for a great deal: https://www.justinwine.com Privacy & Opt-Out: https://redcircle.com/privacy

11 Jan 201521min

Gold Breaks Out, Stocks Break Down – Ep. 41

Gold Breaks Out, Stocks Break Down – Ep. 41

* World markets left the gates weak on first full trading week of the year * Catalysts: Declining oil prices and Greece's potential Eurozone exit * The Euro has gone sideways against the dollar for 9 years * The U.S. stock market will decline until the market believes rate hikes are off the table * U.S. will not experience accelerating growth in 2015 * Evidence shows the home market is not strengthening * Young entrepreneurship at a 20-year low * Falling oil prices are a symptom economy is not expanding Our Sponsors: * Check out Infinite Epigenetics: https://infiniteepigenetics.com/GOLD * Check out Justin Wine and use my code SCHIFF20 for a great deal: https://www.justinwine.com Privacy & Opt-Out: https://redcircle.com/privacy

6 Jan 201522min

As The New Year Begins, Will The Recovery End? – Ep. 40

As The New Year Begins, Will The Recovery End? – Ep. 40

* Falling unemployment trends seem to be over * PMI "unexpectedly" drops to 53.9% * Construction spending "unexpectedly" fell .3% * December ISM fell to 55.5 * Draghi's comments at ECB sparked U.S. Dollar rally despite weak data * Eurozone QE not likely * 2014 was a flat year for gold, despite bad press * Dollar price based on higher interest rate expectations * Price of gold has tripled since 2005 * Gold mining costs rise with inflation * The real bubble is the confidence in central bankers Our Sponsors: * Check out Infinite Epigenetics: https://infiniteepigenetics.com/GOLD * Check out Justin Wine and use my code SCHIFF20 for a great deal: https://www.justinwine.com Privacy & Opt-Out: https://redcircle.com/privacy

4 Jan 201535min

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