Schiff explained that “what has enabled this over the years has been the world’s willingness to hold US dollars as the primary reserve currency and to continue to loan money to Americans and to the US government so we can continue to live beyond our means. We can have enormous government programs that we don’t pay for and we can consume all kinds of goods that we don’t manufacture, and we can live in an economy based on consumption and debt without having to save or produce. The world has done that for us.” he says, as he believes this is going to come to an end. “I think we’re going to see a collapse in the value of the dollar, and when the dollar does collapse, America’s power is going to dissipate. And Americans are going to have to deal with the reality that we’ve hollowed out our infrastructure; we’ve been living beyond our means. And there’s going to be a day of reckoning for these years of excesses.”
The colossal amount of debt created by the Federal Reserve’s money-printing policy and substantial borrowing and spending binge by the US government in attendance to the sanitary crisis’ consequences have only acted as a catalyst to erode the currency much quicker. In March, on his podcast, Schiff firmly predicted that we were “very, very close to a major collapse of the dollar, a major breakout in the price of gold, to a breakdown in the bond market.”
For a long time, Peter’s voice had been a lone echo inside the chaos, but at the present time, with all evidence on the table, people in the mainstream are finally seeing the effects of the problems he has been pointing out over many years. This week, Stephen Roach, a Yale economist, published an article on Bloomberg’s website in reflection to Peter’s alert about the dollar’s downfall.
“Lacking in domestic saving, and wanting to invest and grow, the US has taken great advantage of the dollar’s role as the world’s primary reserve currency and drawn heavily on surplus savings from abroad to square the circle. But not without a price. In order to attract foreign capital, the US has run a deficit in its current account — which is the broadest measure of trade because it includes investment — every year since 1982,” he says.
The economist claims that “the only thing that is going to cause a change is a crisis. And it’s going to be a dollar crisis. It’s going to be a sovereign debt crisis. It should have already happened. We’ve been able to kick the can down the road for many, many years. But the problem with all the can-kicking is the underlying problems have gotten so much worse. So, now it’s a much bigger problem that we’re going to have to deal with.”
He explains that the dollar collapse will have three main repercussions. The first one being inflation. Roach even suggests that stagflation is possible due to the “tough combination of weak economic growth and rising inflation” that could cause damage in the financial markets.
In this aspect, during an interview with Mark Dice, Peter Schiff was even more assertive about this risk, maintaining that “we’re going to have a lot of unemployed people who are going to be paying a lot more money for basic necessities. So, this is going to be stagflation, only the stagnation part is really depression and the inflation can even potentially be hyperinflation.”
In conclusion, both Nenner and Schiff can see a reversal in rates long term, and they are headed up. Rates are expected to rise. Both strategists also remarked that many eyes are opening to the fact that the dollar collapse is inevitable and it is only being delayed while it is possible. Nenner calculates his next price targets on gold and silver to be $2,500 and $20.50 per ounce, respectively. With prices possibly flying much higher over the course of the next few years, and until 2026, the gold market is going to be a bull market. Schiff, on the other hand, advises people to get rid of the dollars while they still can. Tweeting that people should “buy gold or invested to good value, dividend-paying foreign stocks before the bottom drops out of the dollar and you can no longer afford to”. In other words, the fuel is dripping all over the economy and the only thing that is still missing is the spark that will burn the entire US monetary system to the ground.