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Tags: peter schiff | market | crash | stock | 1987

Peter Schiff: Market Flirting With a 1987-Style Crash

(Michael Kuelbel/Dreamstime)

By    |   Friday, 23 February 2018 08:47 AM EST

Economic guru Peter Schiff warns savvy investors to tread cautiously in today’s volatile market.

Schiff, the CEO and chief global strategist of Euro Pacific Capital Inc., a broker-dealer based in Westport, Connecticut, sees omens of a 1987-style market crash.

”Investors have not been this optimistic... since 1987. They are even more optimistic than they were at the height of the technology bubble, the dot-com bubble, the new era. Of course, 1987 didn't end well, right? We had a stock market crash, and there's a lot about what's happening today that reminds me about what was happening in '87," he said at the recent Vancouver Resource Investment Conference.

"The economy has not improved under Trump. We don't have a booming economy. I mean, Trump keeps telling us we have a booming economy, but nothing is booming," Schiff said.

"When Donald Trump was a candidate for president, he said that the unemployment numbers were phony. They were fake. They were a fraud. They were a con. He said the real unemployment rate is 30%, 40%. Now, every time there is an unemployment number that comes out, he's tweeting about how great it is we have this record low unemployment and we should all give him credit for it," Schiff said.

"Now, the tax cuts, are they going to grow the economy? No! Because they didn't cut government spending. See, you don't get government for nothing. Taxes pay for government. But if you cut taxes and you don't cut government, how do you pay for that government?" he asked.

"I believe the debt and inflation we have to create to finance the tax cuts will be a bigger drag on the economy than the tax cuts are a boost," Schiff said.

"Where there will be growth is in the budget deficits, and that kind of is where I see some of the similarity now in the 1980s - 1987 - because these big budget deficits are going to be a big problem," Schiff said.

"Rather than having continuous economic growth, I think the economy is going into recession. Now, I believe that had Donald Trump lost that election, the US would already be in recession. I think we were clearly headed to recession before he won. And when he won, he created this huge burst of misplaced optimism that probably postponed the onset of that recession by another year or two," Schiff said.

"Here's the problem. America's broke. America has more debt than ever before... The debt has more than doubled since the financial crisis. Why did we have a financial crisis? We had too much debt!" Schiff said.

"What has really been propping up the US economy is cheap money and cheap gas," Schiff said.

"Here is the self-perpetuating spiral that we're in. As the deficits go up, now we have to sell more bonds. Well, that puts more downward pressure on bond prices and more upward pressure on interest rates. So, as rising interest rates create bigger deficits, those bigger deficits create rising interest rates."

However, Treasury Secretary Steven Mnuchin brushed aside signs that investors are nervous about rising prices and criticism that growing debt will harm U.S. economic security, declaring that Trump’s policies won’t cause inflation.

“There are a lot of ways to have the economy grow,” Mnuchin said in an interview with Bloomberg News aboard a train to Philadelphia on Thursday, where he toured the U.S. Mint. “You can have wage inflation and not necessarily have inflation concerns in general.”

He also said he isn’t concerned about foreign investment in new U.S. debt, which analysts expect will exceed $1 trillion this year.

An unexpectedly large jump in average hourly earnings in January set off a stock market swoon as investors worried about higher inflation and interest rates. In addition, long-term Treasury yields have surged in recent weeks, in part driven by concerns that widening budget deficits under the Trump administration will fuel inflation.

As Trump’s chief economic cheerleader, Mnuchin has consistently deflected any suggestion that the president’s policies could have a downside. He sidestepped the idea that tax cuts and increased federal spending Trump has signed into law amount to an economic stimulus.

“Is it very good for the economy? Absolutely,” Mnuchin said of the tax cuts. “One of the reasons why the president won the election is because most middle-class Americans had very little wage growth.”

For his part, Trump contends the mainstream media only reports "fake news" about his accomplishments and twists and distorts the facts.

"Main Street is BOOMING thanks to our incredible TAX CUT and Reform law. "This shows small-business owners are more than just optimistic, they are ready to grow their businesses," Trump recently tweeted.

(Newsmax wire services contributed to this report).

© 2024 Newsmax Finance. All rights reserved.


InvestingAnalysis
Economic guru Peter Schiff warns savvy investors to tread cautiously in today’s volatile market.
peter schiff, market, crash, stock, 1987
788
2018-47-23
Friday, 23 February 2018 08:47 AM
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