All posts by Peter Schiff

Peter Schiff is a non-biased investment advisor with more than two decades of experience as a financial professional. He is president of Euro Pacific and chairman of SchiffGold. Schiff comes highly recommended by many leading financial publications as an expert on international investing, economic theory and money. Tune in to his podcast, The Peter Schiff Show, here at Truth In Media.

For The United States, Puerto Rico Debt Is A Bigger Tragedy Than Greece

Global stock markets got beaten up overnight and the carnage continues here in the U.S.

By the time they rang the closing bell, the Dow Jones was down 350 points. That’s just under two percent. That was the biggest point loss of the year. The Nasdaq was down 122 points. On a percentage basis, I think that was closer to two-and-a-half percent.

The real interesting story, though, happened in the foreign exchange markets. The news that sparked the sell off was the Gr-exit—the potential now being maybe 50-50, maybe more, that Greece is going to exit, that the Greek citizens are not going to accept the terms necessary to qualify for the bailout.

About a week ago, there was all sorts of optimism that a deal was done. That fell apart over the weekend. They announced the closure of Greek banks. I believe they will remain closed. There were photographs on the Internet of long lines at ATM machines across Greece.

Hey, by the way, take a good look at those images, because that’s coming to an ATM machine near you one day—except it won’t be as civil. I expect to see a lot more unrest, maybe a lot more fighting breaking out on those long lines—not the civility that we saw over there in Greece.

All of that initially sent the dollar rising. The euro got down last night, when I looked at it near the lows, the euro was down near 1.09 to the dollar, so an initial sell off of two cents because people were worried. Oh, Greece is going to leave the eurozone; this is bad for the euro.

I’ve been saying all along that I think the best thing that could happen to the euro is a Gr-exit because I think Greece is dragging everybody else down. Not that there’s no more dirty shirts in that hamper, but the whole idea, or the fear, is that when Greece goes it’s going to be some sort of domino effect—that Portugal and Spain are going to go. I think it might have the opposite effect. I think it will scare the rest of Europe straight. They’re not going to want to live through what the Greeks are going to have to endure, and so they might want to get their economic house in order.

But also, you’ve got the old trading adage of buy the rumor, sell the fact. People have been buying dollars and selling euros for so long now based on worries that a Gr-exit, that when it finally happens you take profits—you go the other way. And that’s what happened.

Now Puerto Rico has announced it cannot pay its debt. What does Puerto Rico debt mean for the United States? Tune in to the full podcast episode above and listen to more episodes of Peter Schiff Radio here at Truth In Media.

Peter Schiff: Eurozone Deal With Greece Is A Sideshow To U.S.

Well it looks like there is going to be some kind of deal with Greece to avoid the Gr-exit—where Greece exits the eurozone, abandons the euro currency for some kind of resurrected form of the drachma, and, of course, defaults on debt.

Now, I’ve said many times that’s probably the best thing to happen to Europe, is to kick out the weakest link in the chain. But I also didn’t think that was going to happen because I didn’t believe politically that there would be the motivation to do that either in Europe or in Greece.

And if you remember, of course, the current Greek government got elected by promising to bring an end to austerity, and I said at the time that they’re not going to be able to do that. Because if they actually left the eurozone, then the economic problems would get worse and the Greeks would have no one to blame but the current government. As long as they stay in the eurozone, they can continue to blame Brussels or Germany for their problems, and that’s exactly what they’ve done.

The so-called austerity is going to continue. We don’t know all of the specific details of this deal. Who knows—maybe it won’t even come to fruition. But the markets are certainly acting as if it will. But it doesn’t involve any additional haircuts on Greek debt. The Greeks still have to repay, in theory, the money that they borrowed. And the austerity is still there, at least as it’s been described.

Now, there are no significant cuts or maybe any actual cuts to government spending. I think what I’ve read is that Greek taxpayers will have to contribute more towards their own pensions. But that might be scored as a tax hike more than a spending cut, because the government isn’t reducing its outlays. It’s just increasing what it takes in.

This potential eurozone deal with Greece is a sideshow to the U.S. Learn more by tuning in to the podcast above.

Listen to more episodes of Peter Schiff Radio here at Truth In Media.

Peter Schiff: Wall Street Questions The Federal Reserve Narrative

On Monday, the Dow was under some pressure, down 170 points at the time of recording. That’s on the back of breakdown in European talks with Greece over the weekend. This is the lowest I’ve seen the Dow since early May. We’re at 17,730-is. We were above 18,000 not too long ago. We’re just about flat. We’re down maybe close to 100 points on the year. But there is a lot of room for the market to decline as long as Federal Reserve rate hikes are on the table.

The Fed is going to be meeting. It’s Open Market meeting begins Tuesday. It ends on Wednesday. Remember, for a long time everybody thought that June was when the Fed was going to announce their first rate hike. Although, when the year began, I think people were divided between they would hike in March or in June. Of course, I said that they wouldn’t hike at all. Now even most of the June camp as thrown in the towel. I think that the consensus is that the Fed is going to hike rates in September. But I think, as we get through July and August, and the weak economic data continues to roll in, we are going to continue to push back those rate hike estimates maybe to December.

But, of course, if they don’t raise rates in December, why are they going to raise them in 2016? I think 2016 could be a weaker economic year than 2015, which sequentially will be down from 2014. And it will also be an election year. So if they couldn’t raise rates in 2015, why would they do it in 2016 when you have all of that political backdrop that is clouding decision making. Of course, the Fed doesn’t want to be seen as trying to influence the elections, or help or hinder any particular party. So they may decide to be neutral.

Of course, there are a lot of other reasons why the Fed is not going to be raising rates. In fact, I think they’re going to be launching the fourth iteration of its quantitative easing program. In fact, I’m not the only person thinking that. Wall Street questions the Federal Reserve narrative.

Tune in to the full podcast episode above and listen to more episodes of Peter Schiff Radio here at Truth In Media.

Peter Schiff: The Illusion of the Strong Jobs Report

Let’s get into the illusion of the strong jobs report.

Generally weaker than expected data was punctuated by yet another better-than-expected nonfarm payroll report. This comes despite the fact that earlier in the week the ADP private sector payroll report came in slightly below estimates at 201,000 jobs added in May. Also, 5,000 manufacturing jobs lost—the third consecutive monthly decline in manufacturing jobs. These are the important jobs. Not only are they higher paying, but they’re productive. And they also lead to exports, which improve our balance of payments.

But the official number, which came out Friday morning, the consensus estimate, was 220,000 jobs. And that followed the 223,000 jobs that was originally reported for April.

Well, the actual number, according to the government—280,000.

280,000 jobs created in May, far exceeding the 220,000 jobs that had been forecast. So it’s beat by 60,000 jobs. They had a slight downward revision to April—221,000—and they upwardly revised March somewhat. So overall, more jobs than had been anticipated.

Now, the unemployment rate did increase to 5.5 percent as a few hundred thousand more people reentered the labor force—which is bucking the trend. The labor force had been declining. Now some people have come back to the labor force. In fact, the labor force participation rate is back up to 62.9 percent from 62.8 percent. Remember, the lowest it’s been is 62.7 percent. So at 62.9 percent, we’re not far from the low. And certainly there is no indication that the trend has changed.

Of course, a lot of these people who have reentered the labor force don’t even want to be there.

Remember, when we’re talking about labor force participation, when you look at older people—workers in their 60s and 70s—participation is at record highs. It’s younger Americans—Americans in their teens, 20s and 30s—that’s where the participation is at all-time record lows. And a lot of the older guys—who are now in the workforce, who were not in the workforce before—don’t even want to be there. They’d rather be retired. But unfortunately they can’t afford that luxury anymore, so they need jobs.

And of course a lot of them don’t even want full-time jobs. They want part-time jobs. So a lot of these 200,000 jobs that were created are in fact part-time jobs. And they represent workers who would assume not even work in the first place. But, of course, a lot of these older Americans, they don’t want full-time jobs, so it works perfectly for them.

They don’t want full-time jobs for a couple of reasons. One, they want to be at least semi-retired. They don’t want to work 40-hour weeks. They’re just trying to work enough to make ends meet. They need to pay their bills. So if they can do that with a part-time job, that’s what they want to do.

But also, remember, if you’re over 65, you’re getting Social Security. But as you get a job, of course you still pay Social Security taxes, right—even though you’re collecting Social Security. But at some point, as you earn a certain amount of money, you start losing your Social Security benefits, which acts as an added marginal tax. So people on Social Security may want to work a little bit to make just enough money to make ends meet, but they don’t want to earn too much money where they end up paying a very high marginal tax (because they start losing some of their Social Security benefits).

That’s also too part of the illusion of the strong jobs report. I get into the data that came out in the podcast episode above. Tune in now and catch more of the Peter Schiff Show here at Truth In Media.