🔴 Today’s Dollar Rout Confirms Inflation Will Worsen - Ep 906

The Peter Schiff Show

This section introduces the podcast and its sponsor, Indeed. The host mentions that he is recording the podcast earlier in the day from Mykonos, Greece.

Introduction and Sponsorship

• The podcast is sponsored by Indeed, a platform for cost-effective hiring.

• The host is recording the podcast earlier in the day from Mykonos, Greece.

Podcasting from Mykonos

The host explains that he is currently in Mykonos and discusses his schedule change due to late-night partying. He also briefly mentions his previous travel experience in Montenegro.

Adjusting Schedule in Mykonos

• The host is currently in Mykonos, Greece.

• Late-night partying may affect his ability to record podcasts at night.

• He enjoyed his time in Montenegro and recommends it as a summer travel destination.

Inflation Numbers and Market Reaction

The focus of this section is on the inflation numbers released for June and the market's reaction to them. The host mentions using alternative equipment due to technical issues with his regular setup.

Inflation Numbers Release

• June's inflation numbers are discussed.

• Anticipation was for a more benign number than the forecasted 0.3% increase.

• Actual number came out as a 0.2% increase, lower than expected but higher than the prior month's 0.1% increase.

• Year-over-year inflation fell to 3%, better than expected compared to the prior month's 4%.

• Core inflation (excluding food and energy) rose by 0.2%, an improvement over the prior month's 0.4% rise.

• Year-over-year core inflation rose by 4.8%, an improvement over the prior month's 5.3%.

Inflation Expectations and Market Misunderstanding

The host discusses the market's misunderstanding of the inflation numbers and its impact on monetary policy expectations.

Market Misunderstanding

• The market perceives better-than-expected inflation numbers as a catalyst for more inflation.

• This perception leads to expectations of the Federal Reserve easing up on the fight against inflation.

• The host emphasizes that these better-than-expected numbers are not indicative of lower inflation in the long term.

• The Fed's goal is to bring down core inflation to 2%, but it currently stands at 4.8%.

• Despite improvements, there is still a significant gap from the Fed's target.

Impact on US Dollar

The host discusses how market perceptions of monetary policy impact the US dollar.

Impact on US Dollar

• Market perceptions of potential easing in monetary policy lead to sharp movements in the US dollar.

• The host notes that this day has seen one of the weakest performances for the dollar due to these perceptions.

Timestamps may vary slightly depending on video version.

Oil Prices and Inflation

This section discusses the recent rise in oil prices and its potential impact on inflation.

Oil Prices Creeping Higher

• Oil prices have been steadily rising, reaching $75.22 from $68 last week.

• The momentum in oil prices is not limited to just oil commodities but also impacting precious metals like silver.

• Silver has seen a significant increase of 96 cents per ounce, leading to gains in silver stocks.

Impact of Inflation Numbers

• Better-than-expected inflation numbers are acting as a catalyst for future inflation.

• The recent improvements in the Consumer Price Index (CPI) are considered backward-looking, ignoring the current weakening of the dollar.

• If the dollar continues to decline, it may reach support at 90 on the Dollar Index, potentially causing a sharp move in commodity markets.

Potential Effects on CPI and Trade Deficits

• A significant drop in the dollar could lead to a 10% decline within a short period, which would ignite commodity markets and potentially push oil prices above $100 per barrel.

• Gold may also reach new record highs above $2100 per ounce if the dollar weakens further.

• A weaker dollar will put upward pressure on CPI due to increased import costs and higher commodity prices.

• Larger trade deficits are expected as imported goods become more expensive with a weaker currency.

Bond Market Reaction

This section discusses the reaction of bond markets to economic indicators and provides insights into their accuracy.

Misinterpretation by Bond Markets

• The stock market has shown some positive movement following good economic numbers, while bond markets have reacted differently.

• The yields on 10-year and 30-year bonds have fallen below 4%, indicating an expectation of lower interest rates.

• However, this interpretation by bond markets may be incorrect as they should focus on forward indicators like the dollar, gold, and oil rather than lagging indicators like the CPI.

Sponsorship Advertisement

This section includes a sponsorship advertisement for Indeed, a hiring platform.

Sponsored by Indeed

• The podcast is sponsored by Indeed, an online hiring platform.

• Indeed offers cost-effective hiring solutions for businesses.

• Employers can attract, interview, and hire candidates all in one place using Indeed's platform.

Timestamps are provided in seconds and may vary slightly depending on the source video.

Indeed: Simplifying the Hiring Process

The speaker discusses the benefits of using Indeed for hiring and highlights its simplicity and effectiveness in attracting candidates.

Benefits of Using Indeed

• According to Indeed data, sponsoring a job on their platform increases the likelihood of candidates applying.

• Candidates invited to apply through Indeed are three times more likely to apply compared to those who only see the job in search results.

• Indeed is a comprehensive hiring platform that allows employers to manage all aspects of the hiring process in one place.

• It provides immediate matching with quality candidates, making it easier to find suitable hires.

• Unlike other job sites, employers only pay for applications that meet their specific requirements.

• Talent Nest 2019 reports that Indeed delivers four times more hires than all other job sites combined.

Analysis of Gold Market and Potential for Growth

The speaker analyzes the gold market, specifically focusing on recent trends and potential growth opportunities.

Recent Trends in Gold Market

• Gold prices have risen by $25 per ounce, reaching above $1950. Despite a recent pullback, prices remained above $1900.

• The speaker emphasizes that while gold falling below $2000 was seen as significant by some, it was more important that it held above $1900.

• There has been a substantial correction in gold mining stocks, which appears to be over. GDX is up 5% and GDXJ is up 5.5% today.

Long-Term Potential for Gold Stocks

• The speaker advises listeners to consider investing in gold stocks based on their previous recommendations.

• Even if investors missed out on the current rally, there is still significant potential for further growth compared to previous highs.

• The GDXJ index reached a high of just under 44 previously but is currently barely above 38. This indicates a long way to go.

• In 2011, the GDXJ index reached a high of 171.88, highlighting the potential for significant future gains.

Factors Affecting Gold Stocks

• The speaker mentions that sentiment plays a crucial role in the current lower prices of gold stocks compared to previous years.

• Back in 2011, there was more optimism and belief that quantitative easing (QE) would lead to inflation, driving up gold prices.

• However, investors were early in their predictions as QE continued and inflationary pressures built up over time.

• Currently, investors are complacent and not concerned about inflation despite evidence of rising consumer price index (CPI).

Long-Term Outlook for Gold Stocks

The speaker discusses the long-term outlook for gold stocks based on historical trends and current market conditions.

Building a Strong Base

• The speaker emphasizes that gold has built an enormous base over time, making it more stable than in 2011 when it spiked briefly.

• Despite the current price being similar to levels from 12-13 years ago, there is potential for a significant rally due to this strong base.

Investor Sentiment and Inflation Concerns

• The speaker highlights that investor sentiment towards gold stocks is currently pessimistic despite favorable market conditions.

• There is more inflation in the pipeline now compared to 2011 when concerns about inflation were prevalent.

• Investors should be even more optimistic about gold stocks now given the increased likelihood of future inflation.

Misconceptions About Inflation

• Many investors fail to recognize that the surge in CPI is a delayed consequence of past inflationary measures they were worried about in 2011.

• Back then, investors believed that QE would cause inflation but were proven wrong. This led to a drop in gold prices and stocks in 2014/2015.

Conclusion and Final Thoughts

The speaker concludes by discussing the misconceptions surrounding inflation and the potential for gold stocks.

Misconceptions About Inflation Continued

• Investors were fooled into believing that there was no inflation, leading to a decline in gold prices and stocks.

• However, current market conditions indicate a higher likelihood of inflation due to increased QE measures and economic factors.

Potential for Gold Stocks

• Despite the current lower prices, gold stocks have significant potential for growth based on historical trends and market conditions.

• The speaker encourages investors to consider the long-term outlook and the opportunity to buy gold stocks at a fraction of their 2011 price.

Timestamps are approximate.

New Section

The speaker discusses the misconception about inflation and the belief that it is transitory. They argue that inflation is just in its early stages and that the stock market rally is built on a false foundation.

Inflation Misconception

• The speaker criticizes the belief that inflation is transitory, pointing out that it is just the beginning of massive inflation.

• They highlight that the stock market rally is based on the false assumption that inflation has disappeared.

• The speaker mentions news about BRIC nations (Brazil, Russia, India, China) launching a new common currency backed by gold for trade purposes.

• They predict that more nations and private companies will prefer this currency over the US dollar due to its backing by gold.

New Section

The speaker explains why they believe interest rates cannot be lowered back to pre-financial crisis levels and how this impacts financing record trade deficits and budget deficits.

Financing Twin Deficits

• The speaker argues that financing record trade deficits and budget deficits is impossible without relying on inflation.

• They assert that if interest rates are not lowered, they would become prohibitively high.

• The Federal Reserve would need to print more money to monetize debt, leading to increased inflation.

New Section

The speaker discusses their prediction of a potential crash in the stock market similar to the 1987 crash. They explain how factors such as a falling dollar and bond market breakdown could contribute to this scenario.

Stock Market Crash Prediction

• The speaker predicts a potential stock market crash similar to the 1987 crash when investors realize their fantasy of decreasing inflation is shattered.

• They mention how a falling dollar can have an impact on both bonds and commodities.

• Foreign investors holding US treasuries may face forex losses, leading them to sell treasuries or hedge their foreign currency risk by selling dollars.

• This puts downward pressure on the dollar and treasuries while increasing upward pressure on commodity prices.

New Section

The speaker discusses the relationship between the bond market, the dollar, gold, and how these trends will continue until the stock market can no longer ignore them.

Bond Market and Dollar Relationship

• The speaker suggests that the bond market will follow the dollar lower while gold prices rise.

• They argue that a weak dollar puts upward pressure on commodity prices and downward pressure on treasuries.

• Investors who were optimistic about the dollar may sell treasuries or hedge their foreign currency risk, further weakening the dollar.

• The speaker believes that these trends will continue until they can no longer be ignored by the stock market.

New Section

This section discusses the current state of the stock market and the anticipation of a drop in interest rates due to inflation concerns.

Stocks and Interest Rate Sensitivity

• Investors are still buying tech stocks despite them being the stocks that should be sold the most.

• The market anticipates a drop in interest rates, leading to increased interest in tech stocks.

• The belief is that the Federal Reserve (FED) has successfully brought down inflation, setting the stage for rate cuts.

New Section

This section highlights the misconception about low inflation rates and how it was an aberration caused by external factors.

Aberration of Low Inflation Rates

• Low inflation rates below 2% were an aberration.

• The ability to export inflation was due to foreign countries buying U.S. dollars, enabling the U.S. to export its inflation.

• However, this situation is changing as trading partners start sending back their inflation through increased spending and bidding up prices.

New Section

This section discusses government jobs and their impact on inflation.

Government Jobs and Inflation

• Government jobs contribute significantly to job numbers but are particularly inflationary.

• When people are put on the government payroll, salaries are paid by printing money or running larger deficits.

• Government workers do not produce goods but instead subtract from the pool of goods by using their paychecks to buy items they didn't help produce.

• This leads to bigger budget deficits, more money printing, and upward pressure on prices.

New Section

This section emphasizes that there won't be a return to sub two percent days of low inflation due to various factors contributing to a new wave of inflation.

No Return to Low Inflation

• The focus on small improvements in CPI and the belief that inflation is under control overlooks the bigger picture.

• The Federal Reserve and others fail to understand the origins of this new inflation wave, still fixating on COVID-related supply chain bottlenecks.

• Other countries raising rates puts pressure on the U.S. dollar, reducing the incentive to hold onto it.

• The spark for this inflation wave was COVID, but it has been building since 2009 with monetary and fiscal policies.

New Section

This section highlights early warnings about inflation during COVID and the impact of stimulus money on demand.

Early Warnings About Inflation

• While many were predicting deflation during COVID, there were early warnings about increasing demand due to stimulus money.

• Demand increased while supply decreased, leading to a fuse being lit for an impending inflation wave building since 2009.

Due to limitations in available timestamps, some sections may not have specific timestamps associated with them.

New Section

In this section, the speaker discusses the consequences of inflation and how they were overlooked due to government metrics.

Consequences of Inflation

• Saw an explosion of debt levels, including corporate debt, government debt, consumer debt, student loans, credit card debt, and auto debt.

• These consequences of inflation were present but not considered significant because they weren't reflected in the CPI or personal consumption expenditure index.

• The government relied on its own metrics to determine inflation and as long as it wasn't showing up there, nobody paid attention to it.

New Section

This section focuses on the challenges of addressing inflation and the impact on the economy.

Addressing Inflation

• To put inflation back under control would require higher interest rates and significant cuts in government spending.

• However, cutting government spending would lead to a collapse in the phony economy built on it.

• The government is unlikely to choose depression over inflation as it would have severe political consequences.

New Section

Here, the speaker discusses how politicians may shift blame for inflation onto other countries.

Shifting Blame

• The Federal Reserve is unlikely to choose depression over inflation and will likely make excuses for why inflation isn't their fault. They may even point fingers at other countries like Brick Nations who back their currency with gold.

• The world's reaction to US mistakes is often blamed by politicians instead of acknowledging their own role in causing those reactions.

New Section

This section explores the challenges of balancing the budget and the potential consequences.

Balancing the Budget

• Cutting government spending or increasing taxes to balance the budget would lead to an immediate collapse of the economy.

• The middle class already struggles with current tax levels, so substantial tax hikes would be detrimental.

• Any attempt to balance the books through spending cuts or tax hikes would result in a collapse that voters would blame on politicians.

New Section

Here, the speaker discusses why inflation is likely to be chosen over other options and its long-term implications.

Choosing Inflation

• Politicians are unlikely to choose policies that could immediately cause a depression, as they fear losing their positions. Instead, they will opt for inflationary policies.

• The true extent of inflation is unknown and builds up gradually over time, making it less alarming initially compared to a sudden depression.

• Investors can position themselves by moving away from US dollars and investing in assets like gold due to the expected inflationary policies.

New Section

This section focuses on investment strategies considering future inflation.

Investment Strategies

• The speaker suggests getting rid of US dollars as they expect its value to decline significantly in the coming years. Gold is considered a good investment option below $2,000 per ounce.

• If BRIC countries launch a currency backed by gold, it may increase demand for gold and drive its price higher than $2,100 per ounce.

• A fiat currency can be created at will, while a legitimate currency backed by gold is limited by the availability of gold.

New Section

In this section, the speaker discusses the potential for gold to increase in value and highlights the emerging markets as a promising investment opportunity.

Gold's Upward Potential

• The speaker believes that gold has a long way to go up in terms of value.

• The weakening of the dollar is expected to put upward pressure on gold prices.

• The existing supply of mined gold contributes to the positive outlook for its value.

Emerging Markets as a Sleeper Trade

• While many investors focus on tech stocks, the speaker suggests considering emerging markets as a sleeper trade.

• Investing in emerging markets may carry more risk compared to developed markets but also offers greater upside potential.

• It is important to assess upside potential versus downside risk before making investment decisions.

Investment Opportunities in Emerging Markets

• The speaker mentions an emerging market fund called Euro-Pacific Emerging Market Fund as a potential investment option.

• Investors can find information about this fund on the website europac.com and purchase it through discount brokerage platforms or work with advisors at Europe Pacific Asset Management or Alliance Global Partners.

New Section

In this section, the speaker concludes the podcast episode and mentions plans for future episodes.

Wrapping Up and Future Episodes

• The speaker plans to do one more podcast episode at the end of the week, likely on Sunday, to summarize what happened during that week.

• There are additional topics that will be discussed in future episodes which were not covered in today's podcast.