Tags: Peter Schiff | Oil | Recession | Newsmax TV

Schiff to Newsmax TV: Falling Oil Prices Indicate Recession Is on Its Way

By    |   Tuesday, 16 December 2014 02:30 PM

While falling oil prices are a good thing for the consumer sector, as they push gasoline prices lower, in the end they're a bad thing for the economy, Peter Schiff, CEO of Euro Pacific Capital, told Newsmax TV.

"We can enjoy cheaper gasoline, but unfortunately it's probably a harbinger of another recession," he told "America's Forum" on Newsmax TV.

Oil prices have plunged to a five-year low. "They're falling because the markets are anticipating a big drop in demand, as the world economy goes into recession, and that includes the United States," Schiff said.

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"This is negative for oil, but it's also negative for all the other markets. The stock market, the housing market, … the bond market, and it's negative for the U.S. economy."

He also sees the Fed resuming quantitative easing, after ending the third round last month.

"What's going to be an even bigger negative is when the Federal Reserve comes back with their monetary guns blazing and they launch QE4," Schiff said.

"Then the oil price is going to rise to an even higher level than it fell from and that's going to be very bad for consumers who have to pay a lot more for oil and everything else."

U.S. oil traded over $107 a barrel in June and stood at $55.93 Tuesday afternoon.

QE3 propped up financial markets across the board, Schiff said. "So now that the Fed is winding down QE and threatening to raise rates, a lot of the markets that were lifted on a sea of liquidity are coming down."

As for oil, "the problem is a lot of money has been borrowed, predicated on the belief that oil would be $80 to $100 a barrel," Schiff said. "So if those loans default then a lot of jobs get lost. That's going to bring about a recession."

A huge energy industry has recently been built in the United States tied to that oil price, he said. "So the whole industry would be dismantled, and that alone would be much more disruptive than let's say the bursting of the dot.com bubble."

But the real crisis will be a weak dollar in the long run, Schiff said. "Right now people are worried about the ruble. That's just the warmup," he said. "The main event is going to be the dollar crisis, and when our currency starts to collapse it's going to be much more problematic"

So how should investors deal with this scenario?

"Gold prices are still cheap. They're just around $1,200 an ounce," Schiff said. "The dollar is overvalued against most of the world's solid currencies, not that they're as solid as gold, but they're certainly less flawed than the dollar."

Investing in strong foreign stocks in strong foreign currencies makes sense, he said.

"There's a lot of opportunities now in the energy sector," Schiff said. While oil prices may fall further now, "a year from now they're going to be a lot higher."

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While falling oil prices are a good thing for the consumer sector, as they push gasoline prices lower, in the end they're a bad thing for the economy, Peter Schiff, CEO of Euro Pacific Capital, told Newsmax TV.
Peter Schiff, Oil, Recession, Newsmax TV
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2014-30-16
Tuesday, 16 December 2014 02:30 PM
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