Tags: Schiff | Fed | QE | rates

Euro Pacific Capital's Schiff: 'Fed Has No Possibility of Withdrawing Stimulus'

By    |   Friday, 26 December 2014 09:02 AM

With oil prices having plunged to five-year lows, the energy industry is headed for bust, but that's not our biggest worry, says Peter Schiff, CEO of Euro Pacific Capital.

"Much greater and more fragile bubbles likely exist in the stock, bond and real estate markets, which have also been inflated by the easiest monetary policy in history," he writes in a commentary on his firm's website.

"The Fed lacks the firepower to fight a new recession that a bursting of any of these bubbles could create," Schiff says.

"Since interest rates are already at zero, it has no ability to aggressively cut rates now in the face of a weakening economy. All it can do is go back to the well of quantitative easing, which is exactly what I think they will do."

The Fed completed its third round of bond purchases in October.

"Despite the widely held belief that 2015 will be the year in which a patient Fed finally begins to normalize rate policy, I believe the Fed has no possibility of withdrawing the stimulus to which it has addicted us," Schiff writes.

"More QE may minimize the damage in the short-term, but I believe it will keep us trapped in our current cocoon of endless stimulus, where we will slowly suffocate to death."

Most economists expect the central bank to begin raising interest rates around mid-2015.

Meanwhile, CNBC commentator Jim Cramer isn't too impressed with those criticizing the Federal Reserve for waiting too long to raise interest rates. Fed Chair Janet Yellen said last week that it's unlikely to move before April.

"Something bothers me about the endless complaints about Yellen," Cramer writes on TheStreet.com.

"They tend to be from people who are either so rich that they fear their purchasing power will be eroded [by the Fed's low-rate policy], or they can't get enough safe income to make themselves happy, or they are short bonds and stocks and betting against them."

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With oil prices having plunged to five-year lows, the energy industry is headed for bust, but that's not our biggest worry, says Peter Schiff, CEO of Euro Pacific Capital.
Schiff, Fed, QE, rates
327
2014-02-26
Friday, 26 December 2014 09:02 AM
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