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hello i'm david scranton and thanks for watching because today we're discussing the investing for income strategy and if it will work for you and your retirement so ty today i know it's time to bring in some guests i want to bring in of course retirement income store in melbourne florida jeff it's great to talk with you as usual great to see you dave right and we also want to bring in jeff today's special guest and that's peter schiff he's the chief economist and global strategist of euro-pacific capital a division of alliance global partners peter thanks for being back with us on the income generation oh thanks for having me back on peter i've seen you in the airwaves a lot lately and the last time you were on the show you and i had a pretty spirited debate on the causes of inflation but i think in retrospect we were probably both right but the next question is we've got high inflation we don't really know what the real numbers are but in your estimation do you think it's going to be more transitory are we in a permanent phase of accelerated inflation where do you think we're going well i'm certainly in the permanent camp the the forces that are underlying these trends are actually going to intensify so as bad as inflation is in 2021 it's likely to get a lot worse in 2022 and then worse still in 2023 so we're going to be living with inflation for a long time in the united states increasingly higher levels of inflation and since the fed is going to do nothing to put out the fire in fact everything the fed does is going to make the fire burn hotter investors in particular need to dramatically change their investment strategies relative to what they have been in the past 10 or 20 years to deal with this new inflationary reality all right those are great points and that kind of leads us into the next question peter we're getting a lot of questions from folks on the income generation our viewers and listeners that are saying why don't i own gold in my portfolio right now because if we're going into an inflationary environment and the paradox is gold isn't increasing but inflation is so can you shed some light on that well remember gold is a reflection too of the expectations that investors have for inflation in the future and so if most people think that the current inflation is transitory they don't see a need to hedge it by buying gold also when you have the federal reserve threatening to fight inflation by raising interest rates or tightening up on monetary policy and the markets actually believe that threat they are starting to you know be nervous about holding gold because they believe that if the fed were to follow through with that threat it would be negative for gold prices but the fed is only bluffing uh they have no intention or even a real ability to fight a inflation in any politically acceptable manner because the only way to do that would be to send the economy not only into a depression but you know you'd crash the stock market crash the bond market crash the real estate market and force the u.s government to dramatically reduce government spending i mean it wouldn't be a question of should we have this new stimulus plan it would be what prior programs are we going to eliminate or cut back because we can't afford them if the fed is raising interest rates and no longer monetizing the debt so i don't see that as an option so i think once investors realize that inflation is not only here to stay but that it's going to get much much worse and there's nothing the fed is going to do about it you're going to see a meteoric rise in the price of gold peter you know it's funny because you're right the fed is talking a tough talk lately and i think they genuinely would like to raise interest rates they'd like to have some bullets for their gun but what we're seeing today seems to be inflation more from a supply issue than even a demand issue so it's almost like stagflation and i'd like to get your thoughts on that because if it is they can't raise interest rates without sending us into a deflationary spiral right i mean but that doesn't mean they shouldn't they should raise rates anyway even though it's going to crash the economy the problem is the economy is so vulnerable to a crash now because of the mistakes the fed has made in the past it's keeping interest rates artificially low for so long that is the reason the underlying economy is now so vulnerable to the rate hikes that would be necessary to actually fight inflation but yes i believe that it is stagflation the us economy is going to get much weaker in fact we may even have a contraction in the third quarter you know the latest uh numbers from the atlanta fed was a 0.5 gain but we just got the trade deficit numbers out this morning i think it was september's number just a shockingly bad number i mean not only was it a new all-time record high some like 94 95 billion dollars in merchandise trade deficit in one month it just completely destroyed the prior record which was set just last month which was about 88 billion so we're way above estimates all-time record high this is a big subtraction from q3 gdp so we'll see if it takes enough away from gdp to actually tip the quarter into contraction but more importantly than that the the size the enormity of this trade deficit really evidences the fundamental weakness of the us economy because we cannot produce the things that we consume we are completely reliant on the rest of the world to supply american consumers with the goods that we don't have the capability of producing ourselves because the economy is too weak structurally all we do is borrow and spend and we rely on the rest of the world to save and produce and this is going to come to an end i think a dollar crash is coming and when that happens that's really going to accelerate the pressures on consumer prices the upward pressures on prices okay so if i were to play devil's advocate i'd say the west a lot of the western world is really not in a much better position than we are so that brings up the question as to how does this whole thing end you know normally when you start to get the printing of money and the creation of this inflation as we've seen just recently uh i it it does cause a crash of a currency if it's wait wait but it's in other countries hold on a second hold on a second dave the money printing can't stop and i'm sure peter will agree with this because now it's a doctored economy but permanently doctored i call it the frankenstein economy peter what are your thoughts well yeah hey look it's like a drug addict if you're addicted to drugs you can't stop taking the drugs but that doesn't mean you shouldn't quit it just means that when you do quit you're gonna go through withdrawal and we would have a massive economic financial withdrawal if the fed took away the monetary heroin but they're not going to do it because they have no stomach for the withdrawal but your point about other countries having similar problems that's not true when it comes to trade because we're having trade deficits because the rest of the world is having surpluses so the world doesn't have america's deficit problem the world has a surplus with the united states it's america that is living beyond its means it's the rest of the world that is making that possible by producing this stuff that we can't so the rest of the world has the capacity to produce as evidenced by their enormous surpluses with the united states so we've got this vulnerable service sector economy that is incapable of production and so we depend on the rest of the world in in ways that the rest of the world does not depend on the united states but from just a gnp real quick uh because i know we've got to wrap up but you know uh the international equivalent the foreign equivalent most the western countries of gnp you know the gdp they're not doing much better from that perspective than we are so i get the trade deficit issue but how does that play in does doesn't that put them back in the same camp that we are a lot of these western you have to look at what is driving our gdp and whether or not it's sustainable so better than 70 of our gdp comes from spending consumption and what is financing that borrowing debt fed money printing so our gdp is really a bunch of fluff if you look at the actual wealth producing components of our gdp manufacturing for example it's very small we're not seeing uh strength in that sector so we have a complete bubble in our phony gdp and all it is going to take to implode our gdp is an increase in interest rates because if interest rates were allowed to rise and they should be allowed to rise the the spending binge would come to an end uh and our our gdp would completely implode in in a far more dramatic way than any of the other nations that are not as dependent on debt finance consumption to generate their gdp growth all right peter schiff it's been our pleasure and thank you for joining us as usual here on the income generation yeah my pleasure thanks again guys
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