In his latest interview with King World News, Euro Pacific Capital CEO said the U.S. economy is dropping quickly, gold will go much higher as a result of his bleak outlook, and the U.S. Treasury market is not a permanent safe haven for investors seeking shelter from market volatility brought on by sovereign bailouts, which, he added, will move across the Atlantic to the United States.
“We are going to fall off the edge of a cliff; it’s just a different cliff than most people are looking for,” Schiff told King World News’ Eric King. “I don’t think the stock markets are going to fall off the edge of a dollar cliff, or nominal cliff, but the US economy is going over the cliff.”
Schiff, the author of several financial books on the subject of investment strategies investors should take to preserve wealth during the ongoing global financial crisis, suggested one of the ways American investors can protect themselves from the crisis slated to come in the United States is to hold gold bullion.
Though the gold price can be volatile due to fund managers, governments and institutions liquidating gold to cover losses in other assets during the protracted crisis, gold, in the end, will remain as the ultimate safe haven as a store of wealth.
“Anything could happen in the short-run, but in the long-run, gold goes a lot higher,” Schiff explained. “Everything that is happening right now that is pushing the price of gold down, is actually bullish for the price of gold. That is why long-term the gold price will be higher.”
Just as famed commodities trader Jim Rogers of Rogers Holdings and Swiss money manager Marc Faber, publisher of the Gloom Boom Doom Report, Schiff’s betting on the Fed and U.S. Treasury to team up for providing further ‘stimulus’ to the U.S. economy in an effort to stave off a crisis in the U.S. dollar a little longer. That plan, he said, is the primary driver of the gold price—currency debasement to offset stagnant, or lower, GDP.
“We have this completely phony economy going, this bubble economy, it is still going to deflate and that hasn’t happened yet,” said Schiff. “The world is trying to keep the air in it, but ultimately the air will escape.”
In fact, the air has been escaping for quite some time, according to Jeffrey Gundlach of Los Angeles-based DoubleLine Capital.
Arguably the most respected bond fund manager, though lesser-known than PIMCO’s Bill Gross, the Wall Street Journal reported that Gundlach told approximately 100 financiers and reporters at a gathering at the New York Yacht Club, Thursday, “We’re in a recession right now.”
Co-founder & COO of Economic Cycle Research Institute (ECRI), Lakshman Achuthan, agrees. Earlier today, the leading business cycle research firm posted to its Web site, businesscycle.com, “Early last week, ECRI notified clients that the U.S. economy is indeed tipping into a new recession. And there’s nothing that policy makers can do to head it off.” (emphasis added).
Schiff expects the aborted recovery back to lower economic output in the U.S. spells doom for the U.S. dollar. Up till now, investors fleeing the euro into dollars will ultimately play out to have been the wrong move, according to Schiff.
“The dollar has been rallying, but I don’t think it should be,” he said. “The dollar is a risky asset. People are trying to hide out in dollars, in Treasuries, which are just future dollars, but I think that’s ultimately the riskiest place to move. These people who are buying dollars are making a mistake. People bought dollars in 2008, early 2009 and if they held them, they obviously lost a lot of money.”
“When we see an eventual precipitous decline in the dollar, you will see consumer prices rising and interest rates rising.”
At that time, the gold price in U.S. dollars will soar.