US equities are at an all-time high. Investors are bullish about the future. A lot of people are excited about the potential for economic growth with the passage of GOP tax cuts. There’s a lot of optimism.
In a recent interview on The Street, Peter Schiff said he thinks 2018 may start out the same, but he sees clouds on the horizon, especially when it comes to the dollar.
It may start out on the same note. But I would imagine that we’re going to see a ‘buy the rumor, sell the fact’ – some kind of reversal. You know, the dollar has been very weak so far in 2017, despite all of the enthusiasm for the dollar that traders enjoyed at the beginning of the year. I think the dollar’s woes are going to continue in 2018.”
Peter addressed China’s continuing push to move away from the dollar. Earlier this week, we reported that the Chinese are set to launch a yuan-denominated oil futures contract, possibly before the end of the year. Peter said this is part of a long-term strategy by China, along with other countries, to get away from the dollar.
I think China has been positioning itself for ultimately when the dollar is no longer the reserve currency, and that process is ongoing and it will continue. And it’s not just China. I think a lot of the world is trying to move away from the dollar. One reason being we’ve weaponized the dollar. I mean, the United States takes advantage of the dollar’s role to sanction countries that do things that it doesn’t like, and I think a lot of countries would like to take that power away from the United States.”
Peter said he thinks a lot of the economic instability in the world can be traced to the dollar’s role as the reserve currency. It creates malinvestments and misallocation of resources because the US consumes too much, borrows too much, produces too little, and saves too little.
I think ultimately, when the dollar loses that privilege and Americans have to produce to consume and have to save to borrow, that will do a lot to address a lot of these global economic imbalances and deflate a lot of the bubbles that central banks have been inflating.”
Earlier in the interview, Peter touched on tax reform, once again reiterating that Democrats are going to use it as a scapegoat when the next recession hits.
Recessions have been happening for quite some time and the next one is long overdue. I do think the enthusiasm surrounding the tax cuts and the gains in the market could well extend the period between now and the next recession. But I don’t think it will extend it long enough for Trump to be reelected. I think we’re going to be dealing with this recession during his term in office. And I think the Democrats are going to blame it on the tax cuts. Now, the tax cuts are not going to be the cause. The recession was going to happen with or without the cuts. But they’ve certainly set themselves up to be blamed for the recession, especially since they’ve made so many promises.”