Peter Schiff : first of all when it comes to you know 0:12 explaining the fed a lot of people are 0:15 already criticizing job Donald Trump's 0:18 critique because they say well on the 0:20 one hand he says the economy is weak but 0:23 then he says the Fed should raise raids 0:25 and then the one had he says that if we 0:28 raise raise a lot of bad things are 0:30 going to happen but then he criticizes 0:32 the Fed for keeping rates low so which 0:34 is it right he's trying to have trying 0:36 to have his cake and Andy to what Trump 0:39 has to explain is that low interest 0:42 rates don't help the economy low 0:45 interest rates are one of the biggest 0:46 headwinds for the economy because all 0:49 they do is inflate asset bubbles and 0:51 prevent legitimate economic growth and 0:54 Donald Trump has to explain that even 0:57 though the rates have to go up that when 1:00 they do it's going to burst the bubble 1:02 and it's not going to be fun 1:05 it's going to be another financial 1:06 crisis only words but the problem is if 1:10 we're ever going to have a real recovery 1:12 that's going to produce a higher 1:14 standard of living and the good paying 1:16 jobs that everybody claims they want 1:19 we're not going to get there unless we 1:21 let this bubble deflate and that means 1:23 raising interest rates and having to 1:25 live with the consequences which are 1:27 going to be a collapsing stock market a 1:30 collapsing bond market of collapsing 1:32 real estate market failing banks a 1:35 repeat of the OS financial crisis only 1:38 worse and all Janet Yellen is succeeding 1:41 in doing by keeping rates artificially 1:43 low is exacerbating the problem and 1:46 delaying the day of reckoning if you 1:48 remember with so many people worried 1:50 about when it came to bank failures we 1:53 would have had that had the Federal 1:55 Reserve not veiled everybody out as we 1:57 not add the quantitative easing and we 1:59 not had zero percent interest rates so 2:01 the next time around we're going to have 2:04 to deal with the full consequences of 2:06 the mistakes that have been made in the 2:07 past but these mistakes are consequence 2:10 of the said keeping interest rates 2:12 artificially low because they've done 2:14 that we have much too much debt with 2:16 Donald Trump pointed out that under 2:19 Barack Obama the national debt double 2:22 but he didn't point out that it also 2:24 doubled under George Bush and the reason 2:27 it doubled under both presidents is 2:29 because the Fed made it all possible but 2:32 the Fed let everybody lever up not only 2:34 the government but households 2:36 corporations we've all borrowed money 2:38 that is impossible to repay and the only 2:41 thing between us and the crisis is 2:43 interest rates that are practically zero 2:45 but they can't stay there indefinitely 2:47 without destroying the dollar and I 2:50 think ultimately that might be what 2:51 gives is because they try to keep rates 2:54 low so log because they realize how 2:56 painful the correct the process is going 2:58 to be that they destroy the dollar in 3:00 the process and would ultimately causes 3:03 the federal raise raids is because they 3:05 don't want the dollar to become monopoly 3:07 money they want to make sure it doesn't 3:08 lose all of its value adjust the 3:10 considerable portion of its value and 3:13 reluctantly and and eventually they're 3:15 going to have to raise interest rates 3:16 and not just a little but a lot and then 3:19 this whole house of cards is going to 3:21 come falling down and we're going to 3:22 have to deal with the consequences of 3:24 these mistakes i think it's gonna be 3:26 heavy inflation I hope it's not 3:28 hyperinflation i hope we ultimately get 3:30 the rate ice that we need to prevent 3:32 that from happening but then we're going 3:35 to have the complete collapse and we're 3:37 going to have to deal with these 3:38 problems you know one of the things that 3:40 Donald Trump is backing away from and I 3:43 think you should embrace it is his idea 3:45 that we need to restructure the national 3:48 debt and we absolutely must because it 3:50 is impossible for us to repay the 20 3:53 trillion dollars of Treasury debt in 3:56 fact it's impossible to service the debt 3:58 is interest rates rise to a market level 4:01 certainly if they rise to a high level 4:03 to combat inflation there is no way we 4:06 can honor these commitment and I would 4:08 rather restructure and ask our creditors 4:11 many of them are very wealthy many of 4:13 them are far and many of them are 4:14 foreign government 4:16 why should we have massive tax sites on 4:18 the American middle class so that the 4:20 Chinese can be repaid in full for the 4:23 money they were dumb enough to lend the 4:24 US government so we've got to come to 4:27 terms with the fact that we are broke 4:29 that we've borrowed with more money than 4:31 we can ever repay and in the process we 4:34 have created a phony economy 4:35 we have created a service sector economy 4:37 we have enormous trade deficit and they 4:40 don't result from bad trade deals 4:43 it's not NASA that's the reason we have 4:45 these trade deficits it's the Fed it's 4:47 the artificially low interest rates to 4:49 the fact that we don't have our own 4:51 savings to invest in capital it's 4:53 because of excess regulation and excess 4:56 taxation that Hillary Clinton's promise 4:58 to double down on we need less 5:00 government we need free or market we 5:03 need to produce again but none of that 5:05 is going to be accomplished until we 5:06 raise interest rates and we can't raise 5:09 interest rates without breaking the 5:10 bubble so it's like you know that we can 5:13 have the game without the short-term 5:15 pain but politically speaking nobody has 5:18 the stomach for that pain and so we 5:20 never get the game because we keep 5:21 making the problem worse politicians of 5:25 promised voters something for nothing 5:28 a lot of government workers have been 5:30 promised tension but the taxpayers have 5:32 never been asked to fund the pension and 5:35 neither have the workers and so they're 5:37 empty promises and there's no way they 5:39 can get kept that is the bad news 5:42 so there are two possible scenarios we 5:45 come clean and we tell people that 5:47 they're not going to get everything 5:49 they've been promised or we try to 5:51 pretend that everyone's going to get 5:52 paid and we pay off all the promises 5:55 with worthless money I think it's better 5:57 to be honest and restructure these 6:00 obligations in a way that we can 6:02 actually afford to pay them rather than 6:04 just pretend that we can afford it and 6:07 we print a bunch of money destroy the 6:09 value of the dollar and then everybody 6:11 gets their pension but their pensions 6:13 are worthless because you can't buy 6:14 anything with the money I think you want 6:17 is is going to have a substantial rise 6:20 against the dollar you know you have a 6:21 lot of hedge funds that are short that 6:23 currency and I think they're going to 6:25 lose a lot of money on that trade on 6:27 wine i think some of the same people are 6:29 short the yin and the euro I think those 6:31 currencies are going to rise against the 6:33 dollar as well I think they're all going 6:34 to fall against gold and maybe against 6:37 some other currencies but they're gonna 6:39 rise against the dollar and that has 6:41 serious implications for America you 6:44 know one of the things that nobody seems 6:45 to understand or Trump doesn't even 6:47 point out is that in this 6:49 short run the Chinese have been 6:51 supplying a massive subsidy to the 6:54 American economy in the long run they're 6:57 not doing us any favors but in the short 6:59 run they're making our lives better in 7:03 that they supply us with the consumer 7:06 goods that we need and we want and they 7:08 loan us the money to buy them because we 7:11 have this huge trade deficit with china 7:13 that means we're getting a lot of stuff 7:15 from the Chinese that we're not paying 7:17 for so we get all sorts of products that 7:20 make our lives better and they just get 7:22 little pieces of paper that they can't 7:23 do very much with and in fact more 7:25 recently they've been waking up if you 7:28 look at what's been happening to chinese 7:30 holdings of us treasuries they've been 7:32 going down while Chinese holdings of 7:35 gold have been going way up so they can 7:38 obviously read the writing on the wall 7:40 even if we can't but eventually you know 7:43 in the the idea of being careful what 7:45 you wish for 7:46 when we talk about hey we need to look 7:49 kinda has to stop manipulating its 7:51 currency I that means the Chinese 7:54 currency goes up and that means our 7:56 standard of living comes crashing down 7:57 because now all the products that we've 8:00 been buying so cheaply at walmart all 8:02 the sudden a triple in price and nobody 8:05 can afford them 8:06 so this is going to be a rude awakening 8:08 for the average american when he finds 8:10 out just how broke he really is 8:13 prices are going to go way up I mean 8:15 eventually going to walmart is gonna be 8:18 like going to neiman marcus i mean the 8:20 prices are going to be very very high 8:22 and and that means walmart is not going 8:24 to sell as many products in America 8:26 which also means they're not going to 8:27 have to employ as many Americans and so 8:29 it's gonna be a lot of layoffs but in 8:31 the meantime the products that China 8:33 used to ship to walmart in America those 8:36 products are still going to be made 8:38 they're just going to be on a shelf in 8:40 some Chinese walmart and now the Chinese 8:42 people are going to get the byproducts 8:44 that before they didn't have because 8:46 Americans were buying them because 8:48 Americans were richer but when the night 8:50 when the US dollar crashes and their 8:52 currency goes up the Chinese gain the 8:55 purchasing power that we lose 8:57 look there are a lot of problems in the 9:00 financial sector not just deutsche bank 9:02 and Deutsche Bank 9:03 I only have the normal problems but you 9:05 have the US government trying to find 9:07 out what 13 14 billion dollars or 9:10 something like that but i have avoided 9:12 the financials for years that's one of 9:14 the reasons that the funds that I manage 9:17 the mutual funds that are separately 9:18 managed accounts are so outperforming 9:21 the benchmarks this year is because the 9:23 benchmarks have a lot of financial and 9:26 we have none and you know what 9:27 really yeah i think is crazy is you see 9:30 all these animal is talking about how 9:32 higher interest rates are going to be 9:34 good for the banks right because they're 9:36 going to have better margins on their 9:38 loans so we want to see these spreads go 9:40 up these analysts have no clue what 9:42 they're talking about because the banks 9:44 have these toxic balance sheet and 9:46 higher interest rates are going to be 9:49 like a bomb that's going to go off 9:51 because when rates go up the value of 9:53 their portfolios going to collapse 9:56 you've got banks that own the long-dated 9:58 ask that and the collateral for their 10:00 loans is going to lose value and rates 10:02 go up real estate prices are going to 10:04 come down there is going to be all sorts 10:06 of problems that the banks are going to 10:09 be confronted with when interest rates
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