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Peter Schiff: Stock Market Gains a Fed ‘Delusion’

By: 
Bruno J. Navarro
Source: 
CNBC
March 26, 2012

Federal Reserve Chairman Ben Bernanke and inflation are putting the U.S. economy on the road to ruin, Euro Pacific Capital’s Peter Schiff said Monday.

“The substance is inflation. It’s that the dollar we use to buy equities are losing value,” he said. “This is not about the stock market going up. It isn’t going up. That’s a delusion created by the Fed.”
 
Stocks posted their largest one-day rally in almost two weeks.
 
Schiff said that the U.S. dollar was poised to lose a lot more value, which meant higher oil prices, another burst housing bubble and an economic crash “absolutely” worse than in 2008 and 2009.
 
“This whole phony economy the Fed has constructed with cheap money is going to come toppling down. But the reality is we have to kill this phony economy because it’s unsustainable. We need to replace it with a viable one but unfortunately to do that there’s a lot of short-term pain because we’ve got to unwind this bubble, and the Fed doesn’t want that to happen.
 
“The Fed is trying to postpone the day of reckoning. We’ve got to deal with this problem,” Schiff said. “Either Ben Bernanke is incompetent or he’s lying.”
 
Schiff also chided the Fed for creating another bubble in government spending, in the stock market and in the bond market.
 
“The Fed is the biggest enemy of this economy. In fact, Ben Bernanke, as far as I’m concerned, he’s public enemy No. 1,” he said. “We’re never going to have a recovery while this guy’s in charge.”
 
Trader Guy Adami put weight in what Schiff said.
 
“His points are spot-on,” he said. “A lot of the things he says, frankly, you don’t want to hear.”
 
Trader Jon Najarian said he would “totally disagree” that the stock market was heading toward a crash.
 
“But it is true that by inflating these bonds as much as they have, the people that are the last ones stuck when that music stops, they will hurt a lot when that happens,” he said.