Friday, August 29, 2014
Ukraine Crisis Will Hurt the U.S. Dollar: Peter Schiff
Until now, the markets have been immune to the crisis in Ukraine and other current, major conflicts around the world. But these conflicts can influence the Federal Reserve, according to Schiff.
“The real deal is the Federal Reserve,” he told Yahoo Finance, “we do have a difficult international situation that may give the Fed the excuse that it needs to postpone the taper and rate increases. That’s what the market wants. That’s what’s driving this market. That’s the only thing driving this market.”
The situation in Ukraine is volatile and highly unpredictable, but historically markets didn’t care much about geopolitics. Markets do get spooked by geopolitics on occasion, but they typically recovered quickly.
Schiff is more concerned about America’s reaction to Ukrainian crisis than the crisis itself. He says that he had expected the dollar to fall for some time. “We’re flexing a lot of muscle we don’t have,” he added, “and we’re irritating people we need to be sucking up to. America depends on its ability to export dollars to import all the things we don’t produce.”
"We're creating extra incentive for people to move away from the dollar," Schiff said. "That could ultimately be the biggest problem for the market. A big drop in the dollar and acceleration of inflation would put pressure on the Fed to raise rates."
Peter Schiff famously made predictions about the crash of 2008, 2009.
“The people that were ridiculing me back then are still ridiculing me,” he told Birch Gold Group, “because I’m still warning that the real crisis hasn’t even happened yet. Because everything that the Federal Reserve has done, everything that the government has done since the financial crisis of ’08 has just made the problems that they were trying to solve worse. Problems that they caused.”
Russia’s invasion of Ukraine threatens the dollar: Peter Schiff
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Image by the Prime Minister of the Russian Federation