The US's slide on the global shrimp sandwich is heading for a brutal end
According to Peter Schiff, Donald Trump has misunderstood why US factories are being closed and production is being moved abroad. But the crash caused by the tariffs would have happened soon even without Trump, he claims. Through Trump's tariff policy, the US itself has pulled the plug on its debt-financed economic machinery, according to financial profile Peter Schiff.
But the crash that is now happening is partly a liberation, and sooner or later would have happened anyway, he believes. - The US's slide on the global shrimp sandwich is heading for a brutal end, says Schiff. Peter Schiff describes how the Trump administration's tariff policy, the runaway debt and a growing global dissatisfaction with the dollar are now interacting in a perfect storm - with historically rising gold prices as one of the first effects.
- I thought it would take an external dollar crisis to get everything rolling. But we did it to ourselves. We burst our own bubble, says Schiff in the interview. The price of gold has risen by almost 700 dollars since the beginning of the year and on Monday morning approached the record level of 3,400 dollars per ounce (just over 1,000 Swedish kronor per gram).
And yet there is still almost no one buying, except for the central banks, says Schiff. According to him, these central banks have been quietly reducing their dollar exposure for a long time and replacing it with physical gold – in anticipation of a new monetary paradigm. – They are preparing for a world where the dollar is no longer the reserve currency.
What do you replace it with? The obvious answer is gold. But despite the strong goldrally, Schiff recommends small savers to wait to buy physical gold.
rally. Instead, he highlights mining companies as extremely undervalued. – Gold stocks are undervalued at a historic level. Central banks do not buy shares in mining companies – they buy the gold that the companies mine. And the mining companies' costs, especially oil, have never been so low in relation to gold. Their profits will explode
At the same time, it is the trade war between the US and China that is driving market unrest. This week, Donald Trump imposed 145 percent tariffs on Chinese goods, to which China quickly responded with its own tariffs of 125 percent. Beijing calls the US actions "economic blackmail". Peter Schiff is merciless in his criticism of the tariffs – and believes that Trump has completely misunderstood how the world economy works. – He looked at our large trade deficits and thought it was because foreigners were cheating us. But no one is cheating us. In fact, the trade deficits are because we have borrowed too much, and lived beyond our means for decades.
The US overconsumption, financed by foreign loans and asset sales in the form of newly created dollars, has long been possible thanks to the willingness of other countries to keep the US afloat by accepting the dollar as a reserve currency regardless of how many dollars the US creates, according to Schiff.
When Trump now tries to “break the dependence” that he believes China has on the US, it has the opposite effect. – We are the ones who are dependent – not China. It is easy to replace one customer base with another. Anyone can consume. The hard part is producing. And we have left the production to others. “The party is over” Schiff believes that the real crisis is about confidence in the US currency – and the ability to continue to borrow without consequences. With a national debt that has exceeded 34 trillion dollars, there is no way back. – We have lived at the expense of the world. We have had low interest rates, low inflation and higher stock prices thanks to foreign capital.
But if we now try to cut that bond – then the party will be over. At the same time, the dollar, US government bonds and the stock market are falling – three assets that traditionally tend to move in different directions. Schiff sees this as an ominous sign.
The classic "flight to safety" pattern is breaking down. Investors are starting to understand that there is no longer a safe haven in the US. For Schiff, the fact that gold is rising so sharply is proof that reality has caught up with a system that has long rested on artificial respiration.
He quotes himself from a recent post on X: "US dollars, bonds and stocks are being killed. The US's slide on the global shrimp sandwich is heading for a brutal end." And this is how he summarizes the developments in the Kitco interview:
We will be forced to stop living beyond our means. That means higher interest rates, higher prices, lower stock market values – and a greatly reduced standard of living. With a sarcastic twinkle, Schiff says that the United States has now been "liberated" from its standard of living.
– I warned years ago that Trump was threatening to strip us of our prosperity. Now it's happening. And this is just the beginning, says Schiff.
https://axiom1b.blogspot.com/2025/01/wealth-power-after-reading-book-wealth.html
