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19 Nov, 2020 09:35

US economy on such massive jolt of monetary heroin there’s no dialing back the dosage – Peter Schiff

US economy on such massive jolt of monetary heroin there’s no dialing back the dosage – Peter Schiff

Stocks have been on a bull run ever since their big March drop at the beginning of the pandemic, so veteran stockbroker Peter Schiff asks: if Covid-19 didn’t hurt the stock market, why should a vaccine help?

Stocks were up and gold was sold off this week after US-based Moderna announced success in a coronavirus vaccine trial. However, the market’s rise was not to the extent which followed last week’s Pfizer announcement.

“I know it is good news. If we get a Covid vaccine, then more people can go back to work. More people will feel comfortable traveling and doing all sorts of things that they used to do pre-Covid that they’re no longer doing,” said Schiff on his podcast. “So, all of that is good news, except none of the bad news was ever priced into the stock market. The stock market is not way down because of Covid. It’s at record highs. So, if the stock market didn’t go down at all because of the Covid pandemic, why should it rally if the Covid pandemic is going to come to an end?”

The economist explains that, thanks to the Federal Reserve and all the stimulus, the market is higher post-Covid than it was pre-Covid. “So, why should any positive news be positive for stocks when the negative news wasn’t negative for stocks?” he says.

According to Schiff, traders know it doesn’t really matter what happens with Covid. They understand that it’s the stimulus that has kept the market blown up over the last several months when it should have sold off due to the economic impact of the pandemic.

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“Because of all the cheap money, the artificially low interest rates, the money printing, that’s what caused the market to go up. I think that traders recognize that, even if Covid goes away, that cheap money is here to stay. Because if traders believed that the end of Covid also meant the end of zero percent interest rates and quantitative easing, stocks would not be rallying on a Covid vaccine. They would be getting killed on a Covid vaccine because the vaccine would kill all the stimulus.”

US Federal Reserve Chairman Jerome Powell said this week that the central bank cannot end emergency measures too soon. Powell has again called on Congress to pass additional fiscal stimulus.

“The reason he’s saying this is because he knows there’s no turning back. And I think the markets know we’ve sold our monetary souls to the devil and there’s no getting out of this deal. That is the predicament,” says Schiff.

“Because of the sheer volume of the money printing, and the QE, and the zero percent rates, that monetary policy in the face of Covid was so extreme and so reckless, the economy has now been given such a massive jolt of this monetary heroin that there’s no dialing back the dosage. We have so much debt now, the markets are now such a massive bubble that the Fed wouldn’t dare risk pricking it,” he added.

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