Peter Schiff says be ready for “Economic Convulsions” in December

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Peter Schiff, economist and owner of Euro Pacific Capital has been saying for some time  that there are going to be big problems in the economy when they taper QE (quantitative easing). The Federal Reserve is on track to eliminate QE next month, as October is the last month of the wind down.

Schiff likens QE to drugs and the US to a drug addict, saying that once QE is removed, (tapered) the drug addict (the US) will go into convulsions.

Schiff says he has never seen irrational exuberance like he has now; that it is much worse now than during the height of the housing bubble. At that time, he went on TV and predicted the housing market would crash, and the analysts would laugh and mock him. He accurately predicted when it would crash and he now says that the atmosphere is worse now.

QE is like putting out a fire with gasoline. Removing it is going make the economy  go into economic convulsions.

Peter Schiff says, “ From my perspective, I remember the giddy days of the housing bubble very well.  And I remember the attitude that most people had. I remember how irrational about everything everyone was when I was trying to educate them on what was really going on in the economy and the housing  market and the crisis that was in our future, that  nobody wanted to believe.

I believe the collective irrational exuberance, the lack of understanding, of the true nature and character of the US economy  is greater now.  It’s far greater than anything I’ve experienced in that period of time. All of this euphoria that is going on is all based on the Fed and the idea that QE worked, zero interest rates worked, and because they worked so well, now the Fed can end it.

The Fed can take away QE, raise interest rates and the recovery can continue without it. That the stock market and the housing market that rose on that sea of liquidity can keep rising when you remove it [is ridiculous].  And of course, the idea that that can happen is so fanciful that it is amazing that intelligent, otherwise intelligent people, can fail to connect these dots.

That if the Fed were to do what everyone is so convinced they are going to do, based on a lower unemployment rate, or these jobs that are being created, if they were to do it, the jobs would disappear just as quickly as the QE.

Because once they start raising interest rates, even a little bit – the markets cannot sustain it. The stock market can’t sustain it, the housing market can’t sustain it, corporate America can’t afford the higher rates, the banks and home buyers can’t afford it and the Federal government can’t afford it.

The fact is, they can’t end these programs because they worked; … they didn’t work and they can never work. That’s why I’ve always said, QE is like putting out a fire with gasoline.  This fire did not go out with the latest round of gasoline, it’s just been burning hotter than ever.