Peter Schiff: 17 Percent PPI and a 2008 Style Housing Trap Are Hitting at the Same Time
Peter Schiff opened his latest show with a blunt warning. There is an inflation bomb that is going to be going off. The September producer price index rose 1.3 percent in a single month. That annualizes to 17 percent. Export prices jumped 2.2 percent in the same month, more than the entire annual inflation target in one print and annualizing near 30 percent. Oil reached a fresh five month high at 110 dollars a barrel. Schiff said prices are heading toward 150 and then higher, and that the move will not stay confined to energy. EVERY commodity price is set to follow.
The housing numbers, he said, look like 2007. Pending home sales hit the lowest reading in the history of the index. Builder confidence is the weakest since 2012. New homes are now selling for less than existing ones. Lenders sit on 8.5 trillion dollars of fixed rate mortgages carrying an average coupon of about 4.6 percent. With market rates well above that level, roughly 2 trillion dollars of those loans are already underwater on paper, four times the realized losses of the 2008 crisis, and that is before any meaningful wave of defaults.
Schiff argued the two problems are arriving together. Something similar to 2008 is happening in the housing market. Something similar to 2021 is happening with inflation. Except they are happening at the same time. If you think the cost of living crisis is bad now, wait till you see how much worse it is about to get. He noted that the Federal Reserve under Kevin Warsh has delivered only a single 25 basis point hike while money supply and the balance sheet continue to expand. The Fed cannot launch the kind of quantitative easing that papered over the last housing bust while inflation is running this hot. Fannie Mae and Freddie Mac, he said, will need another bailout. The dollar sits at the center of what comes next.
These themes track closely with the case Schiff made on the SilverTrade Insider a few months ago. In that conversation he warned that if the Fed does not monetize the debt the country faces a financial crisis worse than 2008. The new data simply sharpens the bind. Higher rates to fight the inflation surge deepen the mortgage losses and the fiscal hole. Refusing to monetize the debt leaves the banks and the government without a buyer of last resort. Either path, in Schiff’s view, ends with more inflation and a stronger bid for gold and silver as the only assets that cannot be printed to paper over the losses.
