Peter Schiff: The Recession is Already Here (GLD, SLV, AGQ, IAU)

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October 4, 2012 10:25am NYSE:AGQ NYSE:GLD

Jared Cummans: Some analysts, like Jim Rogers, have been warning about a coming recession in 2013, while other big names like Roubini and Faber have been even more bold with their statements. Investors should not be surprised to see Peter Schiff throw


his hat into the ring, as he has never been one to be shy about his views of the economy. Recently, Schiff has been talking a lot about the debasement of our dollar and the inevitable fiscal cliff while also taking calculated jabs at QE3. But he has now taken it a step further, claiming us to already be in another recession [for more economic news and analysis subscribe to our free newsletter].

[Related: Warnings That A Massive Stock Market Crash Is Imminent]

The comments were made in an interview on Monday on Fox Business, as Schiff was asked about his views on the economy. His reasoning for feeling that we are in another recession stems from a few different metrics. First, he points out that government data shows we are growing at 1.3% while inflation is currently at 1.6%. He states that if inflation is truly at 3% (a number he seems to pull out of thin air, mind you) then we are already in a recession. You can watch the interview here to see for yourself, but it appears that Schiff is suggesting inflation numbers are being under reported or covered up for the time being.

Schiff goes on to point out another metric stating that while the Dow Jones may be higher, it has lost 80% of its value in terms of gold over the past 12 years. Reading between the lines here, Schiff feels quite strongly that gold is the only real measure of currency for the world, so the stock markets should be measured against that instead of a flimsy fiat currency. Stocks are not going higher, the dollar is simply getting weaker he pointed out. He finishes things off by predicting a rise in interest rates to combat inflation, sending us headfirst off the fiscal cliff [see also Why QE3 is Just Delaying the Inevitable].

While Schiff makes some good points, there are certainly some holes in his argument. For starters, he fails to acknowledge how easily the price of gold can be moved by hedgers and speculators. We saw this all too well last year when gold skyrocketed to $1,900 per ounce as market panic set in. Gold can certainly be used as a base for value for economies, but those numbers need to be taken with a grain of salt, as the precious metal is by no means a perfect measuring stick. Finally, his theory heavily relies on the fact that inflation is being reported 50% lower than it actually is. Sure, all of the QE may spark up inflation in the future, but for the time being it seems as though things are staying in check.

What do you all think, is this just Schiff ranting and raving again, or do you think we are currently in a recession?

ETF DN Related Tickers: SPDR Gold Trust (NYSEARCA:GLD), iShares Silver Trust (NYSEARCA:SLV), Ultra Silver ETF (NYSEARCA:AGQ), iShares Gold Trust (NYSEARCA:IAU).

Written By Jared Cummans From CommodityHQ  Disclosure: No Positions.

CommodityHQ offers educational content, analysis, and commentary on global commodity markets. Whether you’re looking to speculate on a short-term jump in crude or establish a long-term allocation to natural resources, CommodityHQ has the information you need.


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