There are still ample questions regarding the future of the global monetary system. Peter Schifff, a respected investor and famous gold bull, expects some sort of “doomsday” scenario to unfold over the coming months.
The Doomsday Scenario by Peter Schiff
Various recent measures taken by central banks and governments are a direct result of the coronavirus crisis. While these decisions are designed to inject more liquidity into domestic markets, they will also devalue local currencies. Primarily the US Dollar is at risk of losing a fair bit of value over the coming months, unless the situation improves drastically.
Gold bug Peter Schiff is convinced all of this will lead to a doomsday scenario. Stock markets remain incredibly volatile and lean toward shedding more value in the foreseeable future. According to Schiff, this will only increase demand for alternative assets, including gold. Although gold has seen volatile price swings as well, that period seems to have come to a close.
Schiff firmly believes that the US is on the cusp of experiencing hyperinflation. Such a label is often attributed to poor economies, including those in Venezuela, Argentina, and several African countries. To many, it seems impossible that such a scenario could affect the United States. In reality, the cusp is much closer than most people anticipate at this time.
Avoiding that scenario can be done, according to Schiff. The solution is relatively simple:’ bring back the gold standard. That would see the issuance of US Dollars directly linked to the amount of gold owned by the Federal Reserve. A gold standard has been in place for a long time, but was removed several decades ago.
Is the Gold Standard a Viable Plan?
The big question, as always, is whether or not a gold standard is viable under the current financial conditions. As the coronavirus crisis continues to worsen week over week, one would be inclined to respond negatively to that question. However, if the situation is left unchecked, issuing more currency and liquidity will not be a viable option either.
The option proposed by Peter Schiff is interesting in its own regard. It would certainly put gold in the driver’s seat of any economy around the globe. Moreover, it has the potential to massively increase demand for this precious metal, allowing gold to reach a new all-time high valuation in quick succession.
Finding countries and governments willing to introduce the gold standard again will not happen overnight. It is a very controversial decision to make, as it would seriously hamper any power the central banks may have. At the same time, these are the same institutions responsible for the 2008 financial crisis, and the new financial crisis waiting to happen due to COVID-19.