A Federal Reserve committed to ultra-easy monetary policy poses an even greater challenge to the US economy than "fiscal cliff," investor Peter Schiff said Tuesday.
A sharp critic of the quantitative easing, or QE, Schiff told CNBC's "Futures Now" that the Fed Chairman Ben Bernanke was "a much bigger threat to the US economy than the fiscal cliff."
Even as Bernanke shied away from outlining new stimulus despite what he called a "disappointingly slow" recovery, Schiff insisted that "if it wasn’t for all his accommodation, all the QEs, we wouldn’t have to go over the fiscal cliff. If fact, ultimately because of what the fed has done, we’re going to have to go over a much bigger cliff."
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Schiff, who insists that QE will lead to runaway inflation, is a booster of gold as an alternative to paper money and stocks. He stuck by his call that bullion would surge to USD 5,000 per ounce once the Fed’s policy eroded the value of the dollar.
“If we avoid the cliff, that is very bullish for the gold market because that means that trillion dollar-plus deficits will perpetuate, and these big deficits are what’s undermining the dollar because the Fed has to print money to finance them,” Schiff said.
"The more money they create to buy up the bonds that nobody wants, the higher the price of gold will go," he added.
Until recently, stock markets had been on the rise, a rally that Schiff insisted was due to artificial support from Fed policy.
"All the moves that we’re getting in the US stock market are driven by inflation. It’s not because the economy is getting better or that real earnings are going to improve, it’s just that the value of money is going to be destroyed," he said.
The precious yellow metal "is going to outperform stocks, but stocks are going to outperform paper (money), certainly bonds," Schiff added.
© 2012 CNBC.com
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