Peter Schiff: Stock Market Gains a Fed ‘Delusion’

Federal Reserve Chairman Ben Bernanke and inflation are putting the U.S. economy on the road to ruin, Euro Pacific Capital’s Peter Schiff said Monday.

“The substance is inflation. It’s that the dollar we use to buy equities are losing value,” he said. “This is not about the stock market going up. It isn’t going up. That’s a delusion created by the Fed.”

Stocks posted their largest one-day rally in almost two weeks.

Schiff said that the U.S. dollar was poised to lose a lot more value, which meant higher oil prices, another burst housing bubble and an economic crash “absolutely” worse than in 2008 and 2009.

“This whole phony economy the Fed has constructed with cheap money is going to come toppling down. But the reality is we have to kill this phony economy because it’s unsustainable. We need to replace it with a viable one but unfortunately to do that there’s a lot of short-term pain because we’ve got to unwind this bubble, and the Fed doesn’t want that to happen.

“The Fed is trying to postpone the day of reckoning. We’ve got to deal with this problem,” Schiff said. “Either Ben Bernanke is incompetent or he’s lying.”

Schiff also chided the Fed for creating another bubble in government spending, in the stock market and in the bond market.

“The Fed is the biggest enemy of this economy. In fact, Ben Bernanke, as far as I’m concerned, he’s public enemy No. 1,” he said. “We’re never going to have a recovery while this guy’s in charge.”

Trader Guy Adami put weight in what Schiff said.

“His points are spot-on,” he said. “A lot of the things he says, frankly, you don’t want to hear.”

Trader Jon Najarian said he would “totally disagree” that the stock market was heading toward a crash.

“But it is true that by inflating these bonds as much as they have, the people that are the last ones stuck when that music stops, they will hurt a lot when that happens,” he said.

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Trader disclosure: On March 26, 2012, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders: Joe Terranova is long VRTS; Joe Terranova is long NXPI; Joe Terranova is long IBM; Joe Terranova is long MCD; Joe Terranova is long EMC; Joe Terranova is long MSFT; Joe Terranova is long JOY; Joe Terranova is long OXY; Joe Terranova is long LQD; Joe Terranova is long POT; Joe Terranova is long TBT; Joe Terranova is long HIBB; Jon Najarian is long call spreads in AAPL; Jon Najarian is long call spreads in JPM; Jon Najarian is long call spreads in JOY; Jon Najarian is long call spreads in IBM; Jon Najarian is long call spreads in RIG; Jon Najarian is long call spreads in AMZN; Jon Najarian is long call spreads in QCOM; Jon Najarian is long MPC; Jon Najarian is long OAS; Jon Najarian is long WLL; Jon Najarian is long ARNA; Jon Najarian is long VVUS; Jon Najarian is long CIGX; Jon Najarian is long CBOE; Jon Najarian is long CME; Guy Adami is long C; Guy Adami is long GS; Guy Adami is long INTC; Guy Adami is long AGU; Guy Adami is long MSFT; Guy Adami is long NUE; Guy Adami is long BTU; Brian Kelly is long MS; Brian Kelly is long XLF; Brian Kelly is long SMH; Brian Kelly is long QQQ; Brian Kelly is long SPY; Brian Kelly is long IWN; Scott Nations is long SPY; Scott Nations is long C; Scott Nations is long BAC;

For Stacy Rasgon Bernstein
Bernstein currently makes a market in QCOM

For Peter Schiff
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