Economist Peter Schiff warns that the current financial crisis will be worse than in 2008. He stresses that “future rate hikes are no longer meaningful,” adding that any effects will be more than offset by the Fed’s quantitative easing.
Peter Schiff’s warning of a financial crisis
In a series of tweets this week, economist and gold bug Peter Schiff shared his outlook for the U.S. economy. He explained that when the government “imposed a lot of new banking regulations after the 2008 financial crisis, it guaranteed that what is happening now would never happen again.” He argued, however, that.
One of the causes of the 2008 financial crisis was too much government regulation. So this crisis will be much worse.
“This time it’s different”: when the 2008 financial crisis began, the dollar rose and gold fell. This time it’s the opposite … because investors realize that the high inflation that was supposed to hit 10 years ago is going to hit harder now!” The economist opined.
“The Fed caused the financial crises of 2008 and 2023,” Schiff argues, claiming that he predicted both “because he understood the consequences of the Fed’s policy mistakes.” He added that he “started predicting the current financial crisis in 2009,” but at the time he did not know “how long it would take for a financial crisis to occur.”
Schiff further explained that the Fed’s quantitative easing (QE) is back. He said, “Last week, the Fed’s balance sheet swelled by $300 billion, erasing four months of QT [quantitative tightening] in one week. By the end of the month, the balance sheet could be at its highest level. Raising interest rates is not the issue. Inflation is headed much higher thanks to the bank bailout,” he elaborated. His comments follow the Federal Reserve and the U.S. government’s announcement last Sunday of measures to bail out the failed Silicon Valley Bank and Signature Bank.
The economist continued.
The Fed had been fighting inflation with a two-pronged strategy: raising rates and QT. But now the Fed is backfiring and doing aggressive QE; if QT was meant to lower inflation, QE is meant to raise inflation. Future rate hikes are now meaningless because their effects will be offset by QE.
“As I have been warning for years, the only way for the Fed to get closer to achieving its 2% inflation target is to let a financial crisis more severe than 2008 pass naturally, without bailouts for the banks and their customers,” I told him. He concluded by referring to the recent bailouts of major banks. The Fed chose to bail out and abandon the fight against inflation.”
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