Economist Peter Schiff warns that the U.S. dollar will collapse and “we will default.”

Noting that the United States is “in a far greater fiscal mess than Great Britain“, with a far greater debt problem, Peter Schiff pointed out: “Can we possibly pay off this debt? Of course not. Paying back the debt is impossible. So what will happen? We will default.“

Peter Schiff talks about the collapse of the U.S. dollar

Economist Peter Schiff shared his outlook for the U.S. dollar in a podcast entitled “When This Sucker’s Rally Ends, the Dollar Will Crash“, published on Saturday. He explains that the United States has major problems that will lead to the crash of the U.S. dollar.

Referring to the situation in Britain, Peter Schiff said the UK is concerned about its rising debts. The country’s debt-to-GDP ratio is about 85% and former Prime Minister Liz Truss “has threatened to drive up Britain’s debt to GDP even further“, the economist described, noting that “investors rightly threw away the pound.“However, he added, “They sold books for dollars…The irony is that they were buying dollars despite the fact that the United States has an even bigger debt problem.“

The U.S. national debt now exceeds $31 trillion and the government has recorded a budget deficit of $1.38 trillion in FY 2022. Schiff explained that the debt-to-GDP ratio in the U.S. is actually over 125%. When state and local debt is included, the ratio jumps to 140%, he detailed:

We are in a much bigger fiscal mess than Britain. So selling pounds and buying dollars because you’re worried that Britain has too much debt is jumping out of the frying pan into the fire.

Peter Schiff pointed out that it’s ridiculous that people have been buying U.S. Treasuries as a safe haven, adding that it’s also absurd to sell a country’s currency because of its debt problems and buy dollars when the U.S. is even more in debt.

“In the United Kingdom, almost all of the debt is at the national level. There are no states as there are here, nor are there all the municipalities, so there are many levels of debt“he pointed out. Pointing out that governments fund themselves from the same tax base, he said:

These governments are trying to squeeze juice out of the same turnips. Because Americans are broke. We have no savings. So, can we possibly pay off this debt? Of course not. Paying off the debt is impossible. So what’s going to happen? We will default.

Peter Schiff sees 2 possible ways for the US to default.

The economist went on to detail that there is “only two possible ways to default – the honest way and the dishonest way, but either way is a disaster if you own U.S. Treasuries“.

Schiff continues: “The honest way is simply to admit that we can’t pay and we default. We restructure the debt and tell our creditors.“However, he believes that politicians do not have the integrity to do this, noting:

They’ll take the coward’s way out. They will print. They’re going to inflate the debt… It’s crazy to think that the Fed is going to succeed in getting inflation down to 2%. They can’t do it.

He also warned that the more the Federal Reserve raises interest rates, the worse the problem becomes. His statement echoes a warning he issued recently that the Fed’s action could lead to stock market crashes, a massive financial crisis and a severe recession.

The U.S. merchandise trade deficit unexpectedly jumped by 5.7% in Sept., as imports rose by .8% and exports fell by 1.5%, breaking a five-month streak of falling trade deficits. Now that the dollar is weakening, future trade deficit will widen, causing the dollar to fall further.

– Peter Schiff (@PeterSchiff) October 26, 2022

Peter Schiff also tweeted on Wednesday, “The U.S. merchandise trade deficit unexpectedly jumped 5.7 percent in September, as imports rose 0.8 percent and exports fell 1.5 percent, breaking a five-month streak of declining trade deficits.“He concluded:

Now that the dollar is weakening, the future trade deficit will widen, causing the dollar to fall further.