Economist Peter Schiff usually has a lot to say, and last week he explained in an interview that he thinks the United States will face a financial crisis worse than the “Great Recession” of 2008. He explains that the United States has much more debt than it did then, and insists that America’s economic downturn “will be a much more serious crisis when the defaults begin.“
The decline in U.S. inflation “is only temporary“
As Peter Schiff detailed that he will be liquidating his Euro Pacific Bank, the economist sat down to discuss the U.S. economy with Kitco News anchor and producer David Lin. The day before his interview with David Lin, Peter Schiff explained that while inflation appears to be slowing, he doesn’t think that trend will last. “Ironically, investors are selling dollars and buying gold following a smaller-than-expected rise in CPI in July, as they believe the Fed will adopt a less aggressive policy“, said Mr. Schiff. stated. on Twitter. “They are right to sell dollars and buy gold, but for the wrong reasons. The drop in inflation is only temporary.“
U.S. productivity fell 4.6% in Q2 following a 7.4% fall in Q1. YoY productivity fell 2.5%, the largest drop since the series started in 1948. With falling productivity real wages must fall and consumer prices must rise. Government created #inflation is making both problems worse.
– Peter Schiff (@PeterSchiff) August 9, 2022
Speaking on Kitco News, Schiff explained in more detail why he thinks the U.S. economic recession will be more severe than the one in 2008. According to Schiff, if the Federal Reserve continues to raise interest rates, a financial crisis is inevitable. “2008 was all about bad debt“, he stressed. “These were people who borrowed money and couldn’t pay it back. The collateral for the loans was not good, because it was real estate, and the prices went down. Well, we have a lot more debt today than we had in 2008… And so it’s going to be a much bigger crisis when the defaults start.“
This time, however, the U.S. financial giants will not be bailed out, Schiff noted. The economist noted:
When they go bankrupt, it will be much worse, except that inflation will be too high and the Fed will fight inflation. There is no TARP 2.0. All these banks are going to have to be allowed to fail.
Inflation is going to be around probably for the rest of the decade
Peter Schiff’s comments follow the U.S. Bureau of Labor Statistics’ July Consumer Price Index (CPI) report, which showed an 8.5% year-over-year increase. Following the CPI report, U.S. President Joe Biden was heavily criticized when he stated that the U.S. economy had zero percent inflation in July. Biden’s comment followed the U.S. government’s attempt to redefine the technical definition of the word “inflation.recession“. “If you believe the official CPI, then prices, which are already very high, did not increase during July“, Schiff told the host of the Kitco show. He then added:
I don’t think it’s something to celebrate…It’s not like consumers were relieved by the price drop. There is no doubt in my mind that we will get a number above 9.1%. We are far from finished with this inflation problem. It will persist for years and years, and probably until the end of this decade and beyond.
Schiff’s commentary on the official CPI numbers follows an article published on schiffgold.com the same day, which asserts that the Bureau of Labor Statistics’ calculation of the CPI uses a formula that underestimates the actual rise in prices. In addition, statistics from shadowstats.com’s alternative inflation charts show that inflation is much higher than the official reports.
Even multiple jobs don’t allow workers to keep pace with #inflation. June consumer credit surged by a much higher than expected $40.1 billion, while credit card debt soared at an annualized rate of 16%, as consumer went deeper into debt to afford to buy higher priced necessities.
– Peter Schiff (@PeterSchiff) August 5, 2022
In Schiff’s interview with Lin, the economist said he expects a “massive financial crisis” and major problems with the U.S. dollar. When the dollar collapses, he expects gold and silver values to soar.
“The dollar has risen so far, in the early stages of this great inflation, because investors have illusions about the Fed’s ability to contain inflation and bring it down to 2%“, Schiff concluded. “When they wake up to the fact that inflation is going to be well over 2% indefinitely, then the dollar is going to collapse, and gold and silver are going to go through the roof.“