Investing.com – In a recent podcast and series of tweets, economist Peter Schiff reiterated his warning about a looming major financial crisis, emphasizing that the mainstream is mistaken in thinking the economy is fine , that inflation is under control, and that a soft landing is underway.
“We are only in the early stages of this financial crisis” declared the economist, warning that “the situation will get even worse”.
Schiff also predicted that investors “will all be as caught off guard by this financial crisis as they were by the financial crisis of 2008”, judging that this will prove to be by comparison “much less significant” than the crisis that is currently brewing.
The economist in fact deplored that the signs of a crisis are, according to him, obvious, but that, as in 2008, the media and the economic world will speak of an unpredictable “black swan”, a “heap of bullshit” according to him.
He also estimated that “the bond market is witnessing the collapse of the financial system”, highlighting the return of US rates to and above 5%, and estimating that they could further rise to 7- 8%, or even more.
However, Schiff doubts that the economy will be able to withstand such a level of rates, emphasizing that beyond a few solid statistics, because they are biased by their methodology or their calculation, other indices show that the economy is doing badly.
For example, the index of leading economic indicators fell for the 16th consecutive month in September, with another decline of 0.7%.
However, the economist stressed that “we have to go back to 2007-2008, during the Great Recession, the worst since the Great Depression of the 1930s, to find a series of negative leading economic indicators longer than 16 months that we have now,” which he says “indicates that the economy is much weaker than the “experts” keep telling us.”
Peter Schiff also warned of record levels of credit card debt, noting that the American consumer is drowning in debt, warning that this will pose a problem for stocks in the financial sector, not to mention the fact that if consumers can no longer borrow, they can no longer buy.
The banking sector should also be a source of concern, according to the economist, as banks continue to draw on the bailout program put in place after the collapse of Silicon Valley Bank and Signature Bank, and as the Concern is high regarding the impact of a possible commercial real estate crash on banks.
On Twitter (NYSE:), the economist addressed another subject of concern, namely the massive debt of the USA, judging that it is “already unsustainable”.
“Even if rates remain at 5%, the debt will reach $40 trillion by the end of 2025, or even sooner. 5% of this amount represents $2 trillion per year. This represents approximately 45% of annual federal tax revenues and 46% more than annual Social Security expenditures,” Schiff wrote.
In the end, Peter Schiff judged that “things continue to simmer beneath the surface”, and that “it is only a matter of time before the situation explodes.
2023-10-23 14:14:00
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