Economist Peter Schiff has warned of an inflationary depression, noting that inflation will stay higher for longer, leading to a more severe and prolonged recession. He predicted that the rapidly increasing national debt and federal budget deficits should lead to a collapse in demand for U.S. dollars. “Once the dollar starts falling, Treasury yields will rise faster,” the economist said.
Peter Schiff on Inflation, Recession, Depression
Economist and gold bug Peter Schiff issued warnings about the U.S. economy and the U.S. dollar again this week in a series of posts on social media platform X.
“The financial and economic crisis that’s already begun is long overdue and its ultimate arrival has been obvious for years. Yet as it unfolds, the media, government, academia, and the Fed will claim it was impossible to foresee. There’ll be no shortage of private sector scapegoats,” Schiff wrote. “Remember the reason that interest rates will stay higher for longer is that inflation will also stay higher for longer,” he added, elaborating:
That means the coming recession will be deeper and last longer too. It’s not just stagflation, but an inflationary depression.
He also commented on the remarks by Federal Reserve Chair Jerome Powell regarding the economy on Thursday. “Powell blamed today’s inflation on the pandemic. The pandemic didn’t cause inflation, the Fed and the federal government did. Both made the inflation problem worse during the pandemic by running huge budget deficits and printing a sh*tload of money to finance stimulus checks,” Schiff argued.
“Powell actually said the Fed doesn’t consider fiscal policy when making decisions on monetary policy and that he doesn’t change monetary policy based on fiscal policy. That is likely the most reckless admission ever made by a Fed Chairman. It will define Powell’s failed legacy,” Schiff further opined.
The economist continued:
The primary use for U.S. dollars has been to buy Treasuries. But since the biggest buyers are now sellers, and the national debt and federal budget deficits are soaring, demand for dollars should collapse as well. Once the dollar starts falling, Treasury yields will rise faster.
“It’s clear that bond investors have lost confidence in the Fed’s ability to bring inflation back down to 2%. That’s why 30-year Treasuries are now yielding 5.1%. But 5.1% is not nearly high enough to offset 30 years of high inflation. So bond yields are headed much higher fast,” Schiff explained. “The Treasury yield curve will soon normalize at higher rates across the curve. Short-term yields will move from 5.5% to 6%. Long-term yields will move from 5% to 7%-8%. Given an abnormally large amount of debt, the U.S. economy can’t afford a normal yield curve. QE coming soon,” the gold bug predicted.
Schiff expects no further interest rate hikes. “We’ve got war in the Middle East, so the Fed can’t raise rates with all that uncertainty out there. And maybe they’ll have to cut rates,” he recently said. He has repeatedly warned about an impending biggest bond market crash and an unprecedented financial crisis. Furthermore, he has expressed concerns about a “tragic ending” and the collapse of the U.S. dollar, emphasizing that the day of reckoning is at hand.
What do you think about economist Peter Schiff’s warnings about the U.S. economy and the U.S. dollar? Let us know in the comments section below.