According to Peter Schiff, the chief global strategist at Euro Pacific Capital, it was a “huge mistake” for the Federal Reserve to cut interest rates last month. Schiff says there is no way for the Federal Reserve to stops the United States from going into a recession.
“They never should have taken rates to zero in 2008 and held them there for 7 years,” the veteran economic analyst told RT. “Zero interest rates and quantitative easing have created problems in our economy that will take generations to fix. However, the healing will never get underway if the Fed goes right back to zero (which is where they are headed).”
According to Schiff, it’s impossible to build a viable economy on the back of artificially low interest rates. “All it accomplishes it to push up asset prices, creating bubbles and malinvestments that hurt the economy. Relying on low interest rates for growth makes it certain that recessions will ensue when monetary policy tightens,” he added.
Runaway government debt and the Trump tariffs provided the final push to tip us back toward an inevitable recession, Schiff said. He added: “the Fed is not causing the recession; they are just unable to delay it any longer.” Unfortunately, if interest rates are “allowed” to rise organically to levels that reflect a healthy economy, the interest payments on government debt will sink the government and that’s exactly why President Donald Trump is desperate for artificially low interest rates.
Schiff has commented on a coming recession often, saying if it hits before the 2020 election, Trump will have no chance of winning. Schiff also said that “We’re Not Borrowing Ourselves Rich, We’re Borrowing Ourselves BROKE!” Meaning he sees a problem in the debt accumulation among the average American household. It now takes a lot of debt to stay in the middle class, and the political class isn’t setting a good example by being good with the money they steal from everyone else.
Schiff puts the GDP numbers into perspective, and considering the debt load the U.S. economy is burdened with, the outlook isn’t all that rosy. And of course, it’s not just government debt. Household debt is also at record levels and as Schiff says, “We’re not richer because of this economic growth.”
“So, we had to add a lot more debt in 2018 to buy not as much growth as a much smaller amount of debt in 2005. So, the takeaway from that is this is unsustainable because the growth came at a heavy cost. We had to increase the amount of debt that we had by a lot more than the percentage that the economy grew.”
“If your debt is growing faster than your economy, then you’re not getting richer. You’re getting poorer. You would have been better off without the debt and without the growth … We’re borrowing ourselves into poverty. We’re not borrowing ourselves rich. We’re borrowing ourselves broke.“-Peter Schiff, via Seeking Alpha
In his book, Crash Proof 2.0: How to Profit From the Economic Collapse, Peter Schiff discusses how to profit from the next economic recession. The economic and monetary disaster which seasoned prognosticator Peter Schiff predicted is no longer hypothetical-it is here today. And nobody understands what to do in this situation better than the man who saw it coming. For more than a decade, Schiff has not only observed the economy but also helped his clients restructure their portfolios to reflect his outlook. What he sees today is a nation facing an economic storm brought on by growing federal, personal, and corporate debt; too little savings; and a declining dollar.