Peter Schiff warns of a coming dollar decline, and he predicts the end of the greenback as the reserve currency.
Peter Schiff, a perma gold bull dollar bear, advised Americans to make provisions for a significant US dollar decline.
Peter Schiff has been warning about the demise of the dollar for decades. The 2023 treasury bond market crash, the worst in its history since the American Revolutionary War, wiped off trillions of dollars of the market portfolio of global treasuries adds weight to his view.
The 2023 Great Bond Market Crash, barely mentioned by the mainstream media, was the crux of five known bank failures that year.
“The 2023 Great Bond Market Crash, barely mentioned by the mainstream media, was the crux of five known bank failures that year”
WEALTH TRAINING COMPANY
As we wrote previously, when conservative investors lose fortunes in the perceived safety of haven treasuries, the prime collateral pledged by commercial banks to underwrite loans, it is a systemic crisis.
We noted that the 2023 banking crisis is not over and could spill over in 2024, a view considered alarmist, spreading disinformation and ridiculed by financial elites.
Republic First collapsed in April 2024 and might not be the only bank experiencing extreme stress leading to failure this year.
The 2008 financial crisis and Great Recession that followed was a debt crisis in the niche high-risk subprime mortgage market.
The solution was the greatest monetary easing experiment in financial history with near-zero interest rate ZIRP policy and quantitative easing, QE, and the purchase of bonds to suppress yields.
What followed was a decade-long debt orgy, a fake economic recovery built on multi-asset bubbles and debasing the currency leaving the lower middle class, the middle class with inflation and the wealthy with asset inflation. The widening wealth gap may have been policy-driven.
“The 2008 financial crisis and Great Recession that followed was a debt crisis in the niche high-risk subprime mortgage market”
WEALTH TRAINING COMPANY
The wealthy derive income from asset appreciation, and the rest derive income from their wages, which always falls behind inflation.
So households went on a debt binge, Zombie companies that would never make a profit proliferated the business landscape, and there was the rise of the SPAC con, while the public sector spent like there was no tomorrow. Pundits were warning about the public deficit skyrocketing to 20 trillion in 2019, and many were warning that the debt bubble was about to blow, preparing for a crash, they warned.
Then came the Black Swan event, the 2020 Great Global Lockdowns and a debt orgy that made the previous one look like a catholic ceremony.
In less than 250 weeks, the US public deficit flew to the moon, reaching 34 trillion dollars, a jump of 70%.
“great privileges come with responsibilities, abuse of those privileges, and you lose them” – Wealth Training Company
Exorbitant privileges with the dollar as reserve status hugely benefits Americans across the wealth divide, from the billionaire filling up his private jet with fuel on the tarmac to the struggling sole parent buying essentials at the grocery store on food stamps.
But great privileges come with responsibilities, abuse of those privileges, and you lose them.
The treasury bond market crash in 2023 gives weight to Peter Schiff’s warnings of a coming dollar decline
What if treasury bonds are the new subprime?
The federal government is unlikely to go broke, bearing in mind the Fed creates dollars at will. However, the maturity risk of holding long bonds frightens investors who got burnt in the 2023 bond crash.
A thousand dollars can buy a decent bicycle in 2024, but if I invest in a 10-year treasury bond at current yields and hold to maturity, will those thousand dollars invested buy me a bike tire in 2034?
Argentinian bonds pay over 50% yields, but investors are not queuing up to buy them because inflation is over 100%.
“I think gold is telling us that the dollar is going down again — and this time it’s going down for the count” – Peter Schiff
Peter Schiff warns of a coming dollar decline because there is no way of squaring a circle
Creating copious amounts of currency, increasing M2 and reducing GDP through forced lockdowns equals inflation. The narrative of transitory inflation and temporary inflation becomes wishful thinking. Fed Chair Powell recently admitted what bond investors already know, that the current trajectory is unsustainable.
So, there is something more serious and credible about Peter Schiff warning of a coming dollar decline.
The imbalance of treasury bonds where the supply exceeds global demand leads to no good outcomes; No QE and treasury bond yields rise destroys the collateral base, creates a banking credit squeeze and more bank failures. Without QE yield suppression, the cost of credit increases, destroying bank loans, auto loans, and mortgages and triggering credit card defaults as borrowers default on the loans. Moreover, interest on the 34 trillion dollar public deficit at the current interest rates has surpassed one trillion dollars a year. Put simply, the federal government will be going into debt, and the Fed will have to create more currency so that the government can pay just the interest on the debt.
The Fed resorts to monetary easing QE, yield suppression, and lowers the Fed fund rates. Inflation keeps rising, people living on fixed incomes struggle, destroying pensioners and savings as the dollar debasement continues.
But those with debts, particularly the government and households with mortgages, student loans, car loans, and credit card debts, are relieved from the financial inferno.
The latter scenario might be more politically acceptable to the Fed, but it means a weaker dollar.
“I think gold is telling us that the dollar is going down again — and this time it’s going down for the count,” said Peter Schiff.
“I think [the dollar is] going to be knocked off its pedestal,” Peter Schiff added. “I think it’s going to lose its status as the reserve currency.”
Global allocation of foreign reserves in USD has declined by approximately 7% since 2016, according to the IMF.
Peter Schiff warns of a coming dollar decline, which needs to be on investors’ radar.
