Peter Schiff warns worse is coming in his latest podcast.

“The Fed could not win the fight on inflation by raising interest rates,” said Peter Schiff. 

That doesn’t surprise me, the culprit of this inflation is not higher wages, greedy companies wanting higher prices or excessive consumer demand. 

Prices are rising because of currency debasement, which is diluting the purchasing power of the dollar as unchecked public spending propels past 32 trillion US dollars, which exceeds over 500 Billion dollars in interest payments alone. The model of going into debt to finance mal investments (300,000 USD to blow up a 1,000 USD balloon, 75 billion USD in Ukrainian war “aid” efforts ), then going deeper into debt to pay interest on the debt is unsustainable for a business and a country.

“The Fed could not win the fight on inflation by raising interest rates”

PETER SCHIFF

Peter Schiff warns worse is coming, bearing in mind global investor demand for treasuries is waning

So China and Japan, the largest foreign investors, accelerate the dumping of US treasuries. China sold 173.2 Billion dollars of US Treasuries or 17.2% of its holdings in 2022. Moreover, all foreign holdings of Treasuries securities fell 6% in 2022.

Here is the takeaway; the de-dollarisation is causing the supply of dollars in the US economy to increase, which could be offsetting any Fed tightening. 

But as the Fed tightens it causes a global currency crisis as weaker currencies and economies collapse under the burden of high-interest rates.  

There may be no soft landing as the largest debt bubble, multiple sovereign debt bubbles, in the history of finance implodes. The Fed will be powerless to contain the hyper-financialized debt bomb it created. If the Fed does nothing, the market will send treasury yields and the cost of auto and mortgage loans spiraling into a deflationary depression scenario.

“as the Fed tightens it causes a global currency crisis as weaker currencies and economies collapse under the burden of high-interest rates”

WEALTH TRAINING COMPANY

If the Fed creates more currency to buy the debt nobody wants to hold to suppress yields and keep interest rates low, a currency collapse hyperinflation depression plays out.      

Economic reality is about to hit mainstream consciousness with mass layoffs, auto loan delinquencies, rising homelessness, and rising crime rates. The United Slums States of America is growing, and a rethink of economic and foreign policy is much needed.

For the satellites of the Empire, the collapse is likely to be even worse as they are not self-sufficient. The euro sovereign debt crisis of 2013 could have been the preliminary stage of a currency collapse a decade later. Germany, the economic motor of Europe, is in recession with its energy pipeline blown up, and its wheels of production are stuttering. 

Germany is de-industrialising, with China now overtaking Germany as the world’s second-largest car exporter.

“We also have to see a big contraction in consumer credit and lending standards rising so consumers can’t keep spending” – Peter Schiff

With a backdrop of geopolitical uncertainties, a war in Europe stagflation Peter Schiff warns worse is coming

“You Ain’t Seen Nothing Yet.” said the veteran investor.

“The months of declining inflation are in the rearview mirror.  Now, we are going to see accelerating inflation, and I think before the year is over, we are going to take out that 9% inflation high last year in year-over-year CPI (Consumer Price Index)…and what that is going to show is what the Fed has done thus far in its inflation fight is completely ineffective,” he said.

Did policy monetary policymakers ever get it right?

“If the Fed is serious about fighting inflation, and I do not believe it is, it’s going to have to fight a lot harder than it has. Interest rates need to go up much higher than anybody thinks, but that alone is not going to do the trick. We also have to see a big contraction in consumer credit and lending standards rising so consumers can’t keep spending,” he said.

But if the Fed keeps hiking that could blow up the bond market as bond investors start fretting about massive bond defaults.

Peter Schiff warns worse is coming because he thinks the Fed will pivot, cut rates and buy the bonds.

“I think the Fed is going to have to throw in the towel on the inflation fight because it will be fighting something it fears more, which is a complete economic collapse…

The federal government may be legitimately forced to cut Medicare and Social Security instead of illegitimately cutting them through inflation…

“People are going to suffer the consequences of this experiment gone bad”
Peter Schiff

We have this collapsing standard of living but think about it as a tax. This is what Americans are paying. This is the price of big government

But what happens if the US dollar reserve currency status is lost and the only buyer is the central bank?

Eventually, markets will be markets, and price discovery plays out.

The Fed can suppress yields by buying treasuries, but this is inflationary. Creating currency to buy the debt dilutes the purchasing power of the dollar.  

The 10-year Argentine government bond has a 46% yield with 95% inflation, at the time of writing. 

Put simply, these bonds are worthless, and no investor in his right mind would buy them. Toilet rolls are more attractive, despite their 46% yield.

So there is a point when sky-high yields are a red flag and no longer attractive to investors.  

 But Argentine hyperinflation is deflating the government debt.

“Higher prices are the price we pay for big government, and inflation is a tax. Instead of raising our taxes, they are just printing money, and that devalues the money we have,” said Peter Schiff.

What is the solution as, Peter Schiff warns the worse is coming?  

“We have to let the phony economy collapse so we can build a real economy on the rubble of this economic house of cards,” he said.

There are going to be lots of losers in the coming collapse. Schiff says,

“People are going to suffer the consequences of this experiment gone bad. . . . We know how this experiment is going to end. 

They are not doing anything that Zimbabwe didn’t try, Argentina didn’t try, or the Weimar Republic. They didn’t reinvent inflation. It’s the same old thing,” he added.