2023-10-24 07:51:00
Investing.com – In a podcast and a series of tweets, economist Peter Schiff repeated his warning regarding a major financial crisis on the horizon, stressing that the prevailing belief is that the economy is fine, inflation is under control, and a soft landing is underway, but that misbelief.
The economist declared: “We are only in the early stages of this financial crisis,” warning that “the situation will get worse.”
Schiff also predicted that investors “will be as surprised by this financial crisis as they were with the 2008 financial crisis,” considering that it was “far less significant” than the crisis currently brewing.
In fact, the economist lamented that the signs of the crisis were clear, he said, but, as happened in 2008, the media and the economic world would talk regarding it being an unpredictable “black swan” and a “pile of nonsense,” he said. .
He also estimated that “the bond market is witnessing the collapse of the financial system,” highlighting the return of US 10-year and 30-year bond prices above 5%, and estimated that they are still capable of rising to 7-8%, or even more.
However, Schiff doubts that the economy will be able to withstand such a level of high interest rates, stressing that beyond some statistics that are strong because they are biased by their methodology or calculations, other indicators show that the economy is performing poorly.
For example, the index of leading economic indicators fell for the 16th straight month in September, with another decline of 0.7%.
However, the economist stressed that “we have to go back to the period 2007-2008, during the Great Recession, the worst since the Great Depression of the 1930s, to find a series of leading economic indicators that have continued negative for more than the 16 months that we have now, which he says “indicates “The economy is much weaker than the experts tell 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 that if consumers are no longer able to borrow, they will not be able to buy.
The banking sector should also be a cause for concern, according to The Economist, as banks continue to rely on the bailout program put in place following the collapse of Silicon Valley and Signature Bank, while concern is growing regarding the impact on banks of a potential commercial real estate collapse.
On Twitter, the economist addressed another troubling topic, which is the huge debt of the United States of America, considering it “truly unsustainable.”
“Even if interest rates remain at 5%, the debt will reach $40 trillion by the end of 2025, or even sooner. Of that, 5% represents $2 trillion annually,” Schiff wrote. “This represents approximately 45% of revenues.” annual federal taxes and 46% more than annual Social Security expenditures.”
In the end, Peter Schiff said that “things are still simmering beneath the surface,” and that it was only “a matter of time” before the situation exploded.
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