(Kitco News) – Despite a month-long series of rebounds for U.S. stocks, a financial crisis worse than that of 2008 is looming, said Peter Schiff, chief market strategist at Euro Pacific Asset Management.
Schiff spoke with David Lin, presenter and producer at Kitco News.
Over the past month, the S&P 500 is up 9% and the NASDAQ 13%.
Schiff warned that if the Federal Reserve continues to raise interest rates, a financial crisis worse than that of 2008 will occur.
“2008 was all about bad debt,” he explained. “It was about people borrowing money and they couldn’t pay it back. The collateral on those loans wasn’t good because it was real estate, and the prices went down. Well, we have a lot more debt now than we did in 2008…so it’s going to be a much bigger crisis when the defaults start.”
Schiff added that this time the banks could not be bailed out.
“When they fail, it will be much worse, except with inflation too high and the Fed fighting inflation,” he said. “There is no TARP 2.0. All these banks are going to have to be allowed to fail.”
Inflation will get worse
The latest Consumer Price Index (CPI) figures were released on Wednesday morning.
The year-on-year CPI, which includes food and energy, rose 8.5% in July, a reduction in the official inflation figure from the previous month, when year-on-year prices rose by 9.1%. The 9.1% figure was a 41-year high.
On the same day as the CPI was released, President Joe Biden claimed there had been a “zero percent” change in consumer prices month over month.
“Today we learned that our economy recorded zero percent inflation in the month of July,” Biden said. “When you couple that with last week’s booming jobs report, which showed 528,000 jobs created last month and an unemployment rate of 3.5%, it underscores the kind of economy we’ve built. .”
President Biden was referring to the month-over-month change in the headline CPI, which was unchanged from the previous June.
The core CPI, which excludes food and energy, rose 5.9% year over year and 0.3% month over month.
“If you believe the official CPI, then prices, which are already very high, did not rise during the month of July,” Schiff explained. “I don’t think that’s something to celebrate… It’s not like consumers are actually relieved by the lower prices.”
Despite the slight drop in the reported CPI, Schiff said inflation will get worse.
“There is no doubt in my mind that we will get a number above 9.1% [inflation]”, he said. “We are far from having finished with this problem of inflation. He’s going to be here for years and years, and probably the rest of this decade and more.”
A dollar implosion?
As the Fed pivots to prevent a “massive financial crisis”, Schiff said it will lead to a “sovereign debt crisis” and a “US dollar crisis”.
The US dollar index is up 9.5% year-to-date. However, Schiff claimed that future events are not properly factored in.
“The dollar has risen so far, in the early stages of this great inflation, because investors are under illusions about the ability of the Fed to contain inflation and bring it down to 2%,” he said. -he declares. “When they realize the reality, this inflation is going to be well above 2% indefinitely, then the dollar is going to fall through the floor, then gold and silver are going to skyrocket.”
For Schiff’s thoughts on the upcoming financial crisis, as well as his take on the Inflation Reduction Act, watch the video above.
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