Peter Schiff warns Fed action could cause market crashes, financial crisis, and recession

By: Henry Felix

October 17, 2022 8:35 AM

Economist and gold bug Peter Schiff claims the Federal Reserve's actions could have one of two outcomes for the American economy. Stocks, bonds, and real estate could all crash, leading to "a massive financial crisis and severe recession." The economist emphasized the second possibility, saying, "the world will run away from the dollar."

There Are Two Outcomes for the U.S. Economy, According to Peter Schiff

Peter Schiff, an economist and avid gold bull, has been vocal about his thoughts on the state of the American economy and the Federal Reserve's efforts to curb inflation once again this week. As for the future of the American economy, he tweeted on Saturday, "There are two possible outcomes." One result was described in detail:

"With the Fed's help, inflation is back down to 2%. A widespread financial crisis and severe recession characterized by government defaults and spending cuts follows a precipitous decline in stocks, bonds, and real estate."

Then he moved on to the second possibility: "Or the Fed pivots before inflation returns to 2%." Inflation will spike if the Federal Reserve changes course, either to prevent a financial crisis or in response to one. For once, the rest of the world won't rush to buy dollars; rather, they'll flee them.

On Friday, Schiff also made the following tweet: "Everyone knows about the high inflation of the 1970s that didn't end until Volcker got serious in the early 1980s. However, during that same ten-year period, the CPI increased at a rate of 4.43 percent annually. It wasn't until after the financial crisis of 2008 that the Fed was able to reduce inflation to the target of 2%.

The gold bug is very vocal about their opinions on the state of the American economy on social media. He issued a warning about inflation in September, saying, "Inflation is here to stay, and will get much worse despite rate hikes." A bearish development for the dollar and a positive development for gold. Inflation rates below 2%, Schiff said, "are history."

The crisis "is going to be a much bigger crisis when the defaults start," he said in August, emphasizing the severity of the situation the United States is in. This economic downturn in the United States, he said back in May, "will be much worse than the Great Recession."

Recently, Schiff reached a settlement with Puerto Rico's financial regulator and agreed to liquidate his Euro Pacific Bank without admitting guilt.