Economist Peter Schiff warns the Federal Reserve is about to commit its “biggest error yet” in managing a looming U.S. sovereign debt crisis.
Notably, he argued that a “great repricing” of assets is underway while emphasizing that the turmoil bears little resemblance to the 2008 financial crash, having much deeper implications for the U.S. dollar, precious metals, and personal savings of the average American, as argued in a recent interview with Kitco News.
Schiff believes the ongoing rally in gold and silver, both of which hit multi-year highs in the past weeks, has been fueled primarily by central bank demand, not retail investors.
What’s more, he noted that sales volume from individual “stackers” is still far below historical peaks, implying the broader public entering the market could generate a significant buying wave.
Foreign investors taking steep losses on U.S. debt
During the discussion, Schiff also pushed back on U.S. Treasury Secretary claims about bond market stability, insisting that foreign investors are taking steep losses on U.S. debt and increasingly offloading their holdings. This trend, he warned, also poses significant risks for U.S. fiscal credibility.
Looking ahead, the analyst warns that modern bank runs, accelerated by mobile banking and social media, as seen in the 2023 collapse of Silicon Valley Bank, pose systemic risks. Accordingly, he questions whether the Fed’s infrastructure could withstand a massive, rapid outflow of deposits without freezing the financial system.
A potential solution to the problem, Schiff argued, would be the dissolution of the Fed and a return to the same monetary system that existed before it:
The silver lining in the current situation, he therefore concluded, is that the Fed has retained some independence. While critical of the institution itself, he concedes that giving direct money-printing power to the federal government would be even worse, likely leading to higher inflation.
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Source: https://finbold.com/economist-warns-of-u-s-sovereign-debt-crisis-worse-than-2008/
