Economist Peter Schiff advocates for raising interest rates to correct economic imbalances, even if it leads to a market crash and recession. He warns that inflation could worsen if rates are cut instead.
United States, Bollywood Fever: Economist and gold advocate Peter Schiff has recently expressed strong opinions on the U.S. economy, suggesting that the Federal Reserve should raise interest rates instead of cutting them, even if this leads to a significant market crash.Â
In his latest podcast and social media posts, Schiff emphasized that while such a crash would be painful, it is necessary to correct the long-term economic imbalances created by decades of Federal Reserve policies.
Schiff argues that the U.S. economy is headed towards an inevitable recession due to these policies, and delaying the inevitable by cutting rates would only exacerbate the situation. “The right thing is to raise rates more and let the chips fall where they may,” Schiff stated.
He acknowledged that this approach would likely lead to a crash in stocks and real estate, a hard landing, and a recession, but he believes it is crucial for restoring economic stability.
He further explained that avoiding this “necessary crash” would have required the Fed not to engage in policies that he likened to making a deal with the devil, with the consequences now coming due.
Despite his stance, Schiff noted that market sentiment is increasingly confident about imminent rate cuts, potentially even before the Fed’s September meeting.
He warned that this expectation is already influencing market psychology, with investors mistakenly believing that the economy is strong enough to justify these cuts.
Schiff also pointed out recent economic data that he believes is misleading investors into thinking a recession is not imminent.
For example, he highlighted the unexpected drop in July housing starts and building permits, which fell to their lowest levels since the Covid lockdowns. “Today’s ‘unexpected’ collapse… should be a reality check for investors,” he commented.
Furthermore, Schiff raised concerns about the rising cost of the national debt. He noted that interest on the national debt has become the third-largest line item in the federal budget and predicted that by the end of 2025, it could surpass social security costs, and by the end of 2026, it might even surpass Medicare, becoming the largest federal government expense.
Schiff’s warnings underscore his belief that the Fed’s current trajectory could lead to more severe economic challenges if corrective measures, like raising interest rates, are not taken soon.
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