×
Newsmax TV & Webwww.newsmax.comFREE - In Google Play
VIEW
×
Newsmax TV & Webwww.newsmax.comFREE - On the App Store
VIEW
Tags: peter schiff | rates | stock | collapse | recession

Peter Schiff: End of Artificially Low Rates Spells Stock Collapse, Recession

Peter Schiff: End of Artificially Low Rates Spells Stock Collapse, Recession
(Feng Yu/Dreamstime)

By    |   Wednesday, 28 February 2018 01:48 PM EST

Economic guru Peter Schiff warns that the raging-bull stock-market party on Wall Street is about to come to a crashing end.

And since he said artifically low interest rates have been propping up the economy, the stock market will collapse and the nation will plunge into recession, the CEO and chief global strategist of Euro Pacific Capital Inc. predicted.

"When we got the tax cuts passed, that is a huge negative for the bond market because it means much bigger deficits, because now the government has to borrow the money it used to collect in taxes. But now they just passed this new budget resolution, which is a massive increase in spending,” he told Stefanie Kammerman at the recent Orlando Money Show.

“The budget deficits now, under Trump, are actually going to be bigger than they were under Obama when we were in the worst recession since the Great Depression. This is unprecedented borrowing. And when Obama was running these big deficits, the Fed was monetizing them. They were doing a trillion dollars a year of QE. Now, they're not doing any,” he said.

After years of near-zero rates and $3.5 trillion in bond purchases all meant to stimulate the economy in the wake of the 2007-2009 recession, the Federal Reserve has gradually tightened policy since late 2015. Its key rate is now in the range of 1.25 to 1.5 percent, and while the Fed plans to hike three more times this year it has also forecast that it is about halfway to its goal.

“So, that means we're going to have a massive increase in interest rates. That means stocks collapse. That means we're going into a recession. Because the only thing that has been propping up the economy and the stock market has been artificially low interest rates - extremely, unprecedentedly low interest rates," Schiff said.

Schiff also has no faith that the central bank will actually help avert economic disaster.

"I think it's only a matter of time before the Fed cancels the rate hikes, fesses up to rate cuts and launches QE4. But the problem is it ain't gonna work this time. It's going to blow up in their face because that is basically the nail in the dollar's coffin," he said.

To be sure, Fed policymakers have fretted that they could face the next U.S. recession with virtually the same arsenal of policies used in the last downturn and, with interest rates still relatively low, those will not pack the same punch, Reuters recently explained.

In the midst of an unprecedented leadership transition, Fed officials are publicly debating whether to scrap their approach to inflation targeting, how much of its bond portfolio to retain, and how much longer they can raise interest rates in the face of an unexpectedly large boost from tax cuts and government spending.

That could leave little room to provide stimulus when the world's largest economy, which is heating up, eventually turns around.

"We would be better off, rather than thinking about what we would do next time when we hit zero, making sure that we don't get back there. We just don't want to be there," Boston Fed President Eric Rosengren told a conference of economists and the majority of his colleagues at the central bank.

For his part, Schiff also warned once again about exploding U.S. consumer debt.

"Everybody is loaded up with debt. We have record high student loans, record high credit card debt, record high automobile debt. The savings rate is at a 10-year low. Everybody is loaded up with debt, and the only reason that we can afford it is because the rates are so low. Well, they're about to go a lot higher and the party is over," he said.

© 2024 Newsmax Finance. All rights reserved.


InvestingAnalysis
Economic guru Peter Schiff warns that the raging-bull stock-market party on Wall Street is about to come to a crashing end.
peter schiff, rates, stock, collapse, recession
625
2018-48-28
Wednesday, 28 February 2018 01:48 PM
Newsmax Media, Inc.

Sign up for Newsmax’s Daily Newsletter

Receive breaking news and original analysis - sent right to your inbox.

(Optional for Local News)
Privacy: We never share your email address.
Join the Newsmax Community
Read and Post Comments
Please review Community Guidelines before posting a comment.
 
Get Newsmax Text Alerts
TOP

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved
NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved