Wall Street has been on a roller coaster ride over the last few months. If you listen to the pundits on the financial networks, you’ll hear the word “volatile” used over and over again. That word certainly seems to describe the current state of US stock markets and in a broader sense the economy.
But during a recent interview on RT News with Rick Sanchez, Peter Schiff said it’s not that the economy is volatile. It’s actually a bubble. And we are on the verge of a bigger crisis than the one we went through in 2008.
It’s not a volatile economy, it’s a bubble economy. Thanks to the Federal Reserve, they inflated an even bigger bubble, on purpose, than the one they inflated by accident that popped in 2008. And so the economy is in much worse shape structurally today then it was before it fell apart the last time. So, this is the beginning of a much greater crisis, of a much greater recession than the one that we experienced back in 2008.”
Sanchez asked Peter what exactly the Federal Reserve did wrong. Peter said, basically, everything.
But the biggest things they did wrong were lowering interest rates down to zero, practically, and leaving them there for pretty much the entirety of the Obama presidency. And then they’ve barely raised them. They’re still at 2%, which is very low. They also did all the quantitative easing where they printed a bunch of money and bought US government bonds and mortgage bonds. That enabled the housing bubble to reflate, and that enabled the US government to go much deeper into debt. So, the government didn’t cut spending, which is what we needed. They increased spending. But it also enabled corporations to lever up and buy stocks. It enabled more Americans to go deeper into debt. So, it took a gigantic debt bubble and made it much bigger. And so now we’re on the precipice of a much worse crisis.”
As Sanchez put it, the fear is that if the Fed continues to raise rates, it will pop the bubbles and the economy will come crashing down. But Peter said that’s not what’s going to happen. In fact, the Fed isn’t going to keep raising rates. Ultimately, the central bank will push rates back to zero and launch another round of QE when it becomes clear that the economy has entered into a recession.
That is going to take a very bad situation and make it much worse because it’s not going to work like it did last time in that it blew up a bigger bubble. This is going to blow up in everybody’s face. It’s not going to cause real estate prices to go up or stock prices. It’s going to cause food prices to go up, gasoline prices. It’s the cost of living that’s going to rise, not the stock market. And so this is going to be an inflationary recession.”
Peter went on to say that when the Democrats take control of the White House and Congres in 2020, they will turn the inflationary recession into an inflationary depression.
The problem is Trump made the economy his political issue.
He put his brand on a bubble and when that bubble pops, it’s going to be very easy for the Democrats to blame all the problems on Trump and that’s what’s going to enable them to win in a landslide in 2020.”
As Peter put it, the people aren’t going to vote for four more years of Trump during a recession. They’re going to vote for socialism, “Which is going to give us four more years of hell.”