Summary:
Economist Peter Schiff warned that the U.S. is heading toward a financial crisis worse than 2008 due to the Federal Reserve’s long-term policy of keeping interest rates artificially low. During the Fed’s latest meeting, interest rates were held steady at 4.25%-4.50%, and two cuts were projected for 2025. Schiff criticized the Fed’s inflation and growth forecasts, arguing they underestimate the danger ahead.
He predicted stagflation—a recession combined with high inflation—and warned of potential hyperinflation and a global investor pullout from U.S. stocks and bonds. Schiff said the only real solution involves much higher interest rates, which would likely trigger bankruptcies, defaults, and a prolonged recession.
His concerns align with other major figures like Paul Krugman, Elon Musk, and Jamie Dimon, who have all raised alarms about U.S. debt, inflation, and financial instability.
Economist Peter Schiff issued stark warnings about America’s economic future during the Federal Reserve’s Wednesday meeting, predicting a crisis “worse than 2008” due to the central bank’s prolonged low-interest rate policies.
The Federal Open Market Committee held interest rates at 4.25%-4.50% for the fourth consecutive meeting, while projecting two rate cuts in 2025. However, Schiff told Fox Business that Fed Chair Jerome Powell “basically admitted that they have no idea what’s going to happen.”
Inflation and Growth Projections Under Fire
The Fed’s latest projections show Personal Consumption Expenditures inflation rising to 3.0% in 2025, up from 2.7% in March. Meanwhile, real GDP growth was revised down from 1.7% to 1.4%. The unemployment rate is expected to climb to 4.5% by 2025.
Schiff pushed back on the Fed’s outlook, saying, “All of the inflation chickens that the Fed has been releasing for more than a decade are coming home to roost,” arguing that years of artificially low interest rates—not tariffs—are to blame for mounting inflation pressures.
Schiff Predicts Stagflation and Investor Retreat
The economist forecasted a period of stagflation, marked by a recession occurring alongside “much higher inflation happening at the same time,” and even warned it could escalate into hyperinflation. He cautioned against a “global exodus out of U.S. stocks, out of U.S. bonds” as foreign investors begin pulling out of American assets.
Echoes Across Wall Street
Schiff’s warnings come as other high-profile voices raise red flags over America’s fiscal trajectory. Nobel laureate Paul Krugman recently highlighted the risk of an “emerging-market-type crisis” involving capital flight, housing crashes, and devaluation of the U.S. dollar.
Tesla CEO Elon Musk added his voice to the chorus of concern, stating that the U.S. is heading toward “de facto bankruptcy” as federal debt climbs past $37 trillion and interest payments consume 25% of tax revenue. JPMorgan Chase CEO Jamie Dimon has also spoken about the potential for disruption in the bond market.
“Much Worse Financial Crisis Than 2008”
Schiff emphasized that the same cheap-money policies responsible for inflating the current economic bubble cannot be used to fix it. “The solution involves much higher interest rates,” he said, acknowledging that this path would cause “widespread bankruptcies, defaults, and a protracted recession, probably a much worse financial crisis than 2008.”
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