President Lori Logan about the persistent high inflation, signaling that the Federal Reserve may not be able to avoid a rate hike in June.
Should the Federal Open Market Committee (FOMC) proceed with raising rates next month, the federal funds rate will hover between 5.25% and 5.5%.
Schiff, however, stressed that this course of action would place us above the interest rate threshold that triggered the 2008 financial crisis and the subsequent Great Recession. The crucial distinction today lies in the substantially elevated levels of debt across governments, businesses, and individuals.
“This interest rate level will have far more severe consequences than in 2007,” he cautioned, serving as a reminder of the Great Financial Crisis that followed in 2008.
According to Schiff, the ongoing financial crisis, which commenced in 2023, will surpass the magnitude of the 2008 crisis.
Another area of concern highlighted by Schiff is the burgeoning household debt, which has recently exceeded a historic milestone of $17 trillion.
Schiff concluded that Americans are relying on their credit cards as a means of buoyancy amid escalating prices.
However, he pointed out that credit card interest rates have surged beyond 20%.
“Consumers persist in spending. But where are they sourcing the funds? They are borrowing them. Credit continues to expand. This is a fundamental aspect of the inflationary dynamic. Inflation represents the expansion of the money supply, encompassing credit,” elucidated the investor.
Schiff argues that consumers are not curbing their expenditures in response to rising prices, thereby perpetuating the cycle of price escalation. Consequently, the efficacy of the forthcoming quarter-point rate hike is expected to be no different from its predecessors, implying the necessity for future rate hikes. This, in turn, suggests that the Federal Reserve is on the losing end of the battle against inflation.
Schiff recommends paying attention to Bitcoin, since it is not pegged to the dollar and this is the only safe circle today to save your money from the crisis of 2023.
