Economist Peter Schiff has warned that the current banking crisis is just the beginning of a much worse financial crisis. Schiff, who is known for his advocacy of gold and his predictions of economic downturns, cited the Federal Reserve’s recession forecast as evidence of the severity of the situation. “Normally the Fed doesn’t forecast a recession. So if they can actually see this one coming, it likely means it will be massive,” he said. Schiff compared the current crisis to the subprime mortgage crisis and argued that the government’s rescue of depositors at some banks but not others would create a run on smaller banks.
Schiff made his comments in an interview with Trader TV Live. He argued that the current banking crisis is actually a financial crisis, and that the 2008 financial crisis was also a banking crisis. “It’s going to get much much worse if you are going to try to dismiss it,” he warned. Schiff said that big banks are insolvent too, but are too big to fail, so the government will print money to prevent them from failing. However, he warned that this would create problems for smaller banks, which would not receive the same level of support.
Schiff’s comments were prompted by the failure of several banks in recent months, including Silicon Valley Bank and Signature Bank. The Federal Reserve has sought to downplay the significance of these failures, but Schiff argued that they represent a much larger problem. He compared the government’s response to the subprime mortgage crisis, when officials initially claimed that the problem was contained to a handful of subprime mortgages.
Schiff’s warning comes as the Federal Reserve released minutes indicating that it expects a mild recession. Schiff questioned this assessment, tweeting: “What makes the Fed think the recession will be mild?” He argued that if the Fed can see a recession coming, it is likely to be much worse than anticipated.
Schiff is known for his advocacy of gold as a safe haven asset during times of economic turmoil. He has been a vocal critic of the Federal Reserve and other central banks, arguing that their policies have created a bubble in the stock market and other assets. Schiff has also warned of inflation, arguing that the Fed’s policies will eventually lead to a devaluation of the dollar.
In conclusion, Schiff’s warning that the current banking crisis is just the beginning of a much worse financial crisis is a cause for concern. His comparison to the subprime mortgage crisis is a reminder that officials often downplay the significance of financial problems until they become too big to ignore. Schiff’s advocacy of gold as a safe haven asset is also worth considering, given the current economic climate. As always, investors should do their own research and seek professional advice before making any investment decisions.