Unbridled Discourse: Stagflation (The Real) Unleashed – Analyst Peter Schiff Speaks Out
Economist Issues Grave Warning: America On Path to Financial Ruin Beyond Federal Reserve's Capabilities
Peter Schiff, top gun economist at Euro Pacific Asset Management, let loose on 'The Claman Countdown' with some harsh truths about the state of the U.S. economy.
The curtain fell on the Federal Open Markets Committee (FOMC) meeting with the Fed keeping its key interest rate steady - for the fourth time this year. Chairman Jerome Powell followed up with remarks for the media.
In His Own WordsSchiff fired back saying the Federal Reserve "has no idea what’s happening" with consumer prices or employment. He bemoans these forecasts as wishful thinking more than educated guesses.
Interest Rates UnchangedThe benchmark federal funds rate remains parked at 4.25% to 4.5% post-FOMC. Members of the FOMC also published a summary of economic projections – the so-called "dot plot." According to it, two interest rate cuts are projected for 2025, followed by one each in 2026 and 2027. Inflation is projected to hit 3% this year before dropping to 2.4% in 2026 and 2.1% in 2027. Real GDP growth is expected to slow to 1.4% in 2025, picking up to 1.6% in 2026, and 1.8% in 2027. Unemployment is projected to rise to 4.5% in 2025 and 2026, before dipping to 4.4% in 2027.
Peter Schiff's TakeSchiff reckons inflation will "far exceed" Fed expectations, and the economy will "dramatically weaken" in contrast to anticipated forecasts. He admits the Fed has marginally boosted its inflation forecast for the near term and backed off growth predictions, but calls the adjustments insufficient.
Root Source of InflationInstead of the Trump administration's recent tariffs, Schiff assigns the blame to the long-term consequences of the Fed's policies, namely, artificially low interest rates and quantitative easing that have flooded the world with excessive dollars. As foreigners withdraw from U.S. financial assets, he foresees these dollars streaming back into the U.S, causing further inflationary pressures.
Prepared for StagflationSchiff predicts the U.S. will experience stagflation, a recession, and soaring inflation at the same time, making it hard to manage the economy effectively. He cautions that interest rate cuts will not resolve the issue. Instead, he calls for "painful" rate hikes, though he acknowledges such a course will have negative consequences on the economy.
With the U.S. on the brink of runaway, possibly even hyperinflation, Schiff highlights the urgency of addressing the problem at its root – the Fed's long-term monetary policies – if we are to avoid a catastrophic economic downturn in the future.
- Peter Schiff, an economist at Euro Pacific Asset Management, criticized the Federal Reserve for lacking understanding of consumer prices and employment.
- The benchmark federal funds rate, kept steady by the Federal Open Markets Committee (FOMC), remains at 4.25% to 4.5% amidst forecasts of two interest rate cuts in 2025, followed by one each in 2026 and 2027.
- Schiff anticipates inflation to exceed Federal Reserve expectations and the economy to weaken significantly, at odds with the anticipated forecasts.
- Schiff asserts that the root cause of inflation is not recent tariffs but rather the long-term effects of artificially low interest rates and quantitative easing by the Fed, which has led to an abundance of dollars.
- Schiff forecasts a situation of stagflation in the U.S., characterized by a recession and high inflation simultaneous, posing challenges in managing the economy effectively. He advises against relying on interest rate cuts to resolve the issue and instead advocates for "painful" rate hikes, while acknowledging the potential negative implications on the economy.
