Economist Peter Schiff has called attention to the present banking crisis as the cusp of a much worse financial crisis that will follow. In a recent interview on Trader TV Live, Schiff warned that “everybody has talked about a banking crisis,” but refuses to refer to it as a financial crisis. Schiff emphasized that the previous banking crisis in 2008 was actually part of a larger financial crisis, and that this crisis will not just end with a few bank closures.
Schiff compared the present crisis to the subprime mortgage crisis, noting that the Federal Reserve is claiming that it is just a couple of banks that have failed, namely Silicon Valley Bank or Signature Bank. Similarly, during the subprime crisis, nobody wanted to admit that it was a mortgage crisis – nobody wanted to admit the extent of the problem. As history repeats itself, Schiff cautions that the current situation is not just a “small matter” and that it is “a big deal.” It is not just Silicon Valley Bank and Signature Bank that has caused the banks to become insolvent, and the government may have to print a lot of money to rescue the depositors of smaller banks, creating a large problem.
According to Schiff, the Federal Reserve recently stated in its meeting minutes that a soft landing in the market is unlikely, and that a mild recession will occur. Schiff is skeptical about the accuracy of the Federal Reserve’s prediction, stating that if the Fed is predicting a recession, it will likely lead to a massive recession, given that the Fed traditionally does not forecast an upcoming recession. Schiff questioned the Federal Reserve’s logic and wondered why it believed that this recession would be mild compared to the previous one.
Schiff’s concerns are popular among those who share his view of the economy. Meanwhile, the financial industry has remained optimistic about the future of the market. However, the growing crisis in the banking industry is too large to ignore. Schiff predicts that a much worse financial crisis is to come, and he is not alone in this belief.
Schiff’s prediction of a massive recession is not without merit. The banking industry is a vital pillar of the economy, and its failure would lead to an economic collapse. So far, the banking crisis is silent and has only affected a small number of banks. Nonetheless, the issue can affect other banks and potentially spread to the rest of the industry, which will have a domino effect on the economy.
The government’s rescue plan for specific failing banks will create issues for smaller banks, causing a run on them that could ultimately lead to their failure. The government will also have to print a lot of money to rescue depositors in smaller banks, in a plan to rescue the banking industry and prevent the economy from failing. The government printing a lot of money means inflation that will eventually have a knock-on effect on the economy.
Furthermore, the fallout of the COVID-19 pandemic has led to mass unemployment, which can cause a ripple effect in the economy. Unemployment leads to lower purchasing power, which affects businesses as they lose customers or face reduced sales. This is a further hit taken by the economy, exacerbating the current banking crisis.
In conclusion, Schiff’s predictions should serve as a warning of what is to come. The current banking crisis is just the cusp of a much worse financial crisis that will have a knock-on effect on the economy, similar to that of the subprime mortgage crisis. The banking industry is too big to fail, which means the government will have to rescue it, and this will have multiple unintended consequences that will inevitably create a much worse financial crisis than the current banking crisis. It is advisable to heed Schiff’s advice and prepare for the worst.
