Investment guru Peter Schiff warns that the U.S. economy is on the brink of a collapse that will trigger total financial chaos.
"All the signs are already there. Look at what's happening out there. The stock market is falling, Look at homebuilders, the housing stocks, the financials, the retailers – all these are the same things that were happening in 2007 leading to that crisis," the CEO of Euro Pacific Capital told RT America.
The economist urged people be prepared for not only an economic crisis, but a political crisis as well, RT.com cited Schiff as saying. “So, what you've got to do is get out of U.S. dollar assets. The dollar is going to be the biggest casualty along with the American standard of living,” he said.
As the Federal Reserve grapples with finely balancing the economy while winding down its ultra-loose stimulus policies, investors are fretting about how and when the U.S. expansion will end, Bloomberg reported.
A recent study by JPMorgan Chase & Co. indicated the U.S. economy has a greater than 50-50 chance of tipping into a recession in the next two years.
Meanwhile, Schiff predicted emerging markets would rally in the wake of the dollar's demise. “They are going to see a boom, when the dollar weakens,” Schiff said.
Schiff warned that with U.S. household debt at about $15 trillion, logic dictates that something (in a financial and economic sense) has to give.
“Everybody is loaded up with debt, and it's not like we began this monetary experiment without much debt. We had a lot of debt in 2008. In fact, the financial crisis was about debt, it was about our inability to pay the debt that we had,” Schiff said.
“But instead of addressing the problem and allowing the debt to be paid down, the Federal Reserve led us down the primrose path into much deeper debt by keeping interest rates at zero and holding them for so long. The Federal Reserve actually encouraged an overly indebted nation to borrow even more money,” Schiff said.
“So, everybody is loaded up with debt. And guess what? Interest rates are now finally rising, and that means the cost of servicing that debt is going up, and this is going [to] be a problem just like adjustable rate mortgage was a big problem in 2008, when these things were resetting,” he said. “People couldn't afford to pay. Well, the same thing is going to happen on a national scale. Rates are growing up, and we too broke to pay.”
However, other experts aren't as pessimistic.
Oaktree Capital Group LLC’s Howard Marks recently said that now is the time to adopt a cautious investment strategy as the market cycle ages, though there aren’t signs of an impending U.S. recession.
The world’s largest economy is still doing “very well,” Marks, chairman and co-founder of one of the world’s largest alternative and distressed investment firms, told Bloomberg TV in Sydney.
Despite a lack of bargains in many markets, strategies should focus on remaining invested and position defensively, without piling into cash, he said.
White House economic adviser Larry Kudlow said Wednesday that "there's no recession in sight" for the American economy and that President Donald Trump "is on the right track" with his economic agenda.
"There's no recession in sight," Kudlow, who also served in the Reagan administration, told CNBC's Jim Cramer at the cable network's Delivering Alpha conference in New York.
"The American economy is in very good shape," said Kudlow, who was blunt in that he doesn't sense any economic trouble on the horizion. "I don't see it," said Kudlow, who worked as Reagan’s budget deputy between 1981 and 1985.
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