Veteran investor and economist Peter Schiff warns that the U.S. is rushing toward a financial crisis, with the recent surge in precious metals reflecting a fundamental repricing of the global monetary system rather than a speculative bubble.
Speaking on The David Lin Report on January 29, Schiff said the dollar’s decline to its lowest level in roughly four years, combined with record highs in gold and silver, shows that markets are signaling deep structural stress.
“This is a crisis much bigger than the ‘08 financial crisis for America…This is a complete repricing of gold and silver for the new monetary world order,” Schiff said.
In other words, the financial commentator believes that the dollar’s status as the world’s dominant reserve currency, which has allowed the U.S. to live beyond its means, is coming to an end. According to him, the shift will mark a turning point for the American economy, which he argues has been built on persistent trade deficits, rising leverage, and consumer credit.
Hardly alone in his analysis, Schiff’s words also echo those of Ron Paul, who has recently argued that fiat is at a breaking point.
America will be the victim of the sovereign debt crisis
Further into the interview, Schiff argued that a crisis does not require an outright default, but that inflation occurs when private buyers no longer want U.S. debt.
This, in turn, forces the Federal Reserve to become the sole buyer, triggering runaway inflation and a sharp loss of purchasing power for the dollar.
“Well, sovereign debt crisis is not about default. It’s about the fact that nobody wants to buy our sovereign debt, and so the only buyer becomes the Fed. And that is a crisis.”
In this view, the consequences would be asymmetric. Namely, while Americans would face a declining standard of living, the rest of the world would retain more of its production and capital, boosting domestic investment and consumption abroad.
‘There is no bubble’
The economist also argued against the idea that the current precious metal surge represents a bubble. Rather, he contrasted today’s cautious investor behavior with the greed-driven mania seen during the dot-com boom, as well as historical crypto surges.
Schiff argued that both gold and silver prices will be higher a year from now. The current breakout, he says, is similar to the subprime mortgage market in 2007, which is another early warning signal of a broader financial crisis.
While central bank gold purchases have shown signs of slowing in recent data, the stockbroker said institutional and private investor demand is only just beginning to emerge. For him, the takeaway is thus clear: the move in gold is not a trade, but a signal of what’s coming for the dollar.
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