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Economist Peter Schiff issued warnings about America’s economic trajectory during Wednesday’s Federal Reserve meeting, predicting the central bank’s decade-long policies will trigger an unavoidable crisis worse than 2008.
What Happened: The Federal Open Market Committee kept interest rates unchanged at 4.25%-4.50% for the fourth consecutive meeting, while projecting two rate cuts in 2025. However, Schiff told Fox Business that Fed Chair Jerome Powell “basically admitted that they have no idea what’s going to happen.”
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The Fed’s updated projections show Personal Consumption Expenditures inflation rising to 3.0% in 2025, up from March’s 2.7% forecast, while real GDP growth was downgraded to 1.4% from 1.7%. Unemployment is expected to reach 4.5% in 2025.
Schiff argued these forecasts dramatically underestimate the severity of coming problems. “All of the inflation chickens that the Fed has been releasing for more than a decade are coming home to roost,” he said, attributing inflation pressures to years of artificially low rates rather than tariffs.
The economist predicted stagflation, combining recession with “much higher inflation happening at the same time,” potentially escalating to hyperinflation. He warned of a “global exodus out of U.S. stocks, out of U.S. bonds” as foreign investors retreat from American assets.
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Why It Matters: Schiff’s warnings align with growing economic concerns about America’s economic foundations. Nobel laureate Paul Krugman recently warned of an “emerging-market-type crisis” featuring sudden capital flight, housing crashes, and dollar devaluation.
Concerns about America’s fiscal sustainability are mounting across Wall Street. Tesla Inc. CEO Elon Musk recently warned the U.S. faces “de facto bankruptcy” as federal debt surpasses $37 trillion, with interest payments consuming 25% of tax revenue. JPMorgan Chase & Co. CEO Jamie Dimon has warned of potential bond market disruption.
The economist insisted that lower rates won’t solve America’s problems because cheap money caused them. “The solution involves much higher interest rates,” Schiff said, acknowledging this would trigger widespread bankruptcies, defaults, and “a protracted recession, probably a much worse financial crisis than 2008.”
