Economist Peter Schiff Says the Fed Destroyed US Banking System — ‘It’s Insolvent’
Economist Peter Schiff says the U.S. banking system is insolvent. He stressed that the Federal Reserve destroyed the U.S. banking system, citing near-zero interest rates at banks while “the Fed funds rate is 5.25% and the real inflation rate is much higher.” Schiff previously warned that the U.S. banking system is on the verge of a “much bigger collapse than 2008.”
Peter Schiff on U.S. Banking Crisis
Gold bug and economist Peter Schiff is back with more warnings about the U.S. economy. He tweeted Friday that the Federal Reserve destroyed the U.S. banking system, emphasizing that it is insolvent and would collapse without government help. Schiff wrote:
Bank of America pays just .05% interest on savings accounts and nothing on checking accounts. But the Fed funds rate is 5.25% and the real inflation rate is much higher. The Fed destroyed the U.S. banking system. It’s insolvent and would collapse without government backstops.
This was not the first time that the economist sounded the alarm about potential issues within the U.S. banking system. In March, he tweeted: “The U.S. banking system is on the verge of a much bigger collapse than 2008. Banks own long-term paper at extremely low interest rates. They can’t compete with short-term Treasuries. Mass withdrawals from depositors seeking higher yields will result in a wave of bank failures.”
The interest-rate issue has been highlighted by numerous individuals, including Tesla and Spacex CEO Elon Musk. The billionaire explained in May that the U.S. Treasury and the Federal Reserve have created a massive gap between money market accounts (Treasury Bills) with interest rates of about 4.5% and bank accounts with interest rates of less than 1%. “That’s a massive incentive to move money out of bank accounts,” he emphasized.
When the U.S. government bailed out failed Signature Bank and Silicon Valley Bank in March, Schiff warned:
To finance the bank bailouts the Fed is creating more inflation. So the banking crisis didn’t solve the inflation problem, it made it much worse!
“Bailing out depositors of failed banks is yet another mistake by the Fed & the U.S. government,” Schiff further stressed. “Not only does the moral hazard lead to even greater instability in the banking system and larger future losses, but the inflation created to pay for it unfairly socializes current losses.”
Recently, Schiff issued stark warnings regarding a potential U.S. dollar crisis, economic depressions, and the debt ceiling deal that Congress negotiated in order to prevent a U.S. government default. “Suspending the debt ceiling yet again means that reckless government spending and borrowing will continue until a sovereign debt and U.S. dollar crisis bring it to a catastrophic end,” he opined.
What do you think about the statements by economist Peter Schiff? Let us know in the comments section below.
Source: Bitcoin.com
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