Peter Schiff appeared on NTD News to talk about the bank bailout and the March Federal Reserve meeting. During the conversation, Peter explained that everybody is going to pay for these bailouts because they will ultimately devalue the dollar as inflation skyrockets.
During his press conference after the March FOMC meeting, Jerome Powell said the banking system is “sound and resilient.” Peter said it’s not sound at all.
“It’s a house of cards that is starting to collapse.”
Peter explained how the banking system became so unsound.
First, the Federal Reserve kept interest rates at zero for over a decade. During that time, banks loaded up on low-yielding, long-term Treasuries and mortgage-backed securities. With interest rates so low, they had to go out further on the yield curve. And the reason they were able to take so much risk is because the government guarantees bank accounts. That created a moral hazard. Customers didn’t care what the banks did with their money because they knew the government would bail them out.
“Thanks to the mistakes the Fed has made since the 2008 crisis, we have a much bigger bubble now. The Fed caused the bubble that led to the financial crisis of 2008, and then they inflated a bigger bubble to try to paper over those mistakes and kick the can down the road so that we wouldn’t have to deal with the full consequences of resolving all those mistakes. And of course, we just compounded the problem with bigger mistakes and now the US economy is poised on the biggest economic disaster in its history.”
In the wake of the failures of SVB and Signature Bank, Peter said it was the beginning of the next financial crisis. But virtually nobody in the mainstream is calling it a financial crisis. Peter compared the situation in 2008 with the situation today. In a nutshell, the 2008 financial crisis was about debt people ran up during a bubble and the inability of borrowers to pay when the air came out.
“That’s exactly what’s happening now. It is a banking crisis, and banks are financials. I think people are reluctant to call it a financial crisis because they don’t want to evoke the memories of 2008 and they don’t want to make any comparisons. They don’t want to acknowledge that.”
Even as the subprime mortgage market was blowing up in 2007, people were insisting that everything was fine and “contained.” We’re hearing the same thing today as this crisis unfolds.
“They are dismissing all the early signs of a major financial crisis. But make no mistake, we’re on the cusp of one. And it’s going to be much bigger than the last.”
Peter said the big event that banks can’t handle is a major economic downturn coupled with a rise in inflation.
“So, if we have high inflation and a recession at the same time, banks are going to fail.”
Peter explained that with inflation devaluing everybody’s money, they will want to get it out of banks because banks won’t be able to pay an interest rate high enough to compensate for the loss.
Of course, when people want to get their money out of banks, the money isn’t there. So the only way people can get their money is if the Fed prints it. But if the Fed prints it, it just destroys even more of the value. So, it accelerates the momentum for a spiraling inflation.”
Treasury Secretary Janet Yellen, President Biden, and others insist that taxpayers won’t foot the bill for the bailout. So, who will pay for it? Peter said anybody who holds US dollars. That includes taxpayers, non-taxpayers, and people all over the world.
“The dollar is being debased in order to fund the bank bailouts.”
In just two weeks, the Federal Reserve added nearly $400 billion to its balance sheet. That’s money created out of thin air.
“That’s inflation. And so, when you do that, you destroy the value of all the money that’s already in circulation. So, Americans are going to pay, not because they are taxpayers, but because they are US dollar owners and US dollar earners. Everybody’s paycheck is going to be reduced in value because of the bank bailouts. These bailouts are endangering everybody’s bank deposits, even the banks that are solvent. Now it’s inflation that is the risk. And so it doesn’t matter if your bank fails. You’re still going to lose. In the event that your bank failed, you lose your money. But now, because the government won’t let the banks fail, everybody who has a bank account is going to lose purchasing power.”
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