Schiff Says Fed Has Lost Inflation Fight, Warns of Recession

Noted economist Peter Schiff has spoken out against the Federal Reserve's handling of inflation, stating that they have already lost the fight. In a recent discussion with Grace Remington and Sean Hagan, Schiff emphasized the link between interest rates, the dollar's value, and gold purchases by central banks. He argued that bond-market instability, rising U.S. Treasury yields, weakening dollar purchasing power, and increased gold buying are all connected trends.

Schiff stated that the bond market did not suddenly collapse in recent times but had structurally failed as early as 2020, with a 'slow rewind' following. He warned that further interest-rate increases would inevitably come with a recession, which policymakers and politicians cannot accept. When asked about the possibility of additional Fed rate hikes, Schiff described them as a 'cosmetic hike', stating that tightening not backed by credibility would be unlikely to break inflation expectations.

He also expressed skepticism towards Bitcoin's prospects, saying that if interest rates rise further and the stock market undergoes a correction, it would be a bearish factor for Bitcoin and the broader crypto sector. Additionally, Schiff pointed out that Washington's political capital has already turned its back on cryptocurrency. In terms of gold and Bitcoin's relative moves, he noted that Bitcoin is 23% below its peak while gold rises to $5,500.

Schiff also raised the possibility that Bitcoin, valued in gold terms, may have peaked in 2021. During the discussion, they compared tokenized gold with Bitcoin, with Schiff highlighting the distinction between counterparty risk and whether there is an underlying asset. He emphasized that gold tokens are backed by physical gold, while Bitcoin has no such backing.