Why is no one asking what will happen as inflation increases? The Feds have a terrible track record managing inflation and debt. And now, they are trying to use the same monetary policy they used in the 1980s when we didn’t have enormous debt. Economist Peter Schiff thinks we could end up in an inflationary depression.
Schiff presents a few of the scenarios we could face.
The inflation is likely over 15%, but even if you believe it is 7.9%, inflation can’t likely be extinguished with a one-quarter of a percent interest rate. Why is no one asking what if it doesn’t work? There is no historic record of inflation this high being extinguished with interest rates this low.
What if after rate hikes, inflation goes up? Nobody is asking these questions. No one is asking if what happens if the Feds have to raise interest rates to 10% or what if that isn’t high enough? This could be “catastrophic”.
What would happen if we raised the rates to 10-12% in an over-leveraged US economy?
If we had to raise the rate to 10-12%, the real estate market would crash. What about all this debt in corporations if they have to roll it over at 10% or more? Their profits would have to go to debt service. And who will be able to afford their products?
The stock prices are a function of interest rates. It will devalue their stock.
Banks would fail. If they suddenly had to pay 10% or more, they couldn’t pay it off. The FDIC doesn’t have any money to save these banks.
We have a $30 trillion debt, financed with T-bills and if interest rates go to 10%, interest rates would be 3 trillion a year.
He said the 20% interest rates in the ’70s would not be as bad as 10% now because we were still a creditor nation with little debt in the ’70s. We had trade surpluses. We are a complete basket case today and couldn’t handle even 5%. In 2018, we couldn’t handle 2.5% interest rates. The economy was imploding.
How bad might Biden’s inflation crisis get?
— Tom Elliott (@tomselliott) March 14, 2022