Pres. Trump has spent a lot of time sniping at Jerome Powell and the Federal Reserve in recent weeks. As we put it last week, Powell has become the president's favorite scapegoat as he tries to deflect blame for the tanking stock market. But in a recent appearance on The Closing Bell, Peter Schiff said there will be plenty of blame to go around when the next crash grips America. And this one will make 2008 look like the roaring '20s.
I'm blaming both political parties. I think that the Republicans are going to take the blame because it's going to blow up on their watch."
Peter said Trump and Powell will be the fall guys, but you have to go back long before Trump was elected to pinpoint the source of the problems. If you want to name names, Peter said you need to go back to Alan Greenspan. He wrote this playbook,
Every time we had a bear market while Greenspan was chairman of the Fed, he would quickly restart the party with cheap money. So, we set this process in motion, but it's not going to work anymore."
Peter said the Fed is right to raise rates, but it's going to burst the bubble and collapse the market. And Peter said this is going to be a protracted bear market.
There's nothing that can be done to stop this."
Host Liz Claman brought up strong corporate earnings. Peter said we need to look beyond the immediate numbers.
There is a lot of optimism about earnings, and unfortunately, that's already priced into these stocks. But I think a lot of the earnings came from lower taxes, maybe about a third of it. But a lot of these earnings are going to go away during this recession and especially as interest rates keep rising, because a lot of companies took out a lot of debt during the boom. Now they have to service that debt during the bust. The revenues are going to go down. So, earnings could collapse very quickly. So, stocks have got a long way to fall. The market is very overvalued."
Peter also pointed out that a bear market doesn't need a reason to go down.
More specifically, bubbles don't need a reason to deflate. That's just what they do. And when you look at what's happening in the stock market, realize that this is happening in the real estate market. This is a big decline in assets that were propped up artificially cheap money that is no longer as artificially cheap. And as people watch their home equity evaporate and their retirement savings go up in smoke, what do you think is going to happen to spending? What do you think is going to happen to GDP? This is just not a decline. This is a recession that is coming, and it's going to be a brutal recession because there is absolutely nothing the Federal Reserve can do about it. They're going to try. But rather than reviving the economy or the market, they are simply going to stoke the inflationary fires that are already burning."
Ultimately, Peter said we are heading for a massive downturn. Some of the other guests mocked Peter for talking about "the end of the world."
I didn't say the end of the world. Just the end of America."