Peter Schiff appeared on RT America Friday to talk about the big stock market selloff in the wake of the arrest of Meng Wanzhou, a Chinese businessman accused of violating US sanction laws. The markets reacted negatively, fearing the arrest could derail apparent progress in the trade war.
Peter said Wanzhou's arrest may have provided the catalyst that sparked the sell-off, but it wasn't the underlying cause.
This is a bear market. That's why the market went down. If it wasn't that, they would have found another excuse. If we were in a bull market, I think the market would have shrugged it off. So, we're going lower."
Wanzhou serves as the chief financial officer for Huawei Technologies. The company is the world's largest telecom equipment maker. According to news reports, US authorities have been investigating Huawei since at least 2016 for allegedly shipping U.S.-origin products to Iran and other countries in violation of American export and sanctions laws.
As far as the arrest goes, Peter said flexing that kind of muscle will eventually backfire on the US.
The dollar, having the reserve currency, that status is in jeopardy. And I don't think the world likes giving America this kind of power that we can impose our own rules and demand that the entire world live by it. So, I think this has a much bigger and broader ramifications other than what's going on in the stock market today. I think long-term, this is going to undermine the dollar and its role as a reserve currency. And when that goes, so does the American standard of living because it's going to collapse."
As we have been reporting over the last several months, there is a growing movement around the world to create alternatives to the global dollar system. The Russians have developed a money transfer system that could one day compete with SWIFT, and even the Europeans have announced plans to develop a special payment channel to circumvent US economic sanctions and facilitate trade with Iran.
The host asked Peter what he thought China would do in response to Wanzhou's arrest. Peter said he didn't know specifically, but he thinks China is in a better position than a lot of people believe.
People think we have the upper hand because we have this huge trade deficit with China. But I think it's the other way. I think the fact that they supply us with all this merchandise that our economy needs, and the fact that they hold a lot of our bonds and continue to lend us a lot of money so we can live beyond our means, they're the ones, I think, that call the tunes and we have to dance to it."
The host countered that China's economy is "wobbly" right now, but Peter said that the U.S. economy isn't exactly rock solid.
I was listening to the broadcast before I came in and you talked about how the US economy was sailing along. It wasn't sailing anywhere. It was blowing up like a gigantic bubble. That's what was happening. And now the air is coming out. We are headed for a much worse financial crisis than the one we experienced in '08, and we are headed for a much greater recession than the one we lived through following that crisis - the one we call the 'Great Recession.' And what's going to make it so much worse is it's going to be inflationary. Consumer prices are going to be going up as the economy is going down."
Peter said Trump inherited the bubble, made it bigger and now it's going to pop on his watch. That will have dire political as well as economic consequences.