Peter Schiff: "ALL HELL WILL BREAK LOOSE IN 48 HOURS" Warning on 2026 Recession

Added: 2026-05-15

[00:00:00]But if you remember, the Great Recession started in 2007, but I was doing interviews on popular shows in mid-2008, and they were saying there's no recession. So, what happened was all these economists went backwards and revised down all the data, and then they said, "Okay, I guess we were in recession." They didn't even think a recession was coming, but the fact of the matter is we were actually in one at the time, and they couldn't even see that. And then I think it's going to be very hard for the recession deniers to continue to, you know, put a positive spin on this economy. They're going to have to admit that we're in recession. The question is is the Fed going to change course as a result of that admission, >> [music] >> or is it going to continue with the rate hikes and quantitative tightening, making a bad situation worse, which, you know, is what it should do, but the question is will it do that? Well, I think the real reason that the dollar rose was not just that rates rose. Okay.

[00:01:01]>> the markets believed that these rate hikes were going to work in that they were going to bring down the inflation rate. The Fed said that we're going to return inflation to 2%, and we're going to do whatever it takes to make that happen, and the markets basically took the Fed at its word, so they bought the dollar on the idea that, you know, these high rates were going to produce positive real returns for dollars. But I think as the markets come to terms with reality that despite the rate hikes, inflation is not going down to 2%. In fact, it's more likely to head higher after this, you know, brief dip that we've had, and so that even though the Fed has raised rates, rates are still negative from a a real term. And if you have negative real interest rates, that is not a incentive to hold dollars. That's an incentive to sell dollars because the interest that you earn is not high enough to compensate you for the purchasing power [music] that you lose. And And so, when investors figure this out, I think the dollar is going to fall sharply, and that's going to >> [music] >> exacerbate the the problem that the Fed is dealing with because the strength of the dollar limited the rise in consumer prices in the United States in 2022. So, even though prices were up a lot, they would have been up even more had the dollar not been strong relative to other currencies. Well, remember, all these countries were experiencing inflation.

[00:02:28]Most of the Eurozones, their inflation rates were higher than ours. I mean, they're still looking at, you know, over 10% uh year-over-year inflation rates uh in many European countries. So, all currencies were losing value. It's just that on a relative basis, you know, it's like if if I'm going backwards at 10 mph and a car next to me is going backwards at 20 mph, relative to the car going backwards at 20 mph, I'm I'm moving forwards.

[00:02:56]But, I'm not moving forwards in in in reality. I'm still I'm still going backwards. And so, even though the dollar was strengthening relative to the euro or the yen, it was still losing value in real terms. Just it was losing value more slowly than the euro or the yen. So, the euro and the yen will continue to lose value, but the dollar will go from losing value slower to losing value faster.

[00:03:22]So, on the headline number, we we got some relief. But, of course, on the core, not so much. A lot of the prices continued to rise even as some of the headline numbers were coming down. But, also remember, prices continue to go up.

[00:03:37]It's not like they're coming down.

[00:03:38]They're just going up a little more slowly than they were going up before.

[00:03:42]But, if prices were too high, even a little increase is still a problem. What we need is for prices to go down. You know, we need to, you know, for prices to uh recover uh or for consumers to recover some of their lost purchasing power by having consumer prices actually fall, but that ain't going to happen. Right. All we can hope for is that they rise more slowly.

[00:04:06]In fact, that's what the Fed's goal is.

[00:04:08]The Fed's goal isn't to reduce prices.

[00:04:11]The Fed's saying that we're hoping to reduce the annual increase to 2%, but those 2% increases are going to come on top of all the increases that preceded them. So, if prices go up, I think over the last 2 years they're up better than 15% [music] even the way the government measures them. In reality, they're probably up closer to 30%. But even if they start going up 2% from here, we're going up 2% from a much higher level, you know, than we were at before. But of course, we're not going down to 2%. We're we're we're we're not even getting anywhere near 2%.

[00:04:44]Before we get close to 2%, we'll be above 10%. I don't know that the rate hikes had much to do with it >> Okay.

[00:04:50]>> maybe they had something to do with the break in commodity prices temporarily, because remember, those ri- rising interest rates actually feed into higher consumer prices. Because people forget that well, interest rates are prices.

[00:05:04]Right?

[00:05:05]>> [music] >> And and so, like any other price, they get factored in to finished goods. Like if if I am a business, I have labor costs, I have raw material costs. Well, I also have interest rate costs. Maybe I borrowed some money to build a plant or whatever I'm doing. And and so, I I have to I have to pay interest on my debt.

[00:05:25]Well, if interest rates go up, well, that's a cost of doing business. I might have to raise prices to cover that. Same thing if you're a landlord. What if I own a bunch of apartment buildings and I have debt on those apartment buildings?

[00:05:38]Yes, I have costs that I need to recover, but one of those costs is the interest on the money I borrowed. So, I may have to raise rents on my tenants to cover the higher cost of servicing the money I borrowed to buy the apartment complex in the first place. So, as the Fed is raising interest rates, that is also working to raise prices. [music] Well, no, that they're not going to suck up the lower margins. They'll go out of business, you know, and and and then the ones that remain will have less competition and then they'll be able to raise prices. But take a look at the example of houses. Yes, higher mortgage rates mean that house prices are going to come down. They've already started to come down. But the cost of owning a home is not going down.

[00:06:22]The cost of owning a home is going up.

[00:06:24]The cost of buying a home is going up even if the price is down because when you buy a house, the price is not even that important for most people because they mortgage the price they don't have the money, they have to borrow it. And even if the price goes down 10 or 20% based on how much higher the mortgage rates are, it's actually more expensive to buy a cheaper house today because of your monthly payments. But your monthly mortgage payment is not it. What about your maintenance? What about your utilities? What about your insurance?

[00:06:54]These costs are going through the roof.

[00:06:56]So, it's more and more expensive to own a home, to live in a home. These costs are going up even if the price of the house goes down. And remember during all these years where we supposedly had no inflation, real estate prices were going up.

[00:07:12]Well, during the the rest of this decade when we have high inflation, real estate prices are probably going to be going down.

[00:07:19]And and of course the other thing that has to happen >> [music] >> is that interest rates have to rise to a level that exceeds the inflation rate by a comfortable margin. Yes, I have heard that.

[00:07:29]>> Because what what needs to happen in order to bring down inflation >> [music] >> is we need people to stop spending and start saving.

[00:07:38]And so, why would people save? Well, if they can earn a yield that exceeds the inflation rate, then they're going to get paid to save. Then they'll do it.

[00:07:48]But, if you still hold interest rates below the inflation rate, nobody's going to be dumb enough to save. Everyone's going to spend their money as soon as they get their hands on it, and that is going to make the inflation problem worse. Also, when you look at prices, you have two things going on. You have demand, but then you also have supply.

[00:08:06]Mhm. And so, demand is being fueled by money printing and spending, but [music] we need more supply. Well, if we have less spending and more savings, you kill two birds with one stone because that reduces this the demand, but it increases supply because the money that is saved is then loaned out to businesses to make investments in capital that can increase productivity.

[00:08:31]So, by encouraging savings and discouraging spending, we get less demand and more supply, and that helps reduce prices. But, we're not doing that. We're not getting extra extra savings, so we're not getting additional supply. Yeah. And we're just And consumers are are running up their credit cards at all-time record highs, maxed out on mortgage debt, maxed out on on on auto loans. Everybody is borrowing and spending. So, prices have got nowhere to go but up.