'We prick the bubble, and everything comes imploding down': Peter Schiff sounds off on the 'artificial' economy - and why the next big reckoning is inevitable

'We prick the bubble, and everything comes imploding down': Peter Schiff sounds off on the 'artificial' economy - and why the next big reckoning is inevitable

peter schiff


  • Peter Schiff - president and CEO of Euro Pacific Capital - thinks the longer the Federal Reserve keeps interest rates artificially low, the bigger the collapse will be when the unwinding takes place.
  • He expands on his view that the economy is "artificial" by citing recent action in the IPO market, where companies have garnered sky-high valuations due to the overwhelming prevalance of cheap capital.
  • Unfortunately, the way Schiff sees this debacle being resolved is through the popping of the bubble via higher interest rates.
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If you're looking for a rosy outlook for the US economy, it's probably best to steer clear of Peter Schiff.

The president and CEO of Euro Pacific Capital sees trouble brewing in the "artificial" US economy. Moreover, he thinks the halcyon days of growth and prosperity within US borders are wearing thin - and he isn't going to sugarcoat his perspectives, especially when it comes to the party he thinks is responsible for it all: the Federal Reserve.

"There's a limit to how long the Fed can continue to keep interest rates artificially low," he said in a recent edition of The Peter Schiff Show Podcast. "The longer they succeed in keeping them low, the bigger the ultimate failure is going to be when it comes to everything collapsing down."

To him, the Fed's policies have created a massive bubble - via interest rate cuts and quantitative easing - that's artificially inflated assets of all kind within the US economy, and created an environment that is extremely speculative. What's worse, time is running out.


"You have the federal government borrowing record amounts of money, you have states and municipalities borrowing record amounts of money, you have corporations borrowing record amounts of money, you have individuals borrowing record amounts of money," he said.

Schiff added: "This whole phony economy that was built on artificially low interest rates implodes, and it's not a question of if it will happen, it's only a question of when."

And he's just getting warmed up.

Schiff points to the IPO market as a prime example of how the Fed's ultra-low interest rate policies are having a nefarious effect on today's market. In his view, it's made debt way too easy to come by, and has pushed valuations - undeservedly - into the stratosphere.

Read more: A hedge fund manager who turned $126,000 of firmwide assets into $500 million explains his Warren Buffett-esque investment process - and why he's not concerned with today's stock market valuation


"One example of this, is what's going on with a lot of these stocks - these money-losing companies," he said. "In the speculative fever that the Federal Reserve created, investors didn't care about how much money companies were losing - and they were investing in them anyway, because they just thought they would make money finding a greater fool to pay an even higher price."

It's hard to disagree with Schiff's point here. Companies that have garnered sky-high valuations in private markets have been getting crushed when they come public arena.

Here's how some of the more notable IPOs issues have performed since offering their shares to the public:

And that's not counting WeWork and Endeavor, who recently postponed their IPOs amidst the turmoil.

Unfortunately, the only way Schiff sees the problem being resolved has dismal implications - ones he thinks has the potential to upend the entire economy.


"Interest rates need to rise," he said. "That's part of the cure, that's part of the solution. But when they do, we prick the bubble - and everything comes imploding down."