With President Obama making official request for Congress to raise the debt ceiling by $1.2 trillion, Peter Schiff talked on FOX Business today and believes the situation in the United States is worse than it is in Europe.
“We are able right now to benefit from the European bubble because people are buying dollars because they are afraid of the debt in Europe, even though the debt is bigger here.” said Schiff, “And we are making it even bigger by raising the debt ceiling. We should keep the ceiling where it is. We need to reduce debt in the country.”
Schiff said that the $15 trillion U.S. debt is just a tip of an iceberg, and actually we have much more federal debt than that amount. He believes that the $60 billion trade deficit in November indicates Americans are consuming much more than they are producing.
“We are borrowing all this money, and right now we can do it. Interest rates were record lows, but what is going to happen when they go up?” Schiff asked, “Interest rates were very low in Italy, Spain, and France a few years ago, now rates have gone up. What’s going to happen in America?”
“We are even more depended on cheap financing than Italy was. And when rates go up, we will get a bigger problem than Europe.” said Schiff.
Schiff explained that the Federal Reserve made the mistake by assuming the real estate price would never fall a few years before, and right now they are making a similar mistake. “They don’t understand the potential for interest rates to really rise, and what’s that going to do to the economy, to the banks, to the real estate, to the government fiscal situation?”
“The more debt we have now, the more depend we make the financial sector and the government on cheap financing, the bigger the collapse when the interest rates go up. Because they will go up eventually, and they’re going to go much higher than anybody thinks, and the dilemma in this economy is going be catastrophic.”
“The crisis we are creating is going to be much bigger than the financial crisis we created in 2008. If our leader couldn’t see that one coming, and they’re not going to see this one coming.”