Schiff meant that the placement of trillions of dollars by the United States Federal Reserve and other central banks of the world ‘will form the mother of all bubbles’, and with it the support of unsustainable companies.
In the analyst’s opinion, the pumping of money into the world economy causes interest rates to drop considerably to artificially low levels, a situation that is used by some entities to increase their levels of indebtedness.
To explain his warning, he cited the case of Afterpay, an Australian company that finances consumer purchases for up to six weeks, which in reality is an overvalued company and its activity is not sustainable in the long term.
In this regard, he stressed that this business model could not exist if it were not for the monetary policies carried out by the Federal Reserve and other central banks, which creates the environment for entities like Afterpay to exist.
Schiff considered the worst of all is that even despite all these advantages in the midst of the Covid-19 pandemic, millions of dollars in losses are registered in companies like this, something that can be aggravated when interest rates rise since they will hold out until the bubble bursts.
The American expert said when that happens it will be very painful, since these corporations will have to be liquidated and many workers will lose their jobs.
‘The whole world will be poorer because all this money could have been used for more productive purposes. And it would have had more productive purposes if it weren’t for the artificially low interest rates and the inflationary environment created by the world’s central banks,’ he said.
Schiff is known for his pessimistic views on the American economy and for his predictions of the 2008 economic crisis.