Prominent Economist Peter Schiff Warns of U.S Banking System Collapse

• On Friday, he tweeted that the Federal Reserve had ruined the American financial system.
• Earlier, Schiff warned that the Fed was contributing to inflation by funding the bank bailouts.

Peter Schiff, an economist and gold obsessive, has returned with more dire predictions for the American economy. On Friday, he tweeted that the Federal Reserve had ruined the American financial system, pointing out that without government intervention, it would fail.

As Schiff put it:

“Bank of America pays just .05% interest on savings accounts and nothing on checking accounts. But the Fed funds rate is 5.25% and the real inflation rate is much higher. The Fed destroyed the U.S. banking system. It’s insolvent and would collapse without government backstops.”

This wasn’t the first time the economist has raised concerns about the stability of the American financial sector.

Tweeting in March, he said:

“The U.S. banking system is on the verge of a much bigger collapse than 2008. Banks own long-term paper at extremely low interest rates. They can’t compete with short-term Treasuries. Mass withdrawals from depositors seeking higher yields will result in a wave of bank failures.”

All Eyes on Upcoming Fed Meeting

Moreover, many people, notably Tesla and SpaceX CEO Elon Musk, have brought attention to the problem of rising interest rates. In May, the billionaire claimed that the huge interest rate differential between money market accounts (Treasury Bills) paying about 4.5 percent and bank accounts paying less than 1 percent was caused by the U.S. Treasury and the Federal Reserve.

Furthermore, in March, when the U.S. government bailed out bankrupt Signature Bank and Silicon Valley Bank, Schiff warned that the Federal Reserve was contributing to inflation by funding the bank bailouts. Inflation was therefore not mitigated by the financial crisis; rather, it was made considerably worse by it.

Also, Schiff has recently given dire warnings about the possibility of a U.S. currency crisis, economic depressions, and the debt limit agreement struck by Congress to avert a U.S. government collapse. All eyes are now on the upcoming June 14 Fed interest rate hike meeting.