The theory: Western central banks are bluffing about lower interest rates

Published 7 April 2024 at 14.24

Economics. Western central banks will only cut interest rates when something crashes, and not as soon as they claim. The promised interest rate cut will be postponed again and again, says American economist Peter Schiff, who predicted both the 2008 financial crisis and today's high inflation.

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– They will maintain the appearance that cuts are coming, but I think they will be emboldened to do so if they continue to see price increases in oil, commodities, gold and everything else that shows inflation is rising, Schiff said in an analysis, continuing:

– Then it is very difficult to lower the interest rate. So I think what they're going to do is keep talking about future rate cuts, as if they were coming.

According to Peter Schiff, it's already clear that inflation is coming back again, because asset prices are rising just as last time and this sooner or later feeds through to producer prices, which in turn forces up consumer prices. But that, Schiff claims, the Western central banks will never admit.

“Must crash”
– They will say that they have to wait, they have to absolutely ensure that inflation goes down and so on. Of course, they will never admit that inflation is increasing, because they cannot admit that.

At the same time, Schiff believes that the central banks are not happy to lower interest rates because they know that gold will then explode in price, along with commodities and other of value.

So when will the Federal Reserve hammer through its first rate cut? Only when something too important crashes in the economy and they are thus forced to do so, according to Peter Schiff, who gives some examples:

– If we see bad economic results from the perspective of the Biden­administration, or if we see declining non-farm payrolls, a significant increase in unemployment, or the collapse of some large banks.

US insolvent large banks are currently under a lot of pressure from the higher interest rate, according to Schiff.

– They are sitting on a lot of worthless securities. And if any of this crashes the economy, well then the Fed will cut interest rates.