No Lessons Learned: Next Financial Crisis to be Much Worse with US Dollar Collapse – Peter Schiff

Meanwhile, as the Americas criticize and threaten Venezuela over its financial collapse, the USA itself is very vulnerable to financial meltdown.

© Dado Ruvic / Reuters

A decade after the global financial crisis, the world is facing another crash even bigger than the one in 2008, according to veteran stock broker Peter Schiff, CEO of Euro Pacific Capital.

“The too big to fail banks are now both bigger than ever, and more exposed than ever to rising rates and recession. So the systemic risks to the economy are greater now than they were in 2008,” said Schiff.

Such banks should have been allowed to fail a decade ago, he says. “The moral hazard associated with the government having made the mistake of bailing out banks that should have been allowed to fail. Unfortunately, no lessons were learned from the last crisis. We repeated, and expanded all the mistakes that caused the last crisis, ensuring the next one will be much worse,” he said.

According to the investor, all the problems that caused the 2008 financial crisis loom even larger now. “The even worse monetary and fiscal policy since the last crisis guarantees the next one will be much worse. The crisis will be similar in that government will be the cause, everyone will be caught by surprise, and capitalism will be the scapegoat, but it will be much different in that it will be much worse,” Schiff said.

However, the nature of the next crisis would be different, Schiff predicts. While the 2008 crisis was centered around mortgage debt, dollar rise and gold fall, the new one would be about the US Treasury debt crisis. “Treasury debt will be the focal point of the next crisis, and the dollar will collapse and gold prices will soar. The ensuing recession will be much worse as consumer prices will also rise sharply.”

America's spectacular debt leaves them vulnerable to countries that are not necessarily close friends. Saudi Arabia and China control considerable amounts of American debt. We treat the kingdom very well, but remember who was behind 911 - these people are not our friends. China is being bullied by the US, justifiably, perhaps, but there are also areas of potential serious military and political dispute. China is closer to Russia than it is the USA. What happens if those countries conspire to bring about rapid interest rate increases? Will America follow Venezuela's hyper-inflation pattern? It's a little disconcerting.

In Canada, the Liberal government is spending like a drunken sailor, rapidly increasing the national debt and leaving us far more vulnerable to financial collapse than we need to be.