Peter Schiff: The Latest Bank Bailout Is Another Nail In Capitalism's Coffin
BY TYLER DURDEN
But it is going to be high enough to cause a massive recession and another financial crisis that's worse than the one we had in 2008."
On March 13, 2023, Peter was on Ingraham Angle again, this time to talk about the beginning of that financial crisis.]
In the wake of the failure of Silicon Valley Bank and Signature Bank, the Federal Reserve and the US government came to the rescue, quicking putting together a bailout that includes a promise to protect all of the banks' depositors, along with a Fed program that will offer loans of up to one year in length to banks pledging US Treasuries, agency debt and mortgage-backed securities, and other qualifying assets as collateral. Banks will be able to borrow against their assets "at par" (face value).
Ingraham started the interview by referencing Citadel founder Ken Griffin who said the rescue package shows American capitalism is breaking down before our eyes.
With price inflation becoming such a burden on Americans, the Fed was forced to raise interest rates to fight inflation. That pricked the bubble it had inflated.
Now, all of these institutions are insolvent at higher interest rates. We have a bigger debt crisis now than the one we had in 2008, which was also caused by the artificially low interest rates that followed the bursting of the NASDAQ bubble when the Fed kept interest rates at 1%. That inflated the housing bubble. But this time, zero percent inflated a much bigger bubble, which is why we are now having a much bigger financial crisis.”
Peter emphasized that none of this would have happened if we had stayed with a free market.
The free market would have purged the economy from all these excesses a long time ago, and instead of having a bubble, we would have had a genuine recovery with real prosperity instead of the phony prosperity that we’ve enjoyed. And now the chickens have come home to roost.”
Economist and former Treasury secretary Larry Summers said the problems with Silicon Valley Bank didn’t have much to do with interest rates. He said it was “a failure of risk management.”
So, what was it? Interest rates? Or poor risk management?