In a stunning move, the Chinese central bank devalued its currency to support exports and boost its struggling economy. But according to famed investor Peter Schiff, China is too late. He believes that the U.S. already has an edge when it comes to debasing currency.
“America is going to win the currency war,” he said in an interview with CNBC’s Futures Now on Tuesday. “I think we’re going to win, but right now you have a dollar bubble.” (Source: CNBC, August 12, 2015.)
When the dollar is up 7.2% this year, authorities in China devaluated the yuan by 1.9% against the dollar—causing its biggest one-day loss in two decades. This move by the People’s of Bank of China came in after the world’s second-largest economy has been slowing down faster than economists had anticipated. This suggests that the global economy may soon be on a verge of economic collapse.
The latest unprecedented action by China could puzzle monetary policymakers in the U.S. While all eyes will be on the Federal Reserve in September in lieu of a possible rate hike, Schiff believes the U.S. economy is much worse to bear a rate hike. He even suggests that another money-printing program might be on its way, which could further add to the potential of a dollar collapse.
“They are going to do QE4, they’re going to do QE5, they’re going to do QEs indefinitely until a currency crisis ends the party and they can’t do it anymore. And that crisis is going to come.”
Schiff blamed the Fed’s reckless decision on keeping the interest rate so low for so long. Even raising the federal fund rate now could blow the whole fragile economy. “The Fed should’ve raised rates a long time ago.” he noted. “The Fed is going to make the same mistake again; they are not going to allow the market to fix what they broke.”
Mind you, Schiff is well known for his bold predications. He accurately predicted the housing market crashes in 2007 and now he has been warning investors about the dollar bubble and upcoming U.S. dollar collapse.
“You have all these currency speculators that have been fooled by the Fed’s monetary magic,” Schiff said. “[They] are betting the wrong way, and when they figure it out I think the bottom is going to drop out of the dollar.”
Bottom line; will the dollar collapse? Schiff is certain about it. Regardless of the upcoming decision by officials in the Fed, the U.S. economy is in recessionary territory. “This economy will be in recession if the Fed raises rates, and it’ll be in recession even if they don’t raise rates.” Schiff concluded.
Economic Collapse: Michael Lombardi’s Dire Warning for America
China’s currency devaluation has sent shockwaves through the world financial markets. The Shanghai Composite Index (China’s main stock market gauge) is down 32% since June 12th. Trading in over 1,000 major Chinese companies has been halted. Profit Confidential founder Michael Lombardi is so worried about what is going to happen that he produced a special report for investors explaining how the next financial crisis will play out and how to protect your savings. Click here now to get the full story.