Zinger Key Points
- Higher U.S. debt could keep bond yields elevated, likely increasing the hawkish stance of the Fed, said Peter Schiff.
- The U.S. national debt has ballooned to about $33 trillion, and the country has been living beyond its means every year since 2001.
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Economist and gold bug Peter Schiff believes inflationary pressure hasn’t been contained yet and has further legs to play out.
What Happened: Following this week’s inflation reports that showed a spike in pricing pressure due to higher energy prices, Schiff shared a stark warning to unsuspecting investors. “Investors who have closed their eyes and expect inflation to slow down are in for a rude awaking,” he said Friday in a post on X, formerly Twitter.
Explaining his rationale, Schiff said Americans have lot of debt and use a lot of energy. Additionally, both bond yields and oil prices have been steadily increasing, he noted. “Not only are those gains likely to continue but accelerate,” he said.
See Also: Best Inflation Stocks
Why It’s Important: The U.S. national debt has ballooned to about $33 trillion, and the country has been living beyond its means every year since 2001. Congressional Budget Office’s estimates released in June showed federal debt held by public equaling 98% of GDP by the end of 2023 and increasing further to 181% of the GDP by 2053.
“Such high and rising debt would slow economic growth, push up interest payments to foreign holders of U.S. debt, and pose significant risks to the fiscal and economic outlook,” CBO said.
This, in turn, can keep bond yields elevated, snuffing out hopes of a Fed pivot, which has been behind the recent market rally.
On the energy front, U.S. consumed an average of about 20.28 million barrels of petroleum per day, or a total of about 7.4 billion barrels of petroleum in 2022, data from the Energy information Administration showed. The country was a net crude oil importer in 2022, importing about 6.28 million b/d of crude oil and exporting about 3.60 million b/d.
Supply constraints amid several OPEC nations’ decision to voluntarily cut oil output have sent prices soaring in recent months. The WTI crude oil prices ended Friday’s session at $91.20, up 1.15%, marking the highest closing level since Aug. 30, 2022. Higher oil prices have the potential to push up inflation as they nudge higher fuel prices for both businesses and consumers.
The United States Oil Fund, LP USO ended Friday’s session up 0.21% at $81.29, according to Benzinga Pro data.
Read Next: Inflation Still Bites: Gold Bull Peter Schiff Foresees Triple-Digit McDonald’s Family Lunch Prices
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