In addition to individual income tax reductions, Trump also proposed slashing the corporate tax rate to 15% from its current 35% to 39%.
These changes may seem beneficial for the U.S. economy and companies because consumers will have more money in their pockets, while companies should be able to afford staying in the states.
But Schiff predicts that reducing taxes will actually have negative consequences…
"If we try to cut taxes and raise spending, with the enormity of debt that we have, we will need more monetary stimuli than ever before," Schiff predicted to CNBCon Nov. 21.
For example, he noted that if tax rates were to be lowered, it would actually increase the use of quantitative easing and the Fed will have to reverse and cut interest rates.
Meanwhile, the Fed is expected to raise interest rates this month for the first time in a year, which Schiff predicts will be a huge problem when payments are due.
"Trump doesn't want to tackle, for political reasons, the real problems that are underlying: Americans are living beyond their means and have been for generations, and we have an enormous debt that is being held together by artificially low interest rates," Schiff said.
Not only will Trump's plan ignore the national debt, according to Schiff, but "it would also put upward pressure on inflation, which is already above the Fed's target," he added.
And he's right…
The Fed's target for inflation is 2%. The current year-to-date (YTD) rate of inflation is 2.20%, according to the Statistics Bureau on Nov. 20.
"For actual economic growth," Schiff said, "we're going to have to confront these problems."
It's yet to be determined if Trump's fiscal stimulus plan will have the impact that Schiff is predicting, but if a massive financial crisis does occur, it's vital to be prepared.
Here's how you can protect your money amid a financial crisis and even profit in the event of a stock market crash, starting right now…
- Source, Money Morning