The Federal Reserve’s annual bank stress tests have raised concerns among economists, with Peter Schiff warning that the scenarios ignore a “real nightmare scenario” where no major bank could survive. The 2025 stress test scenarios outlined expected economic conditions and a severely adverse scenario simulating a deep recession, significant asset price declines, and increased market volatility.
However, economist Peter Schiff criticized the assumptions behind the test, highlighting a gap in preparation for stagflation – a situation where both inflation and interest rates rise while economic growth declines. In the severely adverse scenario, the unemployment rate is projected to reach 10%, with a 7.8% decline in real GDP and significant drops in house prices and commercial real estate values.
Schiff’s criticism suggests that the Fed may not be adequately preparing for such a scenario, where banks’ capital requirements would be heavily tested. The stress tests aim to evaluate the resilience of major U.S. banks under various economic shocks, ensuring they maintain sufficient capital to continue lending in adverse conditions.
Source: https://news.bitcoin.com/no-major-bank-could-survive-it-peter-schiff-warns-fed-is-unprepared-for-real-threat