The US is facing 'stagflation' thanks to interest rate hikes by the Federal Reserve, with more banks and other firms facing ruin.
Hot on the heels of the fluidity crisis at Silicon Valley Bank, stock in 52-year-old homewares retailer Bed Bath & Beyond crashed from around £20 per share a year ago to just £0.34 on Tuesday, prompting fears of looming bankruptcy.
Todd 'Bubba' Horwitz warned Sputnik that "we're in for a very, very rough ride here."
The US is "on the verge of stagflation, which means nobody makes any money and nobody has any jobs," he stressed. "How are you going to eat?"
"Inflation is well out of control, no matter what they say. The Federal Reserve is out of control," Horwitz said, because "you don't raise rates into a recession."
The stock trader recalled the last period of stagflation in the late 1970s, when Jimmy Carter was president.
"You had super high interest rates, you had a lack of employment and the people that were working weren't making enough money to survive," Horwitz said. Key producers like farmers "weren't making any money because they couldn't charge enough."
The interest rate rise will have a knock-on effect on business as smaller banks find it harder to borrow from higher up the chain to grant credit to small firms.
"What we've seen in this country over the last two years, coincidentally through President Biden's term, is the destruction of small business, small banks and entrepreneurship and capitalism," Horwitz charged. "When the cost of money is higher, you end up in a in a much bigger problem. And that's exactly what they built us."
Smaller, regional banks will not get the same "bailout privilege" granted by the federal government to big financial institutions, he cautioned. "They're not too big to fail. So many of them will fail."
David Tawil also told Sputnik that it was getting harder for businesses to borrow, because "the cost of credit or debt is going higher" with interest rates.
"In addition, banks have been under assault recently because of everything that's happened with respect to Silicon Valley Bank and Signature Bank," Tawil added. "regional banks have seen deposit outflows, and so they don't have as much money as they once did to go ahead and make make loans."
The cryptocurrency expert put the Bed, Bath and Beyond crash down to "financial shenanigans," but noted that the firm was "once was the leader in its class" until it lost out to hypermarkets and online retail giants.
"This sector has been cannibalized... by Wal-Mart, Target on the bricks and mortar side and then on the e-commerce side by the likes of Amazon," Tawil said. "They've been getting beaten up by much bigger, much more well-capitalized businesses that were profitable for a long time."
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