This billionaire says that inflation will last ‘this year’ and Bitcoin may become ‘worthless’

On Wednesday, the United States reported consumer inflation of 9.1% for the year to June. This figure, a four-decade high, plummeted markets as stock indices fell.

But investors need to get used to inflation, says billionaire Thomas Peterffy, the 77-year-old founder and chairman of the e-commerce platform Interactive Brokers.

“I think inflationary pressures will continue for years, not months,” Peterffy said Forbes over video chat, calling from his home in Palm Beach, Florida. – This is not a short-term problem.

According to Peterffy, which is worth $ 18.1 billion, there are several reasons why inflation has come to stay: decades of chronic US deficit spending; ongoing disruptions in supply chains as globalization “reverses”; shortage of skilled workers and increasing automation; companies’ self-imposed ESG requirements (environment, social and governance) that “increase production costs”; and, paradoxically, rising interest rates, the very mechanism of curbing inflation.

“When the Fed raises interest rates, it increases the amount the country has to pay to service its debt,” Peterffy said. “This is a vicious circle that will eventually result in exploding debt.”

A majority of traders expect the Federal Reserve to raise reference rates by at least 75 basis points, or even a full percentage point, later this month. Last month’s interest rate increase of 0.75% was in itself the largest in 28 years. But Peterffy does not expect to see a repeat of the 1980s, when central bank governor Paul Volcker raised interest rates to double digits, leading to a crushing recession but stopping inflation.

“I do not think the Fed will follow through on its promise to do what is needed [to bring down inflation], because they are afraid of ruining the economy and the exploding debt problem, he says. Instead, according to Peterffy, the Fed will limit the reference interest rates around 4%, and as a result inflation will be around 6% in the next few years – It will be stagflation for a while, “he predicts.

Peterffy, despite its gloomy predictions, expects US stock markets to bottom out as soon as it falls. He suggests that the S&P 500 may fall to as low as 3,000 around October – a fall of 21% from the current value of around 3800. The S&P 500 index has already fallen more than 20% from a record high in November last year.

“Ultimately, rising prices will catch up with equities,” Peterffy insists, and as a result, “equities will enter a long bull-run period driven by inflation.” The broker pioneer adds: “This is a great time to research and collect stocks in companies.” Peterffy is less focused on investing in specific sectors or industries; Instead, investors should target companies that “invest in theirs [own] competitiveness in this environment and gain market share, he says.

In January, Peterffy said investors should consider holding 2-3% of their wealth in crypto to hedge against fiat currencies.[ing] to hell. “Now, after the downturn in the market and the liquidity crisis that has plagued the crypto industry, Peterffy feels less confident.

– I think the chances are great for that [Bitcoin] will be worthless or banned, ”at one point, Peterffy says Forbes. He believes the US government may try to ban crypto because of concerns about digital assets used to “obtain funding for illegal activities”, as well as the US Treasury Department’s inability to “control or keep track of payments and collect taxes.”

Not that Peterffy has written off digital assets yet. He still has some Bitcoin, and says he will buy more if it reaches $ 12,000. (Bitcoin is currently trading around $ 20,000 to US dollars).

Looking ahead, Peterffy thinks of more than just markets. When asked about his vision, he replied with a laugh: “I hope to survive.”