Peter Schiff, CEO of Euro Pacific Capital, warned Newsmax TV that the U.S. stock market is in a freefall, and such a death spiral will ultimately pull down the rest of the sputtering economy.

Schiff explained that you only have to look at the plunging U.S. stock indexes to see the economy's future. "It's very dangerous right now in the market," he told "Newsmax Prime" on Newsmax TV. "We are already in or rapidly heading into a recession," he said.

The year got off to a shaky start on Monday after weak data from China triggered declines in global markets, with the Dow recording its worst first day of the year in seven years, and oil prices weakened further, Reuters reported.

U.S. stocks continued to tumble Wednesday as fresh concerns over the impact of a slowdown in China on the global economy, a sharp fall in oil prices and heightened geopolitical concerns sent investors scurrying to safe havens.

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Schiff bluntly says the immediate future doesn't look good, in an economic sense.

"Corporate earnings are already falling, stocks are way over valued, and companies are way over leveraged," he said.

"There really is nothing to support this market until the Fed acknowledges how weak the economy really is and admits that it's not going to be raising rates, but lowering them back down to zero and launching another round of quantitative easing," he said.

"But absent that, I really don't see what prevents the market from continuing to decline," he said.

Schiff contends that the economy never really recovered from the last recession. All the fuss about the central bank's strategy to put the economy back on its feet was all an illusion done with smoke and mirrors, he says.
  
"The Federal Reserve engineered this stock market rally and there's nothing real behind it. It was just their attempt to create a phony wealth effect," he said.

"That phony wealth [effect] is going to go away, just like the phony wealth went away and the housing bubble or the dot-com bubble. We never had a real recovery, we had a Fed inflated bubble," he said.

"The Fed is going to save the market, but sacrifice the dollar in the process," he predicted. "The real crisis of coming is not going to be a repeat of the financial crisis, but something even worse, a dollar crisis and even a sovereign debt crisis."

(Newsmax wire services contributed to this report).

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