“As far as I am concerned, U.S. Treasurys are junk bonds,” Schiff said on CNBC Asia’s “Squawk Box.” “And the only reason that the U.S. government can pay the interest on the debt, and I say ‘pay’ in quotes because we never pay our bills. We borrow the money so we pretend to pay, but the only reason we can do it is because the Fed has got interest rates so artificially low.”

The Fed has been keeping rates on benchmark 10-year Treasurys low by purchasing bonds via quantitative easing(QE) , and this will ultimately be the U.S. economy’s “undoing,” Schiff said.

“Unfortunately, we are going to get more QE than Rocky movies, because the only thing keeping this phony economy going is this QE,” he said. “And the minute you take it away, it’s going to collapse.”

Schiff’s comments come after two Fed officials warned on Tuesday that the U.S. could be heading for a “fiscal cliff” at the end of the year if mandated tax increases and spending cuts are implemented. On the same day, fund manager Bill Gross, who runs the world’s biggest bond fund, told CNBC that the U.S. will face a downgrade of its triple-A debt rating if it did not fix its fiscal situation.

“It’s not just $15 trillion in terms of current debt,” Gross said on CNBC’s “Street Signs.” “It’s probably three to four times that in terms of Medicare, Medicaid, of Social Security, in terms of the present value.”

“So unless the U.S. begins to make some inroads, and that’s called the structural deficit that the (Congressional Budget Office) and the (International Monetary Fund) basically identified as perhaps six to seven to eight percent, greater than any country other than Japan and the U.K. Until we address that structural deficit, then yes, we're headed to double-A territory,” he said.

Euro Pacific’s Schiff predicts weakness in the U.S. dollar, which will put pressure on commodity prices and fuel inflation . This will in turn force the Fed to raise interest rates, he added.

“The Fed will not do it; the Fed knows the only thing propping up our phony economy is zero percent interest rates and quantitative easing. And I think when the market figures this out, it’s going to put even more pressure on the dollar,” he said.

Schiff is a well-known bear who predicted in 2008 that the dollar will collapse amid hyperinflation . That did not happen, and the dollar strengthened against most major currencies by the end of 2009.

Andrew Economos, managing director and head of sovereign and institutional strategy at JPMorgan Asset Management, said what the Fed is trying to do is “buy time” by keeping credit cheap and encouraging banks to lend.

“Look, I am not an apologist for the Fed, but at the end of the day (Fed Chairman Ben) Bernanke is doing the only thing that he can do, which is buying time,” Economos said on CNBC’s“The Call.” “And I think that buys us time to rectify those structural problems the bears are harping about. It allows corporates and households to continue to deleverage and derisk their own personal balance sheets.”