Friday, April 12, 2019

Peter Schiff: US Economy Not As Strong As Wall Street and the MSM Pretend


Economist Peter Schiff joins me to talk about assertions that he’s “bad for TV”, Jerome Powell’s recent rate capitulation, the state of the gold market, why he thinks the gold standard will eventually come back, why the dollar will collapse, the sorry ass state of the financial media, the Joe Rogan podcast and his take on Trump and the Russian collusion story.

- Source, Quoth the Raven

Monday, April 8, 2019

We're Not Borrowing Ourselves Rich, We're Borrowing Ourselves Broke

Peter Schiff has been saying that despite the recent stock market rally and all of the optimism about an end to the trade war, a recession is a done deal. There is plenty of economic data to back up despite the recent economic growth. In his most recent podcast, Peter Schiff said that while the GDP number might look pretty good, the growth is unsustainable because it's all built on debt.

Last week, we got the first look at Q4 GDP. It came in slightly stronger-than-expected with a rise of 2.6%, on an annual basis. That compares to trade expectations of a rise of around 2.2%. If that holds, total 2018 GDP may well come in at Trump's target of 3%. This would be the biggest GDP number since 2005.

But Peter put this into a little different perspective. Consider this: in 2005, the national debt increased by $554 billion. That borrowing "purchased" 3.5% economic growth. In fiscal 2018, the national debt increased by $1.27 trillion. That's more than double the debt increase of 2005.

So, we had to add a lot more debt in 2018 to buy not as much growth as a much smaller amount of debt in 2005. So, the takeaway from that is this is unsustainable because the growth came at a heavy cost. We had to increase the amount of debt that we had by a lot more than the percentage that the economy grew."

And of course, it's not just government debt. Household debt is also at record levels.

As Peter put it, "We're not richer because of this economic growth."

If your debt is growing faster than your economy, then you're not getting richer. You're getting poorer. You would have been better off without the debt and without the growth … We're borrowing ourselves into poverty. We're not borrowing ourselves rich. We're borrowing ourselves broke."

There's another problem with the growth in Q4 2018. It may well have come at the expense of growth in Q1 2019. Mike Maharrey talked about this in last week's Friday Gold Wrap podcast, noting that US wholesale inventories posted their largest gain in more than five years. Inventories are factored into GDP. That likely gave Q4 a boost. But a pileup of goods in warehouses means people aren't buying.

The consumer spending number for December released last week bears this out. It was down 0.5.

Meanwhile, personal income was up. This could mean Americans are saving. If so, it would be the first time that's happened at this level since the Great Recession.

Analysts are trying to figure out what the numbers mean. Peter had a pretty simple explanation. Americans have stopped spending because they're broke.

They've already borrowed so much money to pay for the spending of the past that they're just done. That expression, 'Shop 'till you drop,' well, maybe a lot of Americans have finally dropped and they're no longer shopping."

This could be a bad sign that Americans are at the end of their rope...


- Source, Seeking Alpha

Thursday, April 4, 2019

Peter Schiff: Powell Puts It to Congress



This year Fed chairman Jerome Powell made his obligatory visit to Capital Hill, where he spoke to Senators and Representatives about monetary policy.


Of course, this really just amounts to a press conference for Democrats and Republicans to either talk up the economy or talk down the economy, depending on who's got the White House. 

Trump is the President, so you have a lot of Democrats trying to talk about why the economy is actually weak and trying to get the Fed Chairman to say something negative about the economy, or negative about President Trump. 

And, of course you have the Republicans trying to get Powell to validate how great the economy is, and how Trump's policies are helping the economy.

- Source, Peter Schiff

Sunday, March 31, 2019

Peter Schiff: Are Debt Laden Consumers Finally Tapped Out?


The Dow Jones started off the final day of the week with a pretty strong rally; we were up a little better than 200 points earlier in the day. Then we got some weaker than expected economic data which I will get to a bit later, and the market sold off. 

The Dow never quite went negative, and then we rallied back and the Dow managed to end the week back above 26,000 with a 110 point gain. In fact all of the major indexes were positive on the day. 

What caused the early morning rally was optimism, once again, that a trade deal with China is about to be signed, and it's kind of amazing how often the markets can bite on this and keep rallying on regurgitated news, because, we've heard this before.

- Source, Peter Schiff

Friday, March 22, 2019

Peter Schiff: Fed's Actions Speak Louder Than Its Words



I want to spend my limited time on today's podcast talking about the Federal Reserve's decision today and the press conference. I did get back on the boat in time to watch the press conference live, and I do want to limit today's podcast to that discussion. 


Before the Fed announced its decision on interest rates - nobody expected a rate hike, and we did not get a rate hike, but before the Fed announced today's decision, the markets were on the defensive. 

Earlier in the day, Donald Trump had mentioned that he now thinks that the tariffs on Chinese imports, or on Americans who want to buy Chinese imports, may remain in effect for a much longer period of time; indicating that maybe this great trade deal is not as close as the President was letting on in the past.

- Source, Peter Schiff

Saturday, March 2, 2019

Peter Schiff: The Powell Put is Driving the Markets Higher

The Federal Reserve Open Market Committee met Wednesday and held interest rates steady in the 2.25-2.50% range. This wasn't really a surprise. More significantly, Fed Chair Jerome Powell kept up the dovish rhetoric, saying, "The case for rate increases has diminished. I would need to see a reason for further rate hikes that would have to include higher inflation."

We've called this the Powell Put, and it appears it's still solidly in play. But in his most recent podcast, Peter Schiff called it the "Powell Pause" and said it wasn't going to be enough.

But for now, the markets are pleased.

The Dow pushed above 25,000 on Wednesday's Fed news. As Peter put it, "The monetary drug pushers at the Federal Reserve gave the addicts on Wall Street exactly the fix that they had been craving."

The FOMC removed language from its December policy statement that risks to the outlook were "roughly balanced." It also struck out language that projected "some further" rate hikes would be appropriate in 2019. In effect, it appears rate hikes are officially on pause.

Powell also said the Fed's balance sheet reduction was no longer on "auto-pilot," and basically admitted that the Fed would only follow through with tightening if it could do so without upsetting the markets.

As Peter Schiff said in a tweet, "That's impossible!"

If the Fed doesn't want to upset the markets, soon it will be forced to go back to QE and zero percent interest rates."

I think that soon the markets are going to be demanding a lot more from the Fed than just a cessation of rate hikes and a commitment not to shrink the balance sheet. I think what the addicts are going to require is going to be more quantitative easing and a return to zero, and that is exactly what the Federal Reserve is going to provide once it realizes that's what's necessary."

But Peter said he doesn't think it's going to work. In fact, he thinks it's going to create the overdose he's been warning about since the Fed went down the policy road after the 2008 crash.

The Federal Reserve wants to pretend everything in the economy is still great. The central bankers are saying everything is still as strong as it was when they were talking about three or four rate hikes in 2019 and saying balance sheet reduction was on autopilot.

Now here we are just a few months later. Nothing has actually changed with the overall economy. Yes, we had a government shutdown; the government shutdown is over. Not that big a deal. I mean, there has been weak economic data, but there's been weak economic data that the Fed has been ignoring the entire time … The only thing that's really changed between the September meeting and today is a bear market in stocks. The bear market that happened in the fourth quarter of last year and the acceleration of the downtrend that accompanied the last rate hike the Fed delivered in December. That's the only substantive difference between now and then. And that's the only reason the Federal Reserve has done a complete 180 when it comes to monetary policy."

The Fed wants to help the stock market and the economy. But the last thing it wants to do is admit the stock market or the economy needs help.

So, it has to manufacture some kind of BS reason to explain this 180-degree flip in policy. And basically what Powell was saying was it had to do with the uncertainty in the global economy."

But as Peter said, the condition of the global economy hasn't changed all that much since September.

Powell also talked about the absence of inflation as a reason to be "patient" on future rate hikes. But is there really any evidence that inflation is absent? As Peter pointed out, a lot of the downtrend in inflationary pressure had to do with the falling price of oil. But oil was falling based on the expectation of central bank monetary tightening and a strengthening dollar - in essence, a policy that never came to pass. Oil is already starting to climb again.

Ben Bernanke once said one of the main reasons central banks don't want to leave interest rates too low for too long is that it will lead to inflation. Well, interest rates have never been this low for this long!

We are staring down the barrels of the worst inflation threat in US history, yet all of a sudden, Powell said that over the last few months, he's no longer worried. Even though we've had these low interest rates - zero percent interest rates for six years or whatever, and then we had them at half-a-percent, one percent, even though we've had all of this money printing over the last decade, something that happened in the last few months. all of a sudden, a Federal Reserve that was worried about inflation because of all the money we've created, how long interest rates have been kept at zero, all of a sudden those worries are no longer there based on the last few months? What happened the last few months?"

The truth is, it's all about the stock market. Make no mistake, if Powell had said the Fed was going to push forward with interest rate normalization and continue shrinking the balance sheet, the stock market would have sold off Wednesday and the bear market would have been back with a vengeance.

The Powell Put, or Powell Pause, or whatever you want to call it has sparked a little bear market rally. But it won't likely last. The real question is then what?

- Source, Peter Schiff via Seeking Alpha

Tuesday, February 26, 2019

Peter Schiff: The Real National Emergency Isn't At The Border, It's The Debt


"Just because we haven't suffered a crisis - yet- based on this debt doesn't mean that one isn't coming. In fact, there's no way around it. It's just a question of when. It's not a question of if, it's a question of when, and I think when is a lot closer than a lot of people think."

- Source, Seeking Alpha