Peter Schiff Digs Down To The Root Cause Of The Trade Deficit Problem

In last Friday's podcast, Peter Schiff talked about the potential impact of the trade war, arguing it could prick the US bubble economy. As a follow-up, in his latest podcast, Peter talked more about why a trade war could be worse for the US economy than most pundits seem to think, and he dug down to the root cause of the trade deficit.

The bottom line is slapping tariffs on Chinese imports isn't going to solve the problem.

The Trump administration raised the stakes in the trade war again this week, threatening 10% tariffs on another $200 billion worth of Chinese imports. According to Seeking Alpha, the new list appears to target Beijing's important manufacturing export industries, going after electronics, textiles, metal components and auto parts. Food and personal sectors will also be affected, along with beauty goods and makeup products.

China's commerce ministry said it was "shocked" by the latest US actions and called them "completely unacceptable." It plans to complain to the World Trade Organization. The Chinese also vowed to retaliate with a "combination of quantitative and qualitative measures."

The US mainstream doesn't seem particularly concerned about the trade war. A Reuters headline Tuesday proclaimed "Dollar strengthens as trade war fears fade, risk appetite returns."

As Peter Schiff pointed out in his latest podcast, a lot of American analysts seem to think the trade war won't have much impact because "the economy is strong." They argue that we couldn't have done this when Obama was president, but now that the economy is humming, we can afford to get our house in order and deal with the trade situation. Peter called this "utter nonsense."

We don't have a great economy. We have the same economy we had under Obama."

Peter underscored the point by citing GDP and jobs data then and now.

Those who say we don't need to worry about a trade war also cite the fact that imports only makes up about 15% of US GDP. As Peter says, that's a pretty significant chunk of the economy. You can't just dismiss that. And regardless, you can't just look at the direct impact a trade war will have on imports. You also have to consider the ripple effect.

- Source, Seeking Alpha

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Peter Schiff: Stagflation Is Coming

The Dow Jones was up Friday, avoiding it ninth consecutive down day. As Peter Schiff noted on his most recent podcast, such a long stretch of declines is pretty rare. Eight straight down days has only happened 43 times since the Dow launched in 1896. The last time we had nine straight days of Dow Jones decline, Jimmy Carter was president.

Peter said this is a little ironic because he sees another Carter-era phenomenon on the horizon - stagflation.

As a result, he thinks Trump is going to do for the Democrats what Carter did for the Republicans.

"The conservatives rode to power because of the problems that were blamed on Carter. Well, the socialists are going to rise to power in America based on the problems that are going to be blamed on Trump."

Of course, it's not really going to be Trump's fault. But that's the way the political class plays the game. Whoever happens to be in office when things go south gets the blame. But the real culprits are the central bankers.

Stagflation is a combination of high inflation and negative economic growth. We saw it under Carter, and Peter thinks we'll see it again as the Trump administration progresses.

Peter has been talking a lot about inflation in both the eurozone and the US, but the mainstream isn't paying a bit of attention.

"Inflation, of course, is not just going to be a problem in the eurozone. It is going to be a bigger problem in the United States. I think the difference is while the Europeans are going to ultimately raise interest rates to fight their inflation, especially since there's going to be a lot of pressure from the Bundesbank on the ECB to do that, the United States is just going to surrender. 

We're not even going to bother to battle inflation because there's no way we can win. And so inflation is going to be a bigger problem here in that it's going to get even more out of control in the eurozone. But it is going to do damage worldwide, and it's amazing that you have such a massive inflationary threat looming on the horizon and as far as the central banks are concerned, the possibility of that isn't even something they can imagine."

- Source, Seeking Alpha

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Peter Schiff Explains Why Sagging Productivity Is Bad News For Your Pocketbook

US productivity numbers for the first quarter of this year were disappointing, to say the least. Analysts expected Q1 productivity to rise by point 0.7%. Instead, it came in at nearly half that, rising by 0.4%. This was only a slight improvement over the 0.3% increase in the final quarter of 2017.

There wasn't a whole lot of chatter about sluggish productivity in the mainstream financial press, but in his recent podcast, Peter Schiff pointed out that it could have significant ramifications for the economy - and on your pocketbook. If you're counting on productivity to keep a lid on consumer prices, you have a big problem.

"That is the only way to keep prices from rising when you're creating all of this money is to have an increase in productivity."

As Peter pointed out, rising productivity doesn't prevent inflation. It merely masks it. Most Americans don't understand what inflation actually is. In fact, the mainstream has effectively redefined the term, as Ron Paul explained during an episode of his Liberty Report. Peter provided a succinct explanation of inflation during his podcast.

"Remember, a lot of people think that inflation is what happens to prices. It's not. Inflation is what happens to money. That's where the word comes from. Inflate means to expand and prices don't expand. Prices go up, prices go down. What expands? The money supply. It expands during inflation, it contracts during deflation. A result of an expansion of the money supply inflation is that prices tend to rise. But they might not rise. If productivity is rising faster, prices might not go up at all."

So, even if increasing productivity keeps prices from rising as fast as they would during an inflationary period, it still harms consumers because they could have benefited from even lower prices.

"If inflation robs you from the benefit of increased productivity, that's still an inflation tax. This is still harming the economy. But the modern day bankers and Wall Street - everybody - they're only worried about inflation if it makes prices go up, not if it prevents them from going down, although now they actually want inflation to make prices go up. They just don't want inflation to make prices go up too much. In fact, if inflation doesn't make prices go up enough, that is supposedly a problem, right? Inflation is too low. That's what's been fueling a lot of the monetary policy."

- Source, Seeking Alpha

Peter Schiff: The Fed Is Pushing Us Toward A No Growth, High Inflation Economy

As expected, the Federal Reserve nudged rates up another .25 basis points on Wednesday. Perhaps more significantly, the Fed took a more hawkish tone than expected, signaling it would likely increase rates two more times this year for a total of four hikes. The central bank had been projecting three 2018 rate increases.

A buildup in inflation pressures was a major reason for the Fed's more hawkish tone. According to the latest data released by the Bureau of Labor and Statistics, the Consumer Price Index (CPI) jumped by 2.8% year over year in May. The central bankers projected inflation will likely run above their 2% target into the near future. Analysts expect the CPI to hit 2.1% this year and run at that level through 2020.

In his latest podcast, Peter Schiff said higher inflation might be a victory for the Federal Reserve, but it will be a big loss for consumers. In fact, we are heading for a no-growth, high-inflation economy.

Peter said he doesn't think he's ever heard a Fed chairman so bullish on the economy. That might not be good news.

"Given the fact that the Fed is a pretty good contrarian indicator as far as being reliable, if Powell is extremely bullish, as bullish as a Fed chairman has ever been, it likely means that the best days of so-called growth are behind us and it is all downhill from here."

While everybody is taking up the Fed's hawkish stance, Peter said he thinks the Fed is actually pretty dovish when it comes to inflation if you read between the lines. In fact, Powell said it was too early to "declare victory" on inflation and he wants to make sure it doesn't drift back down.

"As if victory over inflation is defined by lifting the inflation rate up to 2%. I mean, that's not a victory. Do you think consumers are going to celebrate that?"

In fact, it's not hard to generate inflation. Just print money. The hard part comes when inflation runs out of control and the central bankers have to bring it down. That's real victory - a victory Peter said Powell will never achieve.

- Source, Seeking Alpha