Financial guru Peter Schiff says everyone is being fooled by the mainstream media when it comes to the economic health of the United States. But Schiff says it is all a delusion and phony prosperity isn’t going to last.
A lot of seemingly positive economic data came out last week, but in his most recent podcast, Peter Schiff said it is just feeding into a delusional economic narrative that ignores the most fundamental storyline – debt. According to Seeking Alpha, Schiff says that this delusion built on debt is not going to last, and we should all be prepared.
The May jobs report came out Friday, sending another ripple of optimism through the investment world. Talking heads in the mainstream media were overly excited that the numbers appeared “good.” According to the Department of Labor, the US economy added 223,000 jobs in May. The unemployment number fell to an 18-year low of just 3.8%. Average hourly earnings rose by 8 cents. Average wage growth came in at 2.7% over the past year. Pundits and prognosticators on the major financial networks were giddy like schoolchildren at the news.
But all of that optimism masks a very serious problem, says Schiff. No one is taking into account the debt. Not just the national debt, but the debt of everyday Americans. Analysts were also excited about the personal income and spending data – particularly spending, which rose 0.6% in April. Meanwhile, income was up 0.3%. Schiff put this into some perspective saying:
Consumers are spending money twice as fast as they’re earning it for the month of April – six-tenths up on spending, three-tenths up on earnings. So, what does this tell you? People are tapping into already a pretty shallow savings pool, or they are running up more credit card debt to buy stuff. –Peter Schiff
Despite all of the fundamental issues facing the economy – namely the massive levels of debt – most of the mainstream is exuberant. But Schiff explains that this is phony prosperity.
America is a sea of prosperity. Our economy is immune. We’re just going to keep on growing, even though we’ve got a rising cost of living, even though we’ve got increasing interest rates, massive debt on all levels, all these big-picture problems that we’ve got, but everybody assumes there’s nothing to worry about. In fact, you look at CNBC, I was watching them, today after the jobs numbers… and they are so excited – to a man. I mean, they’re just giddy, like little schoolgirls, about the stock market. Everything is perfect. Nothing can go wrong. Keep on buying.
If you make everybody happy by going deeper into debt, you can have some phony prosperity for a period of time. Not a very long period of time, but enough for people to get all excited about it. I mean, that’s what happened in the run-up to the 2008 financial crisis. A lot of people got excited about a phony prosperity, but the problem with phony prosperity is that it’s phony. And when it’s phony, it doesn’t last. Just like a drug high. It only lasts until the drugs wear off. And the drugs always wear off. You can’t stay high forever. You can try, but it’s not going to work. We’re going to try. We’re going to do QE4. We’re going to cut rates again. But it’s going to end in overdose. It’s going to end in a collapse of the dollar. But the point is, right now, you’ve got all these Republicans talking about how great everything is because we’re living on borrowed money. We’re living in a gigantic bubble. And we know bubbles are going to pop.” –Peter Schiff
Because our economy is built on debt, we are in worse shape now than before the 2008 crisis, Schiff says. But no one is taking that debt into account, and eventually, it will burst.
I have no debt.
I have tangible assets.
As long as my local farmers,
ranchers, and retailers accept dollars,
I’m good to go.
I hope there is a depression.
I’m not invested in overpriced equities,
PMs, or leveraged real estate.
Let the bubble break.
Unless you are going to kill off billions of people,
life is going to go on.
rellik, Peter is correct on many matters. We do all now live in a massive economic illusion and there will be a day it all fails, mainly because it is all based on the massive debt we cannot fully comprehend because it has never existed in all of history. But who knows when or what the catalyst may be that brings that about ?
I notice many here seem to think all is well but do not have any in depth understanding of the real underlying fundamentals that have been created the illusion of prosperity !
Simply ask yourself one question ? is 25+ Trillion or more of debt actually prosperity or is it a sort of self fulfilling prohecy that will fail one day ?
I am a big Trump supporter for certain matters. But he does not understand this debt concept himself. My main concern with him has always been his connections to the corporatocracy and that he would continue the debt creation. The last spending bill did exactly that and he claims he will never get bamboozled again ? we shall see. The economy may well be his nemesis in the end via DSA manipulations to undermine him ? There are so many moving parts and players it is likely not possible to know how it will all settle out going forward at this juncture.
Best policy is to stay clear minded and have keen skill sets, fit and very healthy with a strong immune system ! These are the only things we can control and nothing else makes any sense at all ! Fretting on any of it is the exact wrong way to live. Enjoy all of it daily and roll with it bigly !
Great points. The people by and large are buying into the illusion though, what I don’t like is people at the bottom half of the economy, IE waiters and waitresses, etc.. are sure getting surly, maybe It’s just happening to me, maybe my own delusion. Every time Trump touts the Economy My waitresses are more PO’d and surly. One of these days I really expect them to hurl my eggs and coffee at me and say, “Get it yourself!”, as they walk out slamming the door.
What is left to cut from the welfare state, all of it? The approaching final solution after the debt bubble pops with the poor in the streets being gunned down protesting endless war and rampant economic injustice seems feasible. A vote tonight to cut Medicare bigly. The cost of living riding the greed escalator ever higher. Squeeze them until they pop. I don’t see or read about the duopoly politicians having any concerns about surviving any collapse financially. So capitalism exists only when profits continue to go up. Cleared that up concisely.
Don’t be fooled by Peter Schiff’s alarm-ism that the sky is falling either. He’s been selling that for decades. I suppose one day he will be correct but in the investing world being 15 years early is called being wrong.
It will bankrupt you also.
You took the words straight from my thoughts. Peter Schiff was right about one thing a long time ago and now portrays himself as the know all, be all of the financial world. Actually he is wrong much more often that he is correct and I believe that his actual philosophy today is to say something then wait, and warn, and hope that one day it happens; until then everyone should invest in my world-wide company. What a joke…..
you will EAT those words some day.
Possibly….but they will still taste far better than Schiff’s bravo sierra. If you are not ready for the worst case by now, you never will be.
Peter Schiff is selling reality. But the masses are still drunk on borrowed prosperity.
One sure thing is I will never get margin calls on my physical silver stack. Be prepared when the ball drops.
Trump’s economic recovery is based on real action.
Trump has eliminated reams of government regulation that was crushing business. This is real, it’s not imaginary and it’s going to continue to support business until some liberal hack democrat puts those stupid regulations back.
Trump has produced confidence in business that Obama went out of his way to crush. Businesses across the US are investing millions in money that just sat on the sidelines for eight years of Obama.
Millions of now employed Americans have their confidence back, their self esteem. They are paying off debt and contributing to society.
Trump is signaling that the US is open for business and the days of Obama redistribution of American wealth are over. Many people and nations are balking at Trump renegotiating Obama give away trade deals. They weren’t trade deals, they were Obama making America go into debt so he could give away money we don’t have to the rest of the world. It was a plot to destroy our economy. Trump is stopping it cold.
There is a positive momentum happening that is hard to stop. The stock market losing a thousand points won’t change anything. Had Hillary won, yes Peter Schiff would have been right on the money, now I’m not so sure. At worse we preppers will get a few more years to prepare. Tails of liberals starting to prep is actually comforting, because they are always wrong… LOL!
What businesses are investing in America? Please provide specifics. The tax cuts and money repatriated from overseas will go to prop up the stock market.
Phony prosperity and phony unemployment numbers for sure.
Lot’s of prosperity for the 1%.
“But all of that optimism masks a very serious problem, says Schiff. No one is taking into account the debt. Not just the national debt, but the debt of everyday Americans.”
The ability of the govt to carry the public debt is a function of the DEBT to GDP RATIO. I have explained that relationship here many times. I have also explained that US debt represents the CASH LIQUIDITY of the Uber Rich: both individuals & corporations, safely protected by the US MILITARY (MIC).
Consumer debt is a problem for individuals. If someone goes broke it’s their problem. The business cycle always ends. People and businesses always go BK. Some things never change and it won’t this time around either. Astute individuals are already prepping for the next downturn, to purchase tangible assets for $.10 on the dollar.
The next CRASH will not end with the collapse of the dollar. This is just fear mongering by Schiff who has a vested interest the price of gold. So do I.
The higher the price of gold and other precious metals, the BIGGER my balance sheet. (Bring it on.) Not gonna happen. 🙂
durangokidd, I consider all of the metals as hedges for the massive debt that has been created, not actually an investment. Right now silver is the lever going forward. Anbody that got in either GorS 10 years ago or more is also up big, but with no debt underlying their assets like all the stocks have, only unencumbered upside. I am big on that equation always. How much debt underlies what many call the markets and can Appl phones and NFLX , Google and Facebook drive a real economy indefinitely ? Or are all of them just more illusions created ?
NFLX, Google, and Facebook cannot drive a real economy. Real economies are driven by industrialists manufacturing and consumers purchasing THINGS.
Personally, I can’t see where phone technology can advance exponentially as it has, so I think the price of phones have peaked and prices will fall as they did with computers, to pursue a larger market share.
This has negative implications for Apple & Google earnings; but more so Apple. Apple is becoming a mature company and will have to diversify its product base. The Apple Watch failed.
Where is Apple going to generate additional earnings ??? More than likely it will continue to buy back its stock for lack of a good acquisition. Apple may have to follow Google’s lead with Alphabet and diversify into other, new tech industries.
Every business cycle runs its course, and this one has rounded the far turn and is heading down the homestretch to the wire. 🙂
There are signs saying “HIRING”.
It’s a sign that the economy is improving.
You can hate Trump for that.
The only way to stop the cycle of inflation followed by deflation and ruin is to return the minting of money back to the Federal Government and away from the Private Central Bank Monopoly.
B from CA , agree on your comments except who mints the money is NOT the only important factor. The underlying basis of that money is far more critical. That assumes any of them are in fact credible and not corrupted.
When all is said and done getting off the Gold and silver standard has created what we see today. Just took almost 50 years to get to these extremes and massive illusions created.
The word mortgage comes from the word “death” plus “pledge”.
When you take out a 30 year loan, it is as if you are a slave to that monthly payment for life. Figure how much you can afford to pay by figuring on paying your monthly mortgage plus the principle for one month. That shortens your obligation to pay from 30 years to fifteen with a built in insurance that in an emergency you need only raise enough money for the actual monthly mortgage payment.
Another way to judge what your mortgage limit should be is to estimate one weeks wages or one weeks profits if in your own business. Your mortgage should not exceed one weeks wages.
Never take out a 30. Limit yourself to a 15 year at most. If you can’t afford payments on a 15, then you can’t afford the house period.
The chicken processing plants in Arkansas couldn’t hire enough workers. They where paying $15 per hour & benefits. So they imported green card workers from the marshall islands. There are now more Marshall Islanders in Arkansas than In the Marshall Islands. Granted working in a Chicken processing plant is hard nasty work. But those jobs got filled. and taxes are being paid. those folks are buying and spending. its a boon to the economy. And much of Arkansas Chicken is exported. In Randolph County a Brand new chicken plant was built. I clay county a brand new Feed mill was built. Thousands of new chicken grower houses are already built. and the pace of construction hasn’t slowed. And none of this would of happened without Trump
Not a comment about my chicken boom post. So I will post more info. those chicken grwer houses cost about a million dollars each to build. Or that’s what the Government will guarantee the loan for?. Any road there is a influx of money and a beehive of activity. But there isn’t any substantial footing. Its a house of cards glued together by govt guaranteed debt. The new PECO processing plant was funded by the county floating a 25 million bond issue. PECO took over for bankrupt Townsend. PECO has very little of its own money at risk. The growers build multiple houses. with a 30 year loan. And PECO gives them a contract for ten years. And that contract favors PECO. What is to prevent PECO from pulling up stakes or Going out of Business in ten years? Leaving the Growers County and Banks Holding the Empty bag? And all the tangible assets have the new worn off of them? Just another Debt fueled Ponzi Scheme. Doomed to fail.
Personally, I believe he is correct. The problem is the timing as well as recognizing the reality that the central banks will print money until hell freezer over or currencies collapse and then they’ll issue more fiat currency to paper over the ones that fail. I’d rather see him put his intellect and guidance in how to deal with this reality.
Is there a collapse coming? Yes, I believe there is no way to avoid it but in the mean time….how do I profit from the fraud of fiat currency?
Y’all have a nice day.
Tax liens. Distressed property if you are a sophisticated investor and know how to buy and sell. Otherwise, buy a metal detector to find real money with no broker fees.
HINT: It does help to have a kiln or mini-blast furnace to purify your nuggets and melt your dust into bars. A good detector will pay for itself in no time at all. 🙂
Schiff’s statement is correct. Central banks are the root cause of the decline of civilizations. It is all about the greed folks. There are very few banks operated by the governments of the world. They are privately owned corporations whose sole purpose is to separate you from your wealth. They are NOT benevolent and they are not there to ensure your prosperity. The US is now among the many governments of the world headed for economic collapse. The bloated stock market is a prime example of where we are headed. There are too many companies in trouble closing stores/branches/outlets. The auto industry is gasping for sales and relying heavily on sub-prime loans that are increasingly going into default. Hard assets that banks do not control in any way is where my money is going. Prepare folks, prepare.
Owe everyone nothing and no one anything.
Sounds simple? KISS.
Durango…all good things come to an end one day. So will the dollar…when…who knows. We’ve defaulted on our debt a few times…just ask Nixon .