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Peter Schiff: "Mission Accomplished"
By Peter Schiff of EuroPacific Capital
Mission Accomplished
On May 1, 2003 on the flight deck of the USS Abraham Lincoln then President George W. Bush, after becoming the first U.S. president to land on an aircraft carrier in a fixed wing aircraft (in a dashing olive drab flight suit), declared underneath an enormous "Mission Accomplished" banner that "major combat operations" in Iraq had been concluded, that regime change had been effected, and that America had prevailed in its mission to transform the Middle East. 13 years later, after years of additional combat operations in Iraq, and a Middle East that is spiraling out of control and increasingly disdainful of America's influence, we look back at the "Mission Accomplished" event as the epitome of false confidence and premature celebration.
The image of W on the flight deck comes to mind in much of the reaction to this week's decision by the Federal Reserve to raise interest rates for the first time in nearly a decade. While many in the media and on Wall Street talked of a "concluded experiment" and the "dawning of a new era," few realize that we are just as firmly caught in the thickets of failed policy as were Bush, Cheney, and Rumsfeld in the misunderstood quagmire of 2003 Iraq.
In its initial story of the day's events, The Washington Post (12/16/15) declared that by raising the Fed Funds rate to one quarter of a percent The Fed is "ending an era of easy money that helped save the nation from another Great Depression." Putting aside the fact that 25 basis points is still 175 points below the near 2.0% rate of core inflation that the government has reported over the past 12 months (and should therefore be considered undeniably easy), the more important question to ask is into what environment the Fed is apparently turning this page.
Historically, the Fed has begun its tightening cycles during the early stages of expansions, when the economy had enough forward momentum to absorb the headwinds of rate increases. But that is not at all the case this time around.
Prior to the recent Great Recession, there had been six recessions since 1969, and over those episodes, on average 13.3 months passed from the time the recession ended to when the Fed felt confident enough in the recovery to raise rates. (The lag time was just 3.5 months in the four recessions between 1971 and 1991). (The National Bureau of Economic Research, US Business Cycle Expansions and Contractions, 4/23/12)
But after the recession of 2008 - 2009, the Fed waited a staggering 78 months to tighten the monetary levers. Those prior tightening cycles also occurred at times when GDP was much higher than it is today. Over the prior six occasions GDP, in the quarter when the Fed moved, averaged a robust 5.3%. While the current quarterly GDP is still unknown, the data suggests that we will get a figure between 1% and 2% annualized. (Bureau of Economic Analysis)
Another key difference is the level of unemployment at the time the hikes occurred. As they started tightening much earlier in the expansion cycles, unemployment at the times of those prior recoveries tended to be high but falling. The average unemployment rate at the time the six prior tightenings occurred was 7.5%. But that average rate had fallen to 5.1% (a level that most economists consider to be "full employment") an average of 42 months after the initial Fed tightening. In other words, those expansions were young enough and strong enough to absorb the rate hikes while still bringing down unemployment. (Bureau of Labor Statistics; Federal Reserve Bank of NY)
Our current unemployment rate has already fallen to 5.0% (mostly because workers have dropped out of the labor force). Few economists allow for the possibility that it could fall much lower. This is particularly true when you acknowledge the rapidly deteriorating economic conditions that we are seeing today.
As I stated in my most recent commentary, there is a growing troth of data that shows that the U.S. economy is rapidly losing momentum. Some data points, such as the inventory to sales ratio and the ISM manufacturing data suggest that a bona fide recession may be right around the corner (among them, this week's truly terrible manufacturing PMI and industrial production numbers, a very weak Philly Fed Outlook, the weakest service sector PMI of the year, a big drop in the Kansas City Fed Manufacturing Index, and the announcement that the Third Quarter current account deficit had "unexpectedly" increased 11.7% to post the widest gap since the fourth quarter of 2008, are just the latest such indicators).
Given that the U.S. economy has, on average, experienced a recession every six years, the 6.5-year longevity of the current "expansion" should be raising eyebrows, even if the data wasn't falling faster than a bowling ball with wings.
So what happens when the Fed postpones its first rate hike until the death throes of a tepid recovery rather than doing so at the beginning of a strong one? If unemployment starts ticking up during an election cycle, can anyone really expect the Fed to follow through with its projected additional rate hikes and allow a full-blown recession to take hold prior to voters casting their ballots? All of this strongly suggests that this week's rate hike was a "one-and-done" scenario that does nothing to extricate the Fed from the monetary trap it has created for itself.
Another big question is why the Fed decided to move in December, after doing nothing for so long. Clearly the markets were surprised and confused by the Fed's failure to pull the trigger in September, when the economy appeared, at least to those who chose to ignore the bad data, to be on relatively solid footing. At that time, the Fed suggested that it needed to see more improvement before green lighting a liftoff. And while I tend not to place much stock in the pronouncements of most economists, one would be hard-pressed to find anyone who would claim that the data in December looks better than it did in September.
A much more likely explanation is that through its rhetoric the Fed had inadvertently backed itself into a corner. Even though the Fed would have preferred to leave rates at zero, the fear was that failure to raise them would damage its credibility. After having indicated for much of the past year that they had believed that the economy had improved enough to merit a rate increase later in 2015, to continue do to nothing would suggest that the Fed did not actually believe what it was saying. This was an outcome that they could not abide. If we could doubt them about their economic pronouncements, perhaps they have been equally disingenuous with their professed ability to shrink their balance sheet over the next few years, contain inflation if it ever reared its ugly head, or to prevent financial contagion from spreading during a new recession.
In truth there should be very little confidence that a new era has begun. A symbolic 25 basis point credibility-saving gesture, coming just two weeks before year-end, is really a non-event. It's the equivalent of a credibility Hail Mary, with the Fed desperately trying to infuse confidence into a "recovery" that for all practical purposes has already ended.
The question will be whether such a small move will be enough to push an already slowing economy into recession that much sooner. Over the past seven years the U.S. economy has become dependent on zero percent interest rates. But as with the famous Warren Buffet bathing suit maxim, these dependencies won't be fully revealed until the tide rolls out and those zero percent rates are taken away. The bigger question is how quickly the Fed will reverse course. Will it move once it becomes painfully obvious to everyone that we are headed into another recession, or will it wait until we are officially knee deep in a contraction that is even bigger than the last one?
The new rounds of rate cutting and Quantitative Easing that the Fed will have to unleash will echo the military "surge" in Iraq in 2007. Those fresh troops were needed to roll back the chaos that the Administration had ignored for so long. But just as that surge only bought us a few years of relative calm, look for the gains brought about by our next monetary surge to be even more transitory. That is a development for which virtually no one on Wall Street is preparing.
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Good analogy there Peter - me thinks you may evetually be proven correct.... Mission Accomplished.
Right. And Peter Schiff knows this because he used the same magic prognostication machine he used to make all his prior calls, none of which have come about?
I am Chumbawamba.
I can simplify what Petey means to write -
FUCK THE BANKSTERS.
The banner above the next fed speaker should read: MISSION IMPOSSIBLE.
they still need to put the insolvent banks into receivership, no matter how large, and purge the system of bad debt. treat the big banks like the little ones.
indict, convict and jail law breaking financial executives. many of their crimes have relatively long statutes of limitations. treat the rich like the poor; it would be a morale booster.
so, yeah, mission impossible, apparently.
Or Janets book title, Mission Accomplice: How the Fed Intentionally Destroyed America
The reason they won't prosecute financial execs is during a trial it would be exposed that those in government are AT LEAST as complicit as those on trial.
One outcome you can't argue with: MOAR DEBT !!!!!!!!!!!!!!!!!!!!!
PS: we raised the price this time!
"... none of which have come about"
I think you overlooked one: https://www.youtube.com/watch?v=jj8rMwdQf6k
I think we've found CNBC contributor, Scott Nation's ZeroHedge username @chumbawamba
Peter Schiff is wise in connecting the dots unlike the main street media that categorically, without explanation calls for another 10% rise in stocks while we are contracting!
"The Fed has backed itself into a corner." This corner is called "checkmate."
The Fed wouldn't see 'mate in two'
The Fed won't see checkmate until the last banker is hung from a tree with the entrails of the last politician.
Uncharted tsunamis and an unprecedented level of can kicking by the fed make sites like zerohedge and this guy look like a stopped clock.
Pretty sure all will be vindicated soon although not much fun for anyone when that happens.
2016 is our year
of this
i have no doubt
Houston’s housing market is shifting from a seller’s market to a buyer’s market, according to a new national report.
Home sales fell 4.5 percent year over year in November, according to Redfin’s data. The Houston Association of Realtors found steeper, double-digit declines in home sales in both October and November.
http://www.bizjournals.com/houston/news/2015/12/18/home-inventory-grows-...
With over 60,000 high paying engineering jobs lost in the energy sector and more and more energy companies shutting their doors every day down there, I feel confident the tumbling will gain momentum and the reversion to th emean will surprise those who claim, "House prices never drop." They're just too young [or too blind to see] to have witnessed past 'corrections' and real estate cycles.
I lost 40 bucks listening to this asshole Peter Shit for brains. He said, "the fed won't ever raise interest rates." WRONG. Another bullshit prediction.
You can be an asshole when the fed actually raises rates to something even close to resembling normal. Let's say even just 1%.
NO FUCKING CHANCE.
PERIOD.
When the Fed raised, I thought I read here on Zerohedge that the Fed also announced it was anticipating 4 more rate increases in 2016. But I just listened to a panel discussion (including Schiff) on FOX Business and everyone seemed to agree that Yellen's forward guidance was that they were unlikely to keep raising and that, in fact, they may never raise again. Can someone correct me or clarify? Thank you in advance.
Oh goody I can now get a big raise percentage wise, too bad I'll never see anything due to it not being passed on to the savers.
Book Cooking 101
40 bucks !??!?!?!?!!??!?
Omg,...when do you get your allowance? weekly or monthly????
What a looser
AAAAHHHHGGGph...! That's LOSER, NOT LOOSER.
uh no,...
i know a looser moreon when I see one
Peter Schiff has been pretty accurate accept for the fact he underestimates the power of the Federal Reserve, who is unaudited and able to create electronic money out of thin air.
The Fed has been able to prop up the markets for years and prolong the coming crash.
Which begs the question:
Just how big will QE4 have to be?
My puts are fucked....
Might be big enough to push gold to $3,000 next time around and silver to $100.
Platinum is so freakin cheap right now my co-worker has bought every plt coin he could with his extra salary after essentials. He may be on to something there. I don;t know if any ZH'ers collects platinum coins since I don;t think I have ever seen an article or comment about those.
One never knows.
I'm shocked that PLT is 20% discount to Gold
sun tzu - Most of platinum's uses (approximately 70%) are for industrial purposes; whereas gold is mostly used for retail and as a store of value. With industrial activity in the crapper, it's hardly a surprise that platinum is trading at a discount.
The same applies to silver and helps to explain its low price.
Both of the above said, any and all PMs that have some "store of value" are being manipulated by the PTBs to keep their fiat dreams alive.
But the industrial component of platinum and silver helps explain why the two have suffered disproportionately.
The dollar will not collapse and gold prices will not skyrocket until the world loses confidence in the US dollar. While the ECB and the BoJ continue to ease, the Fed raises a quarter point which only serves to strengthen the dollar in the short term. Until the market fully appreciates that the growing debt can never be repaid and that "normal" interest rates will bankrupt the US government, the US dollar will remain the cleanest shirt in the laundry hamper. My guess is that gold prices will decline further in US dollar terms in the short term. Whether QE4 will affect gold prices will be determined by the relative actions of the other major central banks at the time. The race to the bottom continues.
^^^^^ THIS ^^^^^
The next problem isn't going to be qe4 or paradropping money - it's going to be figuring out how to gracefully default on our debt as the USD loses its Reserve currency status - it's coming faster than most realize. With oil at $35 a barrel it's probably one of the last things on most of our minds let alone the sheeple. But rest assured - it's coming just like the US blinking while staring at Russia in the Syria situation - they know who has the power and it isn't the West. The East will play the game until we are so FUBARED it will be like killing a sick cow.
Platinum is 10x as rare as gold and is needed on rocket nosecones.
There never was a "recovery". Dr. FED gave Wall Street hits of heroin, and Main Street an I.V. drip of saline and Midazolam (Versed).
https://en.wikipedia.org/wiki/Midazolam
Spoctor Din
OBTW: Heroin is an amazing drug. Too bad it has that pesky addiction problem...
It's all part of the plan.
Couldn't finish the whole article ... just saying. Got tired of thinking "who the f does this guy work for?"
Just for starters he was economic advisor to a presidential candidate and CEO of a multinational investment firm.
Also son to a brilliant father who passed recently.
Peter's father didn't exactly pass away (as you nicely put it). He was virtually murdered by denying medical care. And why was a dying 87 year old man handcuffed to a bed? Like your going to run away when your body is wracked with cancer? God rest his soul.
I didn't know about Irwin Shiff and now see that you are right:
http://www.zerohedge.com/news/2015-10-19/peter-schiff%E2%80%99s-father-d...
Central States pension Fund ---- Over 400,000 Teamsters members just received a letter advising their Pension Benefits have been slashed up to 70%…
(er, uh ...and it's gone)
ouch!
The Central States Pension Fund is pursuing a plan that would slash pension checks in half for some former union truck drivers. The fund is on the brink of insolvency and says it needs to cut benefits for 273,000 current and future retirees in order to stay afloat.
Hendershot was told earlier this month that he should brace for a 60% cut as early as July, pending approval from the Treasury Department. If that happens, his remaining check will be $1,396.
http://money.cnn.com/2015/10/15/retirement/central-states-pension-fund-c...
That's gotta hurt.
Hurt? Think revolution when a few more get cut
Imagine It will look lot like Greece
They figure retirees are old and can't revolt so they are easy pickens. Better to print money for Lloyd and Jamie
Teamster's Pension Fund in trouble?
Has nothing to do with all the 'loans' made to the mob, right? But that's old school corruption, small potatos compared to what Wall Street has fgotten away with.
How much of Vegas was built with Central States Pension Fund money? The Teamsters Union has screwed their members over for a long time with opverpaid union officials and questionable finioncial arrangements with questionable characters. Did hey ever find Jimmy Hoffa?
It's not actually gone (yet), just a lot smaller than it was yesterday.
Half of it is definitely gone ! As for the other half, there is still time...
It's credit. It was never there in the first place.
Reference please or do we just take your word for it.
Highlight, Right click, search google.
http://www.pensionrights.org/create-content/action/story-bank
http://www.silverdoctors.com/it-has-begun-banks-government-raiding-retir...
I can give you a reference. I worked for a company early in my career that was represented by Central States. I received a letter stating that my pension at age 65 was being reduced from $571.00 per month to $317.00. There are some who received notices of over 60% cuts. This is real. I know of one already retired gentleman who has been cut from $2600 per month to $1300. He is 70 years old and cannot return to work.
It was indeed, on that glorious day, May 1, 2003 (5+1+2+3=11) when the fearless and swashbuckling Warrior in Chief, just off Point Loma, on a balmy, near perfect, chem-trailless sunny day in SAN DIEGO (named after a guy who personally witnessed five miraculous recoveries* - which is a record!), stepped onto a floating Megabombatropolis Maxx with a deck so clean you could see it from a Piper Cub on Mars.... and declared "Mission Accomplished!", that I knew, then, there, in my heart of hearts, the gringos are fucking crazy.
*The last one was "...when an Indian was mortally wounded in the neck by an arrow shot by accident during some stylized martial displays executed in honour of the Virgin." Wikipedia. No shit.
Do you get paid by the word?
None of your history regurgitation is relevant because the world changed between 1999 and 2009.
I am deeply concerned that none of you seem to remember the breadth and extent of financial Fraud that has been visited upon us.
Please think deeply about why you are all so comfortable with the 'only a quarter percent".
http://seekingalpha.com/article/3578046-this-earnings-recession-can-no-longer-be-ignored
We've been swirling down the rabbit hole for so long that I wonder if you remember where we started?
1- Keynes rule book has a 2nd step. During the good times, PAY BACK THE DEBT!
The closest american politicians ever came to this was when Clinton's tax increases caused "A SURPLUS AS FAR AS THE EYE CAN SEE". Who remembers that?
2- The world had a similar problem with large population groups retiring and Spending Less after age 55. Kids were grown, looking for a smaller house, etc.
They were our Parents!, the Baby Boom is not a new situation!
Who remembers the 1970's? It was a time of Stagflation.
The 'Bob Hope" generation entered their 'spend less-save more' life stage. OUR Parents!
It should be clear that the baby-boom is now in the same life-stage. Just a whole lot more people that don't need all THAT Stuff!.
3- Now, our illustrious LEADERS are continuing to cover up their mistakes by:
a- repealing Mark-to-Market rules (that's when the 2009 rally started!);
b- changing Bankruptcy rules to put the banksters first, and;
c- guaranteeing many TRILLIONS of Derivative Losses through FDIC. That's where the Derivative COLLATERAL DEFAULTS will be paid from;
d- Ignoring more Trillions of unfathonable Debt. Where's Shiff's analysis of higher interest payments on the Federal Deficit?
Conclusion -
Not one Politician will admit they are helpless to restart Economic Growth.
They will wait this thing out, just like before.
Even if it takes 11 to 15 years!
The effectiveness of monetary policy was FIRST discredited in the late 1970's.
The persistent attempts to revive growth with easy money continue to lead to stagflation and financial ruin!
Waiting for the economy to IMPROVE may not happen in our lifetimes.
What if some young, ambitious young politician gets tired of living in her/his parent's basement and decides to run on a platform of "THE GOOD OLD DAYS" ??
Reinstating Mark-2-Market would end all this comfortable rambling about the Fed's stoopidness, eh?
Why not really correct the sins of the 'Great Ones' and reinstate GLASS_STEGALL! !
If you disagree please confirm you are not a commercial banker, et al.
Well stated, hawk. Now I know two people that "get it."
"Waiting for the economy to IMPROVE may not happen in our lifetimes." I'm afraid you might be right. Because the government never undoes anything it does. It will claw for survival: higher taxes, more difficult business environment, and it will no doubt continue to become more corrupt and tilted to evil and the effects of greed, failing morals and ethics. Maybe what Peter just gave us was the bottom of an optimistic view. Yes, no doubt they will keep the Ponzi running as long as possible, because they continue to profit from it as long as they can keep it going. The crash will be hard.
It's funny how politicians love to talk about "growth" and then implement every anti growth policy they can think of.
Good post but you do know the Clinton "savings" was just a ledger entry and had no real correlation to reality, right?
It will NEVER happen, as you have hit upon the core ingredient to the total lie of our banking 'system.' I use the word "system" as we are like a garbage pit or intestinal tract and we need Garlic now.
3.a - the source of everythng that is wrong with the market.
Peter Schiff sounds more reasonable and less arrogant when he types as opposed to when he speaks, imo.
On TV, Schiff always gets a very short time to speak and is usually arguing against 2 or 3 other people with a 180 degree opinion. Poor devil is just trying to make his point in a short and lopsided ambush.
I am talking about his YouTube podcasts, not his interviews.
The guys on TV are simple minded, especially CNBC. They want Schiff to say the crash will come next Tuesday at 10:15AM or Gold will be worth $5K by January 11th or some bullshit. Peter is describing what will happen unless there is a major shift in policy which there won't be. But asking for exact timing is a fool's errand. When there is no crash for a week or a month and gold keeps going down in value in terms of worthless script, they say Peter is ignorant. Simple minded douchebags
GWB to U.S. : Mission accomplished you're all fucked now, but I'll be just fine.
One Eyed Jack -
"This sucker is going down." - GWB
Think that was early 2009 could be a few months off on timing. What has been going down is our Republic. The brand known as Uncle Sam is toast and it had more to do with a few banker folks that wanted this but a few senior political class allowed it to be so yeah like Animal House "You fucked up you trusted us".
What sucks is we are really going to have to become die hard cynics as people like other countries. Viewing all with distrust first is really a shitty way to live. Oh well, I did get to enjoy the 80s and most of the 90's being a young man. I never realized until the last few years how lucky I was.
A big macro lesson I could glean was that countercyclical policy based on our binary behavior cannot outwit our evolution, while it is accelerating toward conclusion it cant be cheated.
The analysis is sound as far as it goes, but it is based on bogus government statistics. GDP is irrelevant, if not misleading, as it attempts to aggregate ephemeral and non-tangible services, not to mention recently adding R&D and other easily manipulated factors to make the economy larger than it is.
Likewise, unemployment and price inflation figures are downright laughable. No one in his right mind believes these numbers.
Apply real world statistics to our situation and a far more distressing conclusion is inescapable: we've been in a recession since at least 2000. Throw GAAP into the mix and we're looking at a technically insolvent nation living on borrowed time while using a fiat currency backed by nothing but bankster jaw-boning and government propaganda.
In other words, this is the Wile E. Coyote economy. We've run off the cliff, are suspended by air, and have yet to look down. The fall will be fast, and the impact will be epic.
Was inside a Tiffany's jewlery store 2 days ago, so I asked how business was going. Salesperson said it's the slowest December they have seen in a long time. No store traffic.
Notice the ruble is going to record lows against the dollar. The rate hikes will cause a recession, and as I'm sure the Fed is smarter than me they must know this. As with the low oil and commodity prices, this is just another part of the economic war against Russia.
Damn! I wish I was a member of the .001%. Life would be easy and carefree.
The most corrupt nation in the world is the United States of America. The US government is the most corrupt; the US judicial system is the most corrupt; the US media is the most corrupt; the US law enforcement is the most corrupt; the US financial and banking systems are the most corrupt; the US political system is the most corrupt; the US corporations are the most corrupt. All the corruption is geared towards exalting and enriching the rich and powerful elites while punishing and impoverishing the poor and middle classes. The US will reach that sudden tipping point, that triggers a mass insurrection against the beneficiaries of all of that corruption. When that happens the elites will have only themselves to blame.
You very obviously have not lived in other countries.
Ignorance is bliss, and you must be a puddle of contented ooze.
If it is so shitty here, why don't you move to the People's paradise Venezuela. Don't forget to take your own butt wipe.
While the US has gone off the rails over the last 15 years, a slow process, it is due to World Government Totalitarians infiltrating our government at all levels. The John Birch Society was absolutely correct in the 1950s and people just made fun of them.
Schiff is right a hell of a lot more than he is wrong. Sometimes you can sense when a person is not a bullshitter. Schiff is not a bullshitter..
Inside I can feel that he measures everything against what his dad was.
His dad was one hard core motherfukker. They don't make a whole hell of a lot like his dad any more. Bad ass and righteous, right to the core.
As the renowned economist Ludwig von Mises warned us decades ago: "There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved." [Human Action, Regnery, 1966, p. 572.]
the scam remains the same
Told ja! They're were going to raise 25bp and print around it. The QE will come next, or already has and the final product is to make the !% wealthier and more stealth inflation for the rest of us. Not to mention all assets EVERYWHERE go to maintain the stawk market and it's derivatives leaving nothing for communities. Central planning at it's finest. If you aint rich, you ain't shit.
Could be another round of queezing coming, maybe they'll just let it all fall though....could be they're ready to implement their new world order now. Who knows?
Actually, I believe Peter has mischaracterized what this hike is and what the Bush stunt was.
"epitome of false confidence and premature celebration."
No
Both events were pure propaganda.
Characterizing them as mistakes embues a sense good purpose into what is clearly subterfuge.
The US comparaed to it's former self is indeed terribly corrupt but it's always been corrupt as is everything in life there is nothing pure in the affairs of men.
We still have miles to go to equal some places that would sell babies and such. Come on it's not that bad here it's just that we have a few people who know better that's all.
Purity comes only from dogs and a few other things on earth, if you want a loyal friend you'll need to buy a dog.
Double post.
The Fed has already demonstrated very thoroughly (even if it did not intend to) that lowering interest rates to zero in the hope of stimulating new economic activity, actually does not promote that goal, but creates a whole string of economic distortions. We can therefore expect that, if faced with a new recession, it will not lower interest rates but rather maintain them and attempt to use other tools to promote renewed activity. It is also clear that any new stimulus measures will require a shift in governmental programs toward investments with economic multipliers, and away from those lacking any multiplier like military expenditures.
Maybe after fifteen or sixteen YEARS Peter might be right for once. Well, the DOW has to drop over 10,000 points first....