Peter Schiff: The Most Reckless Combination Of Monetary And Fiscal Policy In History


On Friday, all the major stock markets finished the week at weekly highs in record territory. Positive data on personal income and spending helped push stocks higher to close out the week. Everybody keeps cheering the “strong economy,” but during his podcast Friday, Peter Schiff said the in truth, the US economy is the biggest bubble ever. And it’s being driven by the most reckless combination of monetary and fiscal policy in history.

Even as we got strong income and spending data, another manufacturing number came in weak. The Kansas City manufacturing index charted its lowest print in four years. It was the sixth monthly decline in that index.

That really is par for the course. We get stronger economic data when it comes to people spending money, but we have weaker data when it comes to generating real production, real wealth, goods production, manufacturing — all that data comes out weaker than expected.”

The final Q3 GDP numbers bear this out. The headline number was unchanged at 2.1%, but consumer spending and government spending were revised up while home building, inventory accumulation, and net exports were revised down. In other words, the economy is being propped up by consumers borrowing and spending money.

Really, what the GDP numbers are confirming is what I’ve been saying all along – that this is a bubble economy; this is not legitimate economic growth. This is a bubble. Because the only thing that is driving that 2.1% increase in GDP is consumers spending borrowed money and the government spending borrowed money.”

This isn’t what we’re being told by the Trump administration and the financial network pundits. The “strong” economy is not about a boom in manufacturing or industry or business.

This is old fashioned pump-primed, excess government and consumer spending.”

It looks increasingly like we will close out this decade without a recession. Even so, it has been a decade of extremely low growth. Many decades with recessions still ended up with higher average GDP growth than this one. This slow growth comes despite the fact that interest rates were lower over the past 10 years than in any previous decade. When you factor in inflation, real interest rates were negative for much of the past decade.

So, we had massive monetary stimulus during this decade. Yet despite that, we delivered mediocre to low overall economic growth.”

On top of that, we’ve had an enormous amount of fiscal stimulus with massive budget deficits.

So, they threw the sink at this economy when it comes to Keynesian stimulus, monetary and fiscal, and they were not able to deliver above-average GDP growth. In fact, very below-average growth.”

And Peter said he doesn’t even believe the government numbers. Things are likely even worse than we’re being told. Peter thinks inflation has been understated. That means growth has been overstated.

Peter also talked about the spending bills recently passed by Congress. President Trump has been pushing for more military spending, and he got it. But as Peter pointed out, all of this money has to be borrowed.

I would argue bringing the nation deeper into debt is a greater threat to our national security than whatever threats are being diminished by building the military even stronger. So, he is making the nation weaker, not stronger, by going deeper into debt to spend more money on defense.”

And there was also all kinds of domestic spending crammed into the spending bills, including 12 weeks of paid parental leave for government workers.

Peter called all of this government spending a “disgrace.”

If we’re going to have deficits during the greatest economy ever, well, when are we ever going to have surpluses? How are we ever going to put an end to the debt if we can’t even do it when times are great?”

Peter also talked about QE4 and the repo markets. Peter called all of this “the most reckless combination of monetary and fiscal policy in the history of our nation.”