While President Donald Trump and elements of the mainstream media describe a strong United States economy – America’s economic future has significant problems on the horizon. Peter Schiff joins Stefan Molyneux to discuss the United States’s $23-plus trillion-dollar national debt, coronavirus, skyrocketing unfunded liabilities, the end of retirement, coming Corporate bankruptcies, the myth of a strong stock market, the subprime auto loan bubble, the role of China, upcoming inflation, flooding the market with treasury bonds, the day of reckoning for the Federal Reserve – and the end of the second-longest economic recovery in history.
Peter Schiff is an economist, financial broker/dealer, author, frequent guest on national news, the host of the Peter Schiff Show Podcast, the President and CEO of Euro Pacific Capital and the Chairmain of Schiff Gold.
Schiff Gold: http://schiffgold.com
Schiff Radio: http://www.schiffradio.com
Euro Pacific Capital: http://www.europac.com
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Quotes:
Stock markets have been getting hammered, ostensibly because of the economic impacts of the coronavirus. Peter Schiff has been saying this isn’t really about the virus. It was the pin that pricked the bubble. If it wasn’t coronavirus, it would have been something else.
Regardless, the Fed hit the panic button last week and slashed interest rates by half a percent. Peter has described this as throwing gasoline on a fire. In other words, the central bank is exacerbating the problem.
Peter isn’t alone in thinking that the Fed is doing more harm than good. In an article published on the Mises Wire, economist Daniel Lacalle said the Fed’s panicked response is actually making the economy worse.
The Federal Reserve’s monumental mistake of cutting rates this past week can only be understood in the context of the rising God complex among central planners: an overwhelming combination of ignorance and arrogance.
Less than a week ago, several members of the Federal Reserve board reiterated—rightly so—that cutting rates would not have a significant impact in a supply shock like the current one. We must also remember that the Federal Reserve already cut rates in 2019 and inflated its balance sheet by 14 percent to almost all-time highs in recent months, completely reversing the virtually nonexistent prior normalization. Only a few days after making calls for prudence, the Fed launched an unnecessary and panic-inducing emergency rate cut and caused the opposite effect of what they desired. Instead of calming markets, the Federal Reserve’s 50–basis point cut sent a message of panic to market participants.
Global money supply has soared to $81 trillion, an all-time high, in the middle of the epidemic, most leading economies have cut rates and implemented zero and negative real rates. In fact, major central banks were already injecting more than $150 billion a month (PBOC, ECB, Fed, etc.) into a doped economy long before the coronavirus was even in the news.
A supply shock is not solved with demand-side policies. Governments and central banks will generate a deflationary crisis by adding fuel to bubbles and increasing overcapacity in an already bloated economy only to create an artificial boost to GDP.
With $14 trillion in negative-yielding bonds and $81 trillion in global money supply, the combination of a panic-induced fall in asset prices and massively leveraged bets could generate a rapid financial shock. We must remember that the risks for dangerous corporate loans have hit an all-time high, according to Moody’s, with 87 percent of all leveraged loans — one of the riskiest types of corporate debt — issued with “covenant-lite” clauses. This means almost no protection for investors.