November 26, 2022

Peter Schiff: More Economic Information Confirms a Recession

“It’s actually a stealth economic downturn because nobody wants to recognize that it’s actually here. “

A lot of mainstream pundits acknowledge that the US economy can be heading for a recession since the Federal Reserve continues to crank up interest rates in its  inflation fight .

But as Peter Schiff explained in a recent podcast, there is plenty of data that shows the economy is already in a recession.

“ It’s actually a stealth recession because nobody wants to acknowledge that it’s actually right here. ”

The fact that the united states economy charted positive GROSS DOMESTIC PRODUCT growth in Q3 has also quieted concerns about a economic downturn.

“ That’s also throwing everyone off. Remember, when we did have two negative quarters of GDP, they still denied that we were in a recession. So , now that they will got a positive quarter, much more the denial even more possible. ”

But as Peter pointed out, the reasons for the positive quantity are all temporary. For instance, the GDP got a boost from exporting oil out of the tactical reserve. At the current pace, the reserve will be clear sometime next year. That means oil prices may well explode.

The other factor was your lower trade deficit. Actually if you ex-out shrinking business deficit, GDP growth had been negative. The falling industry deficit was a function of a strong dollar. We’re at this point seeing a weaker money. As Peter explained  in a previous podcast , that does not bode well for import prices. The  trade deficit will go up   again since the dollar weakens.

Also, the government uses a artificial number to deflate GROSS DOMESTIC PRODUCT. Peter said that number understates the actual increase in consumer prices.

“ That is exaggerating the financial growth. Because if you can make believe inflation is lower, then you concurrently get to pretend that GROSS DOMESTIC PRODUCT growth is higher. Which is another reason that the government has to lie about inflation. Since not only do they fool the general public into thinking that inflation actually as bad as it is, yet at the same time, they get a two-fer. They also get to lie towards the public about how strong the particular economy is because they arrive at show a stronger GROSS DOMESTIC PRODUCT number than what they would show if they had an truthful inflation number. ”

There were a number of reports issued in latest days that scream recession.

The  Kansas City Fed Production Index   came in at -7 in October and -6 in Nov. The negative number means contraction. The Kansas City Fed said, “ manufacturing activity declined at a similar pace compared to last 30 days. ”

Overall US industrial production, which includes manufacturing, mining and electricity output,   reduced by 0. 1% in October . That compares with a downwardly revised 0. 1% (from 0. 4%)  gain in September. The particular expectation was for a 0. 2% gain in Oct.

“ One way to help alleviate the particular upward pressure on prices is to have more goods. But if we’re not producing a lot more, then we’re not going to have more. ”

Meanwhile, capacity utilization went under from 80. 4 to 79. 9.

“ That is a very weak number indicative associated with recession. ”

Then we have the  Philadelphia Fed Production Index . It was forecasted to come out at -7, a slight improvement over October’s -8. 7. Instead, it stepped to -19. 4. The particular Philadelphia Fed said, “ The general activity index declined further, the new orders index remained negative, and the deliveries index remained positive yet low. ”

Again – a negative number means contraction and is indicative of a recession.

“ Nobody believed it would be this negative because the economy continues to surprise individuals by being weaker than everybody expects. … The fact that each one of these manufacturing numbers are coming out negative indicates that it’s getting, and again, this is complicating the Fed’s inflation battle because the one thing that would create that fight easier to win would be an increase in the availability of goods. Yet, all the production numbers are going in the wrong direction. ”

Good News?

There was some great news  — at least from the market perspective. Retail product sales rose more than expected within October. The consensus calculate was for a 1% rise in retail sales. The number came in at 1 . 3%.

Some might state, “ Peter, you’re incorrect about the economy. Look at these strong retail sales amounts. ”

Not so fast.

Very first, you have to remember that retail product sales aren’t adjusted for inflation. Just because dollar widget sales increase doesn’t mean people bought more widgets. It could be that they bought fewer widgets but paid a lot more to them. Conversely, falling sales could reflect price drops and do not necessarily mean people bought less widgets.

“ I think the main reason that will retail sales are up is because prices are upward. So again, this is not due to the fact people are buying more. This is just people paying a lot more. And in fact, in many cases, she or he is actually buying less. These types of just paying so much more that will retail sales are up in dollars, but these people down in volume. ”

Second, we have to consider the question: exactly where are consumers getting all the extra money?

We can say that a lot of it is coming from credit cards.   Household debt set a new record in Q3 .

“ That financial debt burden is going to weigh much heavier on debtors due to the rise in interest rates — not merely the rise that has already occurred, but the rise gowns about to occur. And of course, as households are experiencing a boost in the cost of servicing their debt, they’re about to encounter, or in some cases already are, the decrease in the value of those resources, especially the assets that are levered and on collateral against their debt – their homes. ”

With home costs falling, people will not be capable of easily tap into home equity to make ends meet.

‘ That was a lifeline that in prior recessions homeowners could take advantage of. Well, this time, they’re not going to be able to take advantage of it. ”

In this podcasting, Peter also talks about the particular Republicans gaining control of the home, the FTX Ponzi system, and the decline of bitcoin.

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