Friday, March 23, 2018

Peter Schiff: There's A Big Problem With The Economy, "Americans Are Broke"

Peter Schiff: There's A Big Problem With The Economy, "Americans Are Broke"
THE LATEST FROM THE ECONOMIC WORLD

Financial analyst Peter Schiff says there’s a big problem with the economy even though the mainstream media is reporting that rising interest rates are a good thing.  The problem, however, is that Americans are broke, and those interest rates could have a major impact on some of our wallets.


“The bad news is, we are going to live through another Great Depression and it’s going to be very different. This will be in many ways, much much worse, than what people had to endure during the Great Depression,” Schiff says.
“This is going to be a dollar crisis.”

“When you are talking about the magnitude of the debt we have, that extra money [raising interest rates] is big. That’s going to be a big drain on the economy to the extent that we have to pay higher interest to international creditors...
...a lot of this phony GDP is coming from consumption, while the average American who is consuming is deeply in debt and they are going to impacted dramatically in the increase in the cost of servicing that debt...
...given how much debt we have, and how much debt is going to be marketed the massive increase in supply will argue for interest rates that are higher.” –Peter Schiff
Retail sales “unexpectedly” fell again in February even though most media outlets are touting a booming economy that can support raising the interest rates. It was the third straight monthly drop and the first time the US economy has seen three straight months of declining retail sales since 2012.
Sales fell 0.1% in February even though analysts had expected an uptick of 0.3%. According to CNBC, households cut back on purchases of motor vehicles and other big-ticket items, pointing to a slowdown in economic growth in the first quarter. But Peter Schiff won’t sugarcoat this one for us: Americans are broke.
And the worse things get, the less investors seem to notice.
What makes matters even worse is two Fridays ago, we got the “too good to be true” and “just what the doctor ordered” Goldilocks jobs report that said 1 million people got jobs. Schiff said this “good news” report doesn’t make any sense, actually.
“So why didn’t any of those million people take their paychecks and spend them at a retailer? I mean, Trump is talking about all the great jobs, and all the raises that people have, and all the tax cuts. Why are retail sales down for three months in a row?” –Peter Schiff
Unfortunately, we also saw Americans running up record high levels of debt at the same time that the government is running massive deficits.
Last month, the New York Fed released the latest data on US household debt, revealing it has grown to a record $13 trillion. So yes, Americans have been spending, but they’ve been putting a lot of it on plastic. Credit card balances grew by $24 billion in the last quarter of 2017 alone. Could it be that Americans have maxed out the plastic?
At some point, a house of credit cards will collapse.
Schiff is hard on Donald Trump too, and rightfully so.  Lower taxes are always a good thing, the lower the better, in fact.  But Republicans refused to cut any government spending while instead, increasing it to the point of running massive deficits, making them worse than Democrats when it comes to being fiscally conservative.
The cold truth is that a backup plan is needed, and most Americans don’t have that.  Many would be in some serious trouble during a financial downturn, and the country is most definitely headed that way.

 

Stock Market Falls Another 724 Points! What In The World Is Happening On Wall Street?

By Michael Synder
We just witnessed the 5th largest single day stock market crash in U.S. history.  On Thursday the Dow Jones Industrial Average plunged 724 points, and many believe that this is just the beginning of another huge wave down for stock prices.  After this latest dramatic decline, the Dow is now down 3.1 percent so far in 2018, and overall it is down 9.99 percent from the all-time high in January.  A 10 percent decline is officially considered to be “correction” territory, and that means that we are just about there.
So why are stock prices falling so much?  Well, USA Today is blaming the potential for a trade war with China, the latest Facebook scandal and “the impact of rising interest rates on the economy”…
U.S. stocks sold off sharply Thursday, with the Dow tumbling more than 700 points amid growing fears of a trade fight between the U.S. and its trading partners after President Trump said he will impose billions of dollars in tariffs on Chinese imports.
The heavy selling on Wall Street was exacerbated by continued weakness in shares of Facebook as well as concerns about the impact of rising interest rates on the economy.
Of course the possibility of a trade war between the two largest economies on the planet is certainly the greatest concern that the markets are grappling with at the moment.  According to Ian Winer, any sign of retaliation by China “will really spook people”…
“A global trade war, whether it’s real or perceived, is what’s weighing on the market,” said Ian Winer, head of equities at Wedbush Securities. “There’s this huge uncertainty now. If China decides to get tough on agriculture or anything else, that will really spook people.”
Trump announced tariffs on about $50 billion worth of Chinese imports on Thursday afternoon. It’s not clear which products will be hit, but the action is aimed at curbing China’s troubling theft of US intellectual property.
And we can be quite sure that China will retaliate.
In fact, before the end of the day on Thursday the Chinese embassy boldly declared that China will “fight to the end”…
The Chinese embassy released a statement late Thursday saying China “would fight to the end..with all necessary measures.”
What people need to understand is that China has been taking advantage of us for decades.
For example, many U.S. vehicles cost three times as much in China because of all the tariffs that China slaps on them.  But we have been allowing China to flood our shores with giant mountains of super cheap goods with no tariffs at all.
This is why we have been buying far more from China than they have been buying from us.  It has been an unfair playing field.  As a result of our massive trade deficit with China, they have been systematically getting wealthier and we have been getting poorer.
Since China joined the WTO in 2001, we have lost more than 70,000 manufacturing facilities and millions of good paying jobs.  We have to beg China to lend us back a lot of the money that we send to them, and as a result the Chinese now own more than a trillion dollars of our national debt.
So we simply cannot afford to continue to allow China to take advantage of us, but if we start standing up to them it is inevitable that they will strike back. Here are just a few of the things that they could do…
1. Impose higher tariffs on all US exports to China
2. Restrict market access for US firms in China
3. Provide preferential treatment to US competitors
4. Restrict US travels by Chinese nationals
5. Sell US treasuries and buy other government bonds
But what is the alternative?
Should we just continue to allow China to walk all over us?
Hopefully we can negotiate with China without causing a horrible trade war, because without a doubt trade wars are not good for the global economy…
Trade wars are bad for the global economy, as they cause prices that consumers and businesses pay for goods and services to rise. A rise in inflationary pressures could prompt the U.S. central bank to speed up its pace of interest rate hikes, which could slow economic growth. Trade skirmishes can also hurt U.S. exports and corporate earnings.
And in the short-term, any news about a potential trade war will continue to rattle the financial markets.  At this point more than half of the companies on the S&P 500 are already in “correction territory”, and dozens of companies are already down at least 20 percent from their one year highs…
The U.S. stock market is under pressure once again, with more than half the S&P 500 falling into correction territory.
More than 275 components in the broad index were down at least 10 percent from their 52-week highs as of 11:04 a.m. ET. Of those companies, 84 were in bear-market territory, or down at least 20 percent from their one-year high.
SOURCE
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