Gold Shoots Higher on Poor Economic Data; Here Comes a Recession (Audio)

Peter Schiff tackles the latest economic data, which he argues strongly indicates the United States may be on its way into another official recession in 2015. When that happens, Peter expects not just more quantitative easing, but “old-fashioned, Keynesian pump-priming stimulus” in the form of major deficit spending.

Highlights from Peter’s podcast:

“We did get the JOLTS report on Tuesday. This measures the number of job openings available. The consensus was for 5.158 million, which would be a slight improvement on the 5.133 million from February. This is a March number… Instead of the 5.158 million, the number was 4.994 million. That was way below even the lowest end of the range of what people had been expecting…

“The bigger economic news that sent the dollar tanking and gold surging back above $1200, up about $20-25 an ounce, was the news that we got on retail sales. This is retail sales for April. Everybody was looking for a strong number, because after all, nobody could shop in March, because it was just too cold outside…

“It turns out that the consensus of a 0.2% rise in retail sales didn’t make it. Instead, retail sales were flat in April. Worse yet, [minus] automobiles, they were looking for an increase of 0.5%. We got just 0.1% – 80% less than what they were looking for. And if you take out not only cars, but gasoline, they were looking for an increase of 0.4%. Instead, we got an increase of just 0.2%.

“Really, beneath the surface, you had a collapse of retail sales in really all categories except groceries. People spent more on groceries, not because they’re eating more, but because groceries are more expensive. This is the fourth time in five months that retail sales have risen less than expected. On a year-over-year basis, the increase is 0.9%. That is the weakest increase in year-over-year retail sales since 2009…

“At some point, they’re going to have to come and revise down all these months of job creation. Because there were not jobs created. That’s why there’s no spending. You can’t spend an imaginary paycheck. These jobs aren’t really being created, and that’s why there’s no spending associated with them… The jobs can be made up, but the retail sales data cannot, because you have to actually spend the money…

“Wall Street is always surprised when the economic data is weak: ‘How can the economic data be weak when we have all these jobs?’ We don’t have all these jobs! That’s the problem. And the jobs we have are low-paying…

“March business inventories were only up 0.1%. They were supposed to rise by 0.2%, instead they rose by 0.1%. There were some people that were looking for it to rise as high as a half… Making it worse, they took the February increase of 0.3% and they revised that down to just 0.2%. Both these numbers factor into the GDP for the first quarter. It’s now my guesstimate that based on all the bad numbers that have come out since the original estimate of Q1 GDP – in particular, that horrific trade deficit… I think there’s a good chance that the GDP is going to end up contracting by greater than 1% in the first quarter. Something like 1-2% negative in the first quarter…

“Everybody is still hopeful about the second quarter… The Atlanta Fed GDP [forecast] now just revised down their estimate to 0.7%. They were the ones that were within 1/10th of a percent of guessing Q1… If they’re accurate at 0.7%, and we end up getting a first quarter of minus 1% or more, that means the US economy will have contracted for the first half of the year. Yet the Fed is still looking for 3% economic growth, which would mean we would need to get 6% or something like that for the second half of the year. There’s not a snowball’s chance in hell that that actually is going to happen.

“What’s more likely is that we get a negative number again for Q2. We could have the second quarter GDP actually contract. If we get a contraction in the second quarter, which follows a contraction in the first quarter, that’s an official recession… If that were the case, how is the Fed going to raise interest rates in September? …

“What we’re going to get next is not just QE. We’re going to get old-fashioned, Keynesian pump priming stimulus. There is going to be big deficit spending… People are going to say look, ‘The Fed can’t do it all. The problem with the stimulus is that we were operating with one hand tied behind our backs. We were doing monetary policy, but not fiscal policy, because we had this irrational, Republican objection to deficit spending. What we need is double-barrel stimulus.’ … Which means the budget deficit is going to blow out of control… Is that going to give us any economic growth? Not a chance…

“If we go from recession to supposed recovery back to recession, and the Fed has never raised rates – they’ve simply talked about doing it, but never got around to it and now we’re back in recession and they’re ramping up the QE all over again. Where’s the Fed’s balance sheet going to be at the end of QE4? … When it gets that big is there anyone on the planet that’s going to believe Janet Yellen when she says she’s going to shrink the balance sheet? … Our creditors are going to get wise and there’s going to be a run on the dollar…

“Gold back about $1215. Every time it gets to this level, every time it kind of gets smashed down. It gets back down below $1200, or $1180, $1185, and there’s big buyers that come in and have been loading up. I don’t know who the shorts are, or the sellers are. I think there are speculative shorts, but at some point they’re going to have to give up. All this economic data is going to have to sink in…”

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