The basic definition of an interest rate is simply the cost of borrowing money. It’s the cost associated with acquiring credit, whether buying a car, getting a mortgage, or taking a vacation. We encounter interest rates every time we make a monthly credit card or student loan payment. Interest and interest rates are a major part of daily life, yet many people don’t have a good understanding of the most critical types of interest or how their rates are set. Broadening our understanding even a little can help empower us to make more informed decisions, whether at the bank or at the ballot box.
In a recent article on the next looming recession, Peter Schiff explains how current monetary policy has come to a crossroads. With respect to interest rates, there now seems to be two entrenched camps: raise or don’t raise. Unfortunately, they’re both wrong, mainly because they’re beginning with the wrong premise: that the economy can somehow avoid the painful process of market correction that raising rates would inevitably bring. Peter explains:
“The real choice is not between recession now or recession later. It’s between a massive recession now, or an even more devastating one later … Now is the time to bite the bullet, endure the pain, and allow the wound to actually heal.”
A wilting, stifled economy is the story this week with the Fed. They’re trapped, unable to bolster the economy and they have no ammo to halt inflation.
Fed President Lacker Urging Preemptive Rate Increases
Regular Fed dissenter Jeffrey Lacker said this week he sees even bigger rate increases coming in if the Fed doesn’t start gradually tightening as soon as possible. His remarks sent precious metals tumbling. In his latest podcast, Peter Schiff discusses why the Fed can’t accomplish Lackers’ plan: “We have so much debt that if we try and fight inflation we’re going to have a worse financial crisis than 2008,” Peter said. “Because it can’t fight inflation, the Fed pretends it can do it.”
In his 200th podcast, Peter Schiff explains the ineffectual outcomes of Richmond Federal Reserve President Jeffrey Lacker’s call for “preemptive” interest rate action. Lacker said he believes the Fed should anticipate a rise in inflation levels by getting ahead of the curve. The suggestion only makes sense to those who can’t see the artificially inflated bubble economy the Fed has been creating for years.
Whether the Fed raises rates in December or not, it won’t solve our economic woes. Only a recession will bring the cure. Tough love, not economic coddling, is what’s needed, but current monetary policy continues to pump the economy full of temporary pain meds instead of helping us through the withdrawals.
There are currently about 54 million millennials entering the workforce in the US, and for many of them, the idea of buying a home isn’t an immediate goal. That’s because the majority (70%) are under an enormous amount of student debt. Large school loans are motivating many millennials to put off their first home purchase until they pay down some or all of their education expenses. The delay is having an immediate impact on the housing markets.
Ever since the financial crisis of 2008, many investors have bought gold and precious metals to withstand the storm of volatile markets and insolvent banks. Demand for gold storage services is so in-demand throughout the world, Switzerland vault owners are turning customers away. Many of these Swiss vaults reside in the Alps within old military bunkers converted to high-tech facilities catering to the wealthy.
In his latest podcast, Peter runs down the real threats of prosecuting and over-regulating financial institutions like Wells Fargo. Last week, Wells Fargo CEO John Stumpf was lambasted by members of the House Financial Services Committee over the unauthorized accounts scandal. Members called for Strumpf’s resignation and a breakup of the company.
Aside from the heated exchanges echoing the congressional chambers, the hypocrisy of the situation left a foul odor on the proceedings. For congress members to fault an executive for facilitating theft of customer deposits takes a lot of chutzpah. Peter explains:
The Fed wasn’t immune from the political spectacle that was the Presidential debate on Monday. After that, Yellen had to answer even more criticisms from the nation’s financial regulation.
“The Fed is being more political than Secretary Clinton”— Trump
In Monday’s much-awaited presidential debate between Hillary Clinton and Donald Trump, there were many contentious topics brought up to over 80 million viewers throughout the event. One topic, brought up by Mr. Trump, was the Federal Reserve, as well as Janet Yellen. As you might guess, he was not singing praises to the Fed Chair on the stage. Trump brought up that Yellen’s moves might be influenced by President Obama, and that the possibility of a stock market bubble was a near-certain disaster awaiting the economy.
On Wednesday, Federal Reserve Chairwoman Janet Yellen testified before the House Financial Services Committee on financial regulation. The Fed Chair took criticism from both sides, with Democrats and Republicans criticizing the regulatory body for doing too much and for doing too little. Among the topics was the over-reach of Dodd-Frank, breaking up “too big to fail” firms, and the recent Wells Fargo phony account scandal. However, one important topic side stepped was the impact of low interest rates on any of the problems brought up at the hearing.
In his latest episode, Peter Schiff reacts to the first presidential debate and Donald Trump’s missed opportunities to put Hillary Clinton on the defensive about paid maternity leave, government mandates, profit sharing, and the Federal Reserve.
One of Trump’s biggest opportunities was going after independent voters by expanding the argument that Clinton’s policies were “just more of Obama” and included criticism of George W. Bush. “You’re looking for the undecideds,” Peter states. “You’re looking for the independents, and they will appreciate someone who’s critical of both parties.” Certainly, a cross-party strategy would have emphasized Trump’s “outside” position, a major theme of his campaign.
In the end, Trump failed to call Clinton out on her erroneous assumptions about the economy (i.e. Bush’s tax cuts caused the 2008 Financial Crisis). Trump had ample opportunity to show Clinton’s lack of business experience and idealistic detachment from economic realities.