Peter Schiff: “Charles, Keynesianism Doesn’t Work!”
Pretty much everybody in the mainstream is giddy about the US economy. As Charles Payne on Fox Business put it, “The Trump economy continues to fire on all cylinders.”
Payne rattled off a long list of positive indicators, from increasing wages, increasing consumer confidence, and strong spending and income numbers. Payne said this is all “building on what’s already been an amazing economy.”
And then Peter Schiff came on and dumped cold water on the party.
Yeah, I don’t think we have a booming economy at all. There isn’t a historic turnaround. We’re not firing on all cylinders. This is the same bubble economy President Trump accurately criticized when he was a candidate. The only thing Trump has been able to do since he became president is blow a little air back into that bubble. But the air is going to come out. This thing is going to deflate, and I think all of this cheerleading and all of this self-congratulation about victories that haven’t been won, I think it’s going to come back and bite the president and the Republican Party in 2020.”
Melissa Armo from The Stock Swoosh took issue with Peter’s gloomy assessment, saying, “The victory has been won! The tax cuts are working.”
The is just the beginning. We’ve barely begun. I totally disagree with him, I’m sorry … I just can’t see any reason to be negative at all.”
Armo said all we have to do is look at the big GDP number recently released. But Peter simply reiterated what he said in a recent podcast. Pres. Obama had plenty of one-off quarters of strong GDP. There were four quarters over 4% during his presidency and 5.2% growth in Q3 2014. This isn’t the sign of a booming economy.
But sure, if you give tax cuts you can get a temporary boost, so people are spending a little bit now because the government ran up the deficit. And one of the reasons people are spending more is because prices are going up. So in many cases, it’s just people paying more for the things they’re buying, not buying more stuff.”
Payne asked Peter, “What is the biggest fault-line in the economy.” Peter responded by saying that when Trump inherited the economy, there were a lot of structural problems that have never been addressed.
One of the big ones was the size of government. Government was much too big. It was spending much too much. And unfortunately, under President Trump, we have increased both welfare spending and warfare spending. We have made this big government even bigger, yet we’ve reduced the revenues to pay for it.”
Peter said it’s great to talk about tax cuts. He said he would like to eliminate the capital gains tax and the income tax altogether.
But to do that, we have to eliminate all the government that that money is being spent on. But Trump is not doing that. He’s telling Republicans they can have a free lunch.”
Payne and Armo pretty much shrugged off Peter’s point, pivoting back to, “Well, the consumer is spending money” and “everything is trending higher.”
Peter crushed them both.
That’s what it looks like before a collapse. You know, the problem was consumers were spending too much. We don’t want consumers borrowing and spending more money. We need people saving money. We need capital investment.”
Armo claimed people are saving because interest rates are up. On that count, she’s just plain wrong. As we reported recently, average savings are at the lowest level since 2005.
Pete said a recession is coming.
I think if Hillary Clinton had won, we’d already be in a recession, so we were able to postpone it for a couple of years. But unfortunately, I think it’s going to be worse than the Great Recession of 2008 – 2009, so we’re going to have to rename that. And a recession would be cathartic if the government would let it run its course. Unfortunately, the Federal Reserve keeps coming in with artificial stimulus. They print money. They do quantitative easing. They reduce interest rates. And they actually make the problems worse. The problem for Trump and the country is when it hits the fan, it’s going to be blamed on his rhetoric. It’s going to be blamed on the tax cuts. It’s going to be blamed on the free market. That’s not how we got into the mess, and I think we’re going to lay the foundation for a sharp turn to the left in 2020.”
Payne tried to close things out by saying “This is a big experiment. We’ve got a chance to see if Reaganomics 2.0 works.”
Peter had the last word.
This is Keynesianism. Charles – Keynesianism doesn’t work.”
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