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Schiff on Business Matters: Consumers Are in Big Trouble

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On Friday, Don Ma interviewed Peter on NTD’s Business Matters. Their conversation focuses on declining consumer sentiment. With GDP and unemployment figures also signaling a recession, a worsening consumer outlook bodes poorly for the economy.

Peter points out that consumers aren’t pessimistic enough:

“If consumers only knew just how much worse it’s going to get, confidence would be even lower. They’re actually a little bit too optimistic about the future. What they’re really concerned about is rising inflation and high interest rates, and the problem is, interest rates aren’t really high yet. And unless the Fed raises rates even more, inflation’s going much higher! So the Fed is in a box if it tries to raise consumer confidence.”

The Federal Reserve is constrained by the absurd amount of debt both consumers and the government are carrying:

“The Fed is planning on reducing rates despite the fact that rates are still too low. But the problem is, Americans have so much debt that even these low rates are too high! That’s the main reason the Fed stopped hiking— because we started to see another financial crisis as the banks started to fail. And the U.S. government is in a bind fiscally. You know, everytime the Fed raises rates, it causes the budget deficit to widen.”

Average, ordinary Americans are not doing well:

“He’s on life support right now. The consumer’s in a lot of trouble. He’s got a record amount of debt— credit card debt, household debt. Savings are totally depleted. The cost of living has skyrocketed and is going much higher, and a lot of Americans are now holding down multiple jobs just to make ends meet. … You need two or three jobs now to pay for what one job used to provide for just a few years ago.”

To top it all off, establishment economists and politicians have their heads firmly planted in the sand:

“They’re blind. We’re probably already in a recession. A lot of the numbers that we’re getting that indicate otherwise are probably going to be revised lower—probably after the election. … Powell just said at the last press conference that he doesn’t see any signs of stagnation or inflation, and he’s wrong on both counts!”

The Fed is in a tough spot: does it fight inflation at all costs, even at the expense of the financial special interests, or does it sacrifice the consumer to stave off a catastrophic banking crisis? Neither choice is pleasant, but the Fed will be forced to choose when recessionary pressures finally catch up to the American economy.

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