Contact us
CALL US NOW 1-888-GOLD-160
(1-888-465-3160)

Another Ugly Day on Wall Street; Is the Air Coming Out of the Bubble?

  by    0   0

Wednesday was another ugly day on Wall Street.

Stocks tanked, wiping out gains for the year in both the Dow Jones and S&P 500 Index. The Dow fell 608 points and the S&P 500 shed 3%. The Nasdaq plunged 329 points and lapsed into a correction territory. It was the largest daily decline on Wall Street since 2011.

In his most recent podcast, Peter Schiff asked a key question: will the Federal Reserve swoop in and change the nature of the game?

Peter noted that the drop in the NASDAQ ranked as the third-largest in history. The two biggest declines both came in 2000 as the dot-com bubble burst. Of course, in percentage terms, there have been some steeper drops, but not since the 2008 crash.

The fact that this is the biggest single-day decline in the NASDAQ since the 2008 financial crisis means that today’s drop is larger than any point drop that we had during the 2008 financial crisis. You have to go all the way back to the dot-com bubble. Something big is happening when you see this kind of drop. I mean, the market technically couldn’t be weaker … this is a bloodbath.”

There was also some bad economic news yesterday. New home sales came in way below estimates and dropped to near a two-year low, falling 5.5% to a seasonally adjusted annual rate of 553,000 units in September. That was the lowest level since December 2016. The August number was also revised down. Of course, rising interest rates are not good for the housing market.

And there are also problems in the commercial real estate market, but artificially low interest rates have masked the issues. As Peter put it, we’ve been on a huge credit bubble.

How do you think the Fed was able to engineer the rise in real estate prices, the rise in the stock market? This whole phony recovery was based on debt — based on going deeper and deeper into debt. Well obviously, once you raise interest rates, that’s it.”

Lowering rates, launching QE and creating bubbles is the easy part. It’s the normalization that’s hard. As Peter put it, “Anybody can get drunk. The hard part is sober up.” In the wake of 2008, the mainstream continues to believe the Fed won; the Fed’s plan worked. But they were celebrating prematurely.

So, will the Fed do something to change the dynamics? Will Jerome Powell sweep in and try to rescue the stock market with elections looming? Pres. Trump has certainly been putting the pressure on.  He needs a scapegoat because he’s been running around claiming the US is in the midst of the greatest economy in the history of the world.

If that’s the case, well, obviously it can stand 2% interest rates. The reason the economy is imploding with 2% interest rates is because it isn’t the greatest economy in the history of the world. It’s simply the biggest bubble in the history of the world. And the bigger the bubble, the smaller the pin that it takes to pop it. And this bubble has been popped and the air is going to come out.”

Peter has said the recession is obviously coming. The mainstream still doesn’t see it. People still point to the 4-plus percent GDP growth last quarter. But as Peter pointed out, the economy always looks strong right before a recession.

Nobody expects recession. Everybody is very optimistic just before the economy goes into recession. Remember the Great Recession, which was the worst recession since the Great Depression … it started in December of 2007. But nobody knew we were in it even the summer of 2008. Everybody thought the economy was great. Everybody was talking about how great the economy is — it was in recession at the time and people still thought it was great. It was only after the financial crisis, after the market imploded and Lehman Brothers went bankrupt, that’s when people talked about the economy being bad. That’s when the Fed started to cut rates, or slash rates, in order to bail it out, because everybody was so clueless.”

The question is what will the Fed do? It could take upcoming rate hikes off the table in order to prop up the markets. But even that might not work. Or it could stand pat and let things run their course. That might be the best medicine in the long-run, but probably not politically viable.

TaxFreeGold.Banner.1000x285

Get Peter Schiff’s most important Gold headlines once per week – click here – for a free subscription to his exclusive weekly email updates.
Interested in learning how to buy gold and buy silver?
Call 1-888-GOLD-160 and speak with a Precious Metals Specialist today!


Related Posts

ETF Gold Holdings Hit Another Record High

Gold continued to flow into ETFs after breaking a record in September. Gold-backed funds took in another 44.4 tons of metal in October, pushing global holdings to another record of 2,900 tons, according to the latest data by the World Gold Council. The previous record for ETF gold holdings was set back in 2012 when […]

READ MORE →

Consumer Debt Sets Another Record But Borrowing Pace Slowing

Consumer debt set another record in September, but the pace of borrowing appears to be slowing. This could signal trouble for an economy built on American consumers spending money they don’t have. Total consumer debt grew by $9.5 billion in September, according to the most recent data released by the Federal Reserve. That represents an […]

READ MORE →

The Federal Government Spending Is Even Worse Than Advertised

Uncle Sam is spending money far faster than he’s taking in. The US federal government ran the biggest budget deficit in seven years in fiscal 2019, according to the Treasury Department. And the spending is even worse than advertised. The $984 billion deficit amounts to 4.7 percent of GDP. That’s the highest percentage since 2012. […]

READ MORE →

Gold Demand Up 3% in the Third Quarter

gold coins and bullions laying on a newspaperGold demand was up 3% in the third quarter, coming in at 1,107. 9 tons, according to the Gold Demand Trends Q3 2019 report put out by the World Gold Council. Record inflows of gold into ETFs overcame weakness in the jewelry, and gold bar and coin markets to push overall demand higher. Gold mine […]

READ MORE →

Central Bank Gold-Buying Spree Shows No Sign of Letting Up

The central bank gold-buying spree shows no sign of letting up as countries seek to diversify their reserves away from the US dollar. Globally, central banks added another net 47.5 tons of gold to their reserves in September, according to the latest data from the World Gold Council. There were no significant gold sales by […]

READ MORE →

Comments are closed.

Call Now