Peter Schiff: Americans Are Broke

Retail sales unexpectedly fell again in February. It was the third straight monthly drop and the first time the US economy has seen three straight months of declining retail sales since 2012.

Sales fell 0.1% in February. Analysts had expected an uptick of 0.3%. According to CNBC, households cut back on purchases of motor vehicles and other big-ticket items, pointing to a slowdown in economic growth in the first quarter.

So, why is this happening? Peter Schiff offered a simple reason in his latest podcast.

Americans are broke.

There was another sign of trouble. Inventory numbers also indicate people aren’t buying what’s on the shelves. According to the Commerce Department, business inventories rose 0.6% on the heels of a 6% rise in December.

Of course, on Friday, we got the “too good to be true” Goldilocks jobs report. Peter said this doesn’t make sense.

So why didn’t any of those million people take their paychecks and spend them at a retailer? I mean, Trump is talking about all the great jobs, and all the raises that people have, and all the tax cuts. Why are retail sales down for three months in a row?”

Again, the most obvious and simple explanation is Americans are broke.

Retail sales were pretty hot during the last months of 2017, before falling off in December. But we also saw Americans running up record high levels of debt at the same time.

Last month, the New York Fed released the latest data on US household debt, revealing it has grown to a record $13 trillion. So yes, Americans have been spending, but they’ve been putting a lot of it on plastic. Credit card balances grew by $24 billion in the last quarter of 2017 alone.  Could it be that Americans have maxed out the plastic?

At some point, a house of credit cards will collapse.

Peter also noted that the Atlanta Fed has once again lowered its GDP forecast for the first quarter of this year. Remember earlier in the year when they were talking about 5.4% growth? Well, now they’ve lowered that bar all the way down to 1.9%.

Peter said he could see GDP dropping below 1% in Q1 before it’s all said and done. The only thing that might save it is inventories. Those higher inventory numbers count toward GDP. But if inventories are rising, that means people aren’t buying and manufacturers will pull back to let inventories shrink. In other words, we are borrowing GDP growth from Q2 and shoving it into Q1.

So that means even if we’re going to get a weak number for Q1, we could have an even weaker number for Q2.”

Peter talked a little bit about the special election in Pennsylvania and asked a pretty poignant question: if everything is as great as Trump says, why does it appear his guy lost the race?

The president is trying to tell his voters that everything is great. Well, they know that it’s not. They’re just as broke now as they were a year ago. Their lousy jobs are the same. They’re still making no money. They’ve got part-time jobs. Nothing has gotten better.”

And what exactly has Trump done to make America great again anyway?

People are not shopping because they’re broke. They’re not voting for Republicans because they’re broke – because Trump has not already made America great again. It’s not that simple. I mean, what has Trump done to make America great again? Run bigger deficits? That’s all he’s done, right? He’s reduced government revenue and increased government expenditures. Is that all it took to make America great again? Is that the problem we had before we elected Trump – the deficits just weren’t big enough? America wasn’t great because the government wasn’t borrowing enough money?”

Peter said the reason America wasn’t great and still isn’t great is because the government got great.

Government got too big. Regulations were too many. Taxes were too high. There was too much bureaucracy. And none of that has changed.”

Yes. The Trump administration has cut some regulations. But it’s just spitting in the ocean. And Congress did cut taxes. But as Peter has said over and over, we got tax relief without government relief. Despite the president’s claims that he has already succeeded in making America great again, very little has changed. The bottom line is Americans are broke and we’re starting to see it in the economic data – if anybody was willing to pay attention.

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