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Peter Schiff: Jobs Are Another Bubble About to Burst

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October jobs numbers came out on Friday and everybody was all giddy about healthy growth. But in his most recent podcast, Peter Schiff said jobs are just another bubble about to burst.

According to the Labor Department, the US economy added another 250,000 jobs in October. The unemployment rate held steady at 3.7%. Earnings took their biggest leap since 2009, rising 3.1% year-on-year.

Peter noted that everybody considered this a really good report, but we’re working off a pretty low bar.

Two hundred thousand jobs a month in an economy the size of ours, especially given how few people, or what a large percentage of the workforce is not working, we should be creating a lot more than 200,000 jobs per month. But we’re not.”

The rising wages in the most recent report got a lot of attention in the media. But as Peter pointed out, the increase in wages is part of a broader increase in inflation. As we reported last week, US consumers face a wave of inflation. Everything from food prices to airline fares is going up.

Even though wages are rising for people that have jobs, the cost of living is rising faster. But the cost of servicing their debt is rising even faster than that.”

Peter also said he thinks the wage increases might be fueling some of the volatility in the stock market.

Not just the wages going up, but all of the other prices going up that are driving interest rates higher. And interest rates are only starting to go up They’re still ridiculously low, and they have no place to go but up, as long as the Fed stays out. And that’s what they’re doing. In fact, the Fed is going to continue to increase short-term interest rates, which means long-term interest rates should continue to move up even faster given how much higher inflation is going to go, because we’re just getting started with inflation. We’ve barely seen what’s coming.”

Increasing prices is a direct result of a decade of Federal Reserve easy money policy. Over the last 10 years, the Fed has printed billions of dollars out of thin air.

And now all of this money is finally having a bigger effect on prices. As money loses value, you need more money to buy stuff.”

As far as the job growth goes, the mainstream keeps pointing to it as a sign of a booming economy. But as Peter pointed out, we’re borrowing a tremendous amount of money to get this jobs growth.

Clearly, if we’re running record budget deficits, and record trade deficits, and everybody is levered up, you know, spending all of that borrowed money creates some jobs. But those jobs are not sustainable because the debt is not sustainable. The consumption based on debt is not sustainable.”

When you look at the trade data that also came out on Friday, it’s pretty clear the US is losing this trade war. The trade deficit came in at $54 billion, a half billion higher than expected. They also revised the previous deficit up. The report also showed record imports and the highest level of imports from China on record. This is winning the trade war?

The point is we’re running record trade deficits. We’re running huge government budget deficits. The GOP cut income taxes. We’re giving everybody money to spend, so people are spending.

And in the short-run, yes, you can goose up the economy and you can create some unsustainable jobs. But just because we have these jobs today doesn’t mean these jobs are going to be here tomorrow.”

The bottom line is the jobs growth is a function of artificially low interest rates and elevated asset prices that created a wealth effect.

But this is going to quickly come to an end as all the debt catches up with us like it always does, and interest rates go up and asset prices come down.”

In fact, asset prices are already coming down. Look at the stock markets. Look at the housing markets.

So, looking at some of these numbers, they may look strong now, looking in the rear-view mirror, but just open your eyes and look through the windshield and see what is going on and just connect the dots.  And remember that every boom has been followed by a bust.”

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