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

A Real Recession is Better than a Fake Recovery

  by    0   1

In a recent article on the next looming recession, Peter Schiff explains how current monetary policy has come to a crossroads. With respect to interest rates, there now seems to be two entrenched camps: raise or don’t raise. Unfortunately, they’re both wrong, mainly because they’re beginning with the wrong premise: that the economy can somehow avoid the painful process of market correction that raising rates would inevitably bring. Peter explains:

“The real choice is not between recession now or recession later. It’s between a massive recession now, or an even more devastating one later … Now is the time to bite the bullet, endure the pain, and allow the wound to actually heal.”

stock market recession

Since 2009, all of the standard metrics for indicating a recovery have shown sub-par results. The only growth has occurred in asset prices. However, higher prices in stocks and bonds haven’t occurred because of upward pressure from a free market, but have been artificially inflated by easy borrowing and risky speculation. Consequently, the “recovery” we’re supposedly experiencing is as artificial as asset prices themselves. The next bubble that will have to burst is the Fed’s own fantasy it’s been selling investors.

“So I agree with those who believe that rate hikes now will bring on a recession,” Peter states in the article. “But I disagree that we should keep rates where they are … despite the short term pain that will surely follow, we need to raise rates now to break the addiction before it gets worse.”

Ironically, the Fed’s low-rate policy ends up creating the very thing it seeks to avoid. By disrupting the natural business cycle of speculation and market correction with artificially low rates, the Fed actually encourages risk taking that otherwise might not have existed. Over speculation leads to bad debt and bubble creations where prices no longer reflect the true (i.e. market created) value of an asset, product, or service. This becomes an illusionary cycle where the only “solution” to the problem involves keeping up the appearance of growth by papering over the problem with printed money.

Ultimately, no monetary policy will be able to hold off an inevitable correction. Any attempts to do so only increase the intensity and downside of the next one. “I think it’s high time the Fed finally moves rates well into positive territory,” Peter states. “The next recession has been on its way for years, and it will arrive no matter what the Fed does if it’s not already here. Sometimes reality hurts, but fantasy can be more damaging in the long run.”

Get Peter Schiff’s latest gold market analysis – 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

Thirty-Nine States Don’t Have Enough Money to Pay Their Bills

It’s not just the federal government running massive deficits and piling up enormous levels of debt. Thirty-nine US states don’t have enough money to pay all of their bills. That was the grim conclusion of Truth in Accounting’s annual Financial State of the States report. The report summarizes a comprehensive analysis surveying the fiscal health […]

READ MORE →

No Inflation? Money Supply Continues to Grow at Record Rate

To hear Federal Reserve officials, politicians and mainstream financial media pundits tell it – there is no inflation. In fact, the consumer price index remains “stubbornly low” according to those who view rising prices as an economic good. But inflation defined correctly is rampant. In fact, it is at all-time record levels. Strictly speaking, inflation […]

READ MORE →

The Fed Is Backstopping the Enormous Government Debt

The 2020 budget deficit surged passed $3 trillion in August even as the US government continues to borrow and spend at a torrid pace. Since March, the federal government has added $3.3 trillion to the national debt. That is on top of the $1.4 trillion in debt Uncle Sam piled on in the 12 months […]

READ MORE →

The Fed Delivers What’s Expected

If you go to McDonald’s, you expect to get a hamburger. If you go to KFC, you expect to get chicken. And if you go to the Federal Reserve, you expect to get easy money. The Fed delivered exactly what you would expect at this month’s Federal Open Market Committee meeting that wrapped up Wednesday.

READ MORE →

Lockdowns May Have Permanently Scarred the Labor Market

Every week, analysts and pundits pour over the latest weekly jobs report looking for signs of life. Every month, we dive into the monthly unemployment numbers hoping they signal economic recovery. But these unemployment numbers don’t tell the whole story. The government economic shutdowns in response to the coronavirus pandemic have deeply wounded the economy […]

READ MORE →

Comments are closed.

Call Now