The US federal government posted the largest budget deficit since 2012 in fiscal 2018. Uncle Sam ended 2018 $779 billion in the red, adding to the ballooning national debt. The Bipartisan Policy Center called the Treasury report a “wakeup call,” noting that trillion dollar deficits during an economic expansion are a serious issue.
But not everybody is concerned. Peter Schiff appeared on RT this week to debate a socialist about the deficit.
On Tuesday, US stock markets rallied. The Dow was up over 500 points. That led a lot of people to conclude that the recent declines were just a correction. But as Peter Schiff pointed out in his most recent podcast, bear markets have rallies. Just because the market goes up a few days doesn’t mean we haven’t entered a bear market. The fact is — at this point we just don’t know.
But the dynamics are in place for a bear market. In fact, Peter has said the recession is obviously coming.
The US national debt increased by $1.27 trillion in fiscal 2018. If you expected the pace of borrowing to slow in fiscal 2019, you’ll be disappointed. In just the first 11 business days of the new fiscal year, the US government added another $138 billion of debt to the total. That brings the total national debt to a staggering $21.654 trillion — or as Wolf Street put it “debt out the wazoo.”
Meanwhile, the two biggest buyers of US Treasuries are in a selling mood.
On Oct. 10, the IMF released its Global Financial Stability report, highlighting increased levels of risk revealed by a number of global metrics. Just after the report was released, stocks in the US, Europe and Asia lost 4%, 3% and 4% respectively over three days.
As a recent investment update released by the World Gold Council points out, although stocks rebounded and regained some of those losses, the IMF report and subsequent market pullback “underline the relevance of holding gold in the near and long term.”
Yesterday, the Hungarian central bank announced it recently boosted its gold reserves 10-fold.
According to its website, the National Bank of Hungary (MNB) now owns 31.5 tons of gold, up from 3.1 tons. It was the first significant purchase of gold by Hungary since 1986.
A statement by the bank said the increase in gold stocks was intended to increase financial stability and strengthen market confidence.
Keynesian central planners suffer from what Peter Schmidt calls “fatal conceit.” Paul Krugman serves as the poster child for central planning arrogance. But it’s the Federal Reserve that gives the central planners power, as Schmidt highlighted in the first article in a series highlighting this fatal conceit. Schmidt built on this theme in the second article, telling the story of Benjamin Strong and his role in blowing up the 1920s stock market. In this third installment of the series, Schmidt tackles the question no one dares to ask.
In the wake of the stock market plunge last week, Pre. Donald Trump said the market drop wasn’t because of his trade war. Trump said, “That wasn’t it. The problem I have is with the Fed. The Fed is going wild. They’re raising interest rates and it’s ridiculous.” He also said the Fed is “going loco.” In a Thursday interview, the president doubled down, saying “I’m paying interest at a high rate because of our Fed. And I’d like our Fed not to be so aggressive because I think they’re making a big mistake.”
Peter Schiff appeared on Fox Business Countdown to the Closing Bell along with National Alliances head of fixed income Andy Brenner to talk rate hikes, the stock market and where things might go next.
Could we be heading toward $5,000 gold?
Last week, there was a big sell-off in the bond market. Yields on the 10-year Treasury soared 11 basis points in one day. Global stock markets sold off the following morning and US stock markets followed suit. This week, things really got really ugly on Wall Street. The Dow dropped over 1,300 points in two days. In a video for SchiffGold, Peter Schiff said stock market investors “finally took notice of the carnage that was going on in the bond market.”
On Thursday, the price of gold popped, rising nearly 3%. But despite all of the action this week, most people in the mainstream remain complacent. The narrative is that this is a normal bull market correction. Peter said nothing could be further from the truth.
The economy is even a bigger bubble than the stock market.”