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

Peter Schiff: We’re not Borrowing Ourselves Rich; We’re Borrowing Ourselves Broke

  by    0   0

Peter Schiff has been saying that despite the recent stock market rally and all of the optimism about an end to the trade war, a recession is a done deal. There is plenty of economic data to back up despite the recent economic growth. In his most recent podcast, Peter Schiff said that while the GDP number might look pretty good, the growth is unsustainable because it’s all built on debt.

Last week, we got the first look at Q4 GDP. It came in slightly stronger-than-expected with a rise of 2.6%, on an annual basis. That compares to trade expectations of a rise of around 2.2%. If that holds, total 2018 GDP may well come in at Trump’s target of 3%.  This would be the biggest GDP number since 2005.

But Peter put this into a little different perspective. Consider this: in 2005, the national debt increased by $554 billion. That borrowing “purchased” 3.5% economic growth. In fiscal 2018, the national debt increased by $1.27 trillion. That’s more than double the debt increase of 2005.

So, we had to add a lot more debt in 2018 to buy not as much growth as a much smaller amount of debt in 2005. So, the takeaway from that is this is unsustainable because the growth came at a heavy cost. We had to increase the amount of debt that we had by a lot more than the percentage that the economy grew.”

And of course, it’s not just government debt. Household debt is also at record levels.

As Peter put it, “We’re not richer because of this economic growth.”

If your debt is growing faster than your economy, then you’re not getting richer. You’re getting poorer. You would have been better off without the debt and without the growth …  We’re borrowing ourselves into poverty. We’re not borrowing ourselves rich. We’re borrowing ourselves broke.”

There’s another problem with the growth in Q4 2018. It may well have come at the expense of growth in Q1 2019. Mike Maharrey talked about this in last week’s Friday Gold Wrap podcast, noting that US wholesale inventories posted their largest gain in more than five years. Inventories are factored into GDP. That likely gave Q4 a boost. But a pileup of goods in warehouses means people aren’t buying.

The consumer spending number for December released last week bears this out. It was down 0.5.

Meanwhile, personal income was up. This could mean Americans are saving. If so, it would be the first time that’s happened at this level since the Great Recession.

Analysts are trying to figure out what the numbers mean. Peter had a pretty simple explanation. Americans have stopped spending because they’re broke.

They’ve already borrowed so much money to pay for the spending of the past that they’re just done. That expression, ‘Shop ’till you drop,’ well, maybe a lot of Americans have finally dropped and they’re no longer shopping.”

This could be a bad sign that Americans are at the end of their rope.

Peter breaks down these numbers and more in greater detail in the podcast. Make sure you give it a listen.

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

Peter Schiff: Inflation Bloodbath on the Way

This time Peter tackles Jerome Powell’s speech from Wednesday, in which he announced that the Fed is holding the federal funds rate between 5.25 and 5.5%. He also briefly discusses Bitcoin’s pullback and the media’s lies about Donald Trump. 

READ MORE →

Peter Schiff: The Inflation Genie is Out of the Bottle

In this episode, Peter reacts to a hotter-than-expected CPI report, big trades in Bitcoin, and the federal bill that would ban the popular social media app TikTok. He also notes silver’s historically low price, which is nearly 50% of its 2011 high.

READ MORE →

Peter Schiff: Biden Ignores Fiscal Time Bomb

On Sunday, Peter recapped a stellar week for gold. He also provided an analysis of President Biden’s State of the Union Address and criticized Fed Chair Jerome Powell’s perspective on the economy. 

READ MORE →

Peter Schiff: Price Controls Are Coming

This week, Peter reacts to politicians’ sophomoric views on inflation and explains the recent surge in the price of gold. He also comments on the first day of Jerome Powell’s congressional testimony. Be sure to watch Peter’s special extra episode from earlier this week if you missed it. 

READ MORE →

Gold Hits New All-Time Record High

Gold hit a new all-time nominal high, surpassing the previous record set in December of the previous year. The precious metal’s price reached approximately $2,140, indicating a robust and continuing interest in gold as a safe-haven asset, despite a rather peculiar lack of fanfare from the media and retail investors. This latest peak in gold […]

READ MORE →

Comments are closed.

Call Now