The federal government set an all-time record budget deficit in February. And this is with a Republican in the White House. The GOP is supposed to be the fiscally responsible party. In this episode of the Friday Gold Wrap, host Mike Maharrey offers some interesting analysis that reveals spending money in Washington DC is really a bipartisan sport. He also talks about Thursday’s selloff in gold and silver, explains why dollar strength is something of an illusion and illustrates how the way “the market” thinks is often pretty dumb.
The Fed wrapped up another FOMC meeting this week and came out even more dovish than expected. Rate hikes are off the table in 2019 and the central bank now only expects one hike in 2020. In his episode of the Friday Gold Wrap, host Mike Maharrey talks about the meeting and the dirty little secret Reuters let slip out. The goal here is to get you to spend more money and keep the bubble full of air. As Mike put it, “The Fed is trying to feed the debt monster and it wants you to pick up the tab.” He also covered the meeting’s impact on the markets and the latest in political theater.
Americans owe over $1 trillion in credit card debt and recent polling data indicates they aren’t paying off those balances anytime soon.
According to a CNBC article, nearly half of all Americans carry a balance on their credit cards. Of those, only 30% say they will be able to pay off that balance within the next year.
As we reported last week, consumer debt continues to break records month after month. Americans owe over $4.3 trillion dollars in revolving debt (primarily credit cards), student loans and auto loans. When you factor in mortgages, the number climbs to $13.54 trillion. That figure was $869 billion higher than the previous peak of $12.68 trillion in the third quarter of 2008 (right before the crash) and 21.4% above the post-financial-crisis trough reached in the second quarter of 2013.
But many mainstream analysts downplay this surge in debt. And on the surface, the numbers do seem to indicate the risk isn’t as big as it was prior to the 2008 financial crisis. But as Wolf Richter explains, the averages conceal a different reality.
Federal Reserve Chairman Jerome Powell appeared on 60 Minutes last Sunday to reassure us that the US economy is great. There’s nothing to worry about. So, why the sudden reversal in Fed monetary policy? According to Powell, the central bank is just worried about slowing global growth. But as Mike Maharrey discusses in this week’s Friday Gold Wrap, it’s pretty clear the real problems are right here in the good ol’ US of A. Mike also covers the latest in precious metals news, with a focus on silver.
Total consumer debt broke another record in January, according to the latest report by the Federal Reserve.
Borrowing increased by $17.05 billion in the first month of 2019. The increase pushed overall consumer borrowing to a new $4.03 trillion record. That compares with $3.84 trillion in January 2018. That represents a 5.1% annual increase.
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.
Based on the latest data, the student debt crisis in America isn’t about to end any time soon.
US household debt climbed to a record $13.54 trillion in the fourth quarter of 2018. Student loan debt makes up a sizeable chunk of that total. In fact, student loan debt now ranks as the second-largest consumer debt category, trailing only mortgages.
After Jerome Powell indicated that the Federal Reserve tightening cycle was on pause during last week’s FOMC meeting, Peter Schiff said, “The monetary drug pushers at the Federal Reserve gave the addicts on Wall Street exactly the fix that they had been craving.”
Peter often compares the markets to drug addicts. They are addicted to the easy money the central bank provides. Reuters used that same imagery to describe America’s business community in the wake of the “loose money era,” saying it left a “trail of US corporate debt junkies.
What happens when central banks push interest rates to zero – in some cases below zero – and hold them there for nearly a decade?
You get debt.
Lots and lots of debt.
Record levels of debt, in fact.