Peter Schiff: V-Shaped Recovery Narrative Falling Apart


June 29, 2020 by SchiffGold 0 1

Over the last couple of months, we’ve been arguing that we won’t see a dramatic “v-shaped recovery.” Even if we cure COVID-19, it won’t treat the economy The mainstream has stayed positive. In his podcast Friday, Peter Schiff points out some of the methods the entire v-shaped healing story is breaking down.

The weekend before last, Peter speculated that we might be near to tiring the booming market in stocks Markets were under pressure last week. The Dow was the weakest of the major indexes, falling 3.3%. The S&P 500 and the Russell 2000 were both down about 2.8%. The Nasdaq remained the strongest index, dropping 1.9%.

There has been a considerable weakness in bank stocks. The regional banking index was down about 10% on the week and numerous of the huge banks got clobbered, consisting of Goldman Sachs, suffering an 8.65% drop.

Peter said what is dragging out the stock market and truly harming the banks is the economy rolling over.

Anything that is injuring businesses and hurting the economy ultimately is injuring the banks because all of these businesses, or a large percentage of them, have loans. They owe cash to the banks. And if they’re not open, if they’re not collecting incomes, then they’re not paying the banks and the banks stand to have a lot to lose if the economy isn’t rebounding as strong as people think.”

Many people are concentrated on the rebound. Peter said they ought to focus on the regression.

After the rebound, we’re going to get a relapse and people don’t understand we’re going to regression even lower than we rebounded from. We’re not returning to where the economy was since the economy was a bubble and we can’t return to Kansas. That’s not occurring. We’re going back to economic downturn– anxiety.”

On The Other Hand, the Federal Reserve continues to pump stimulus into the economy The mainstream remains convinced that this is the only course forward. Otherwise, many companies would fail. Some even call the Fed’s actions “strong.” But Peter asked a poignant question. Why not let them stop working? Why not let industrialism work? Because that’s the only thing that will eventually get us out of this mess.

There’s nothing strong about what the Fed is doing. It’s cowardly. The Fed is taking the coward’s escape. And it’s not blazing brand-new routes. It’s following the very same trails that many other reserve banks have followed. And it leads to disaster. It causes a currency crisis. It leads to a sovereign financial obligation crisis. It results in hyperinflation. There’s nothing brand-new about this. This has been done over and over once again and it’s failed every time it’s been attempted.”

The international trade deficit in goods can be found in at 74.3 billion– much greater than expected. A plunge in exports drove that number up. Imports visited 1.2%, however exports plunged by 5.8%.

That really proofs a weakening US economy, even more than just the reduction in imports does because that’s our capability to produce and export.”

This bodes ill for GDP given you deduct the trade deficit from the GDP number. It will also weigh heavily on the dollar. Peter dug into this thorough when he broke down the “dollar milkshake” theory

There’s a glut of dollars since of our massive trade deficit which is getting even larger. We are flooding the world with dollars that the world does not need to buy American exports.”

Retail and wholesale stocks were also down. Some people spun that as great news, arguing it would boost future GDP as companies work to restore those inventories. However Peter stated he does not think that will happen.

I believe they can check out these rather obvious tea leaves. They do not require the inventories because they can’t offer them. I indicate, not for a high sufficient rate. Today, a great deal of business are simply needing to mark stuff down since it’s the only way they can move the product. I believe a lot of these stores — and more shop closures are being revealed every day, more insolvencies are being announced every day– bankrupt stores do not require more inventory.”

Peter likewise talked some politics, discussing the odds of the Republicans hanging on to the White Home and Senate, and the push to make Washington D.C. the 51 st state.

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