Thursday, July 18, 2013

Peter Schiff: “All Evidence Points to Recession”

So you don't think that they'll roll QE back to $65 billion a month by September, like Bernanke alluded last month?

No, I think they'll step on the gas and roll it up to 125 billion or 150 billion. Because it's like drugs and a tolerance. The economy is so addicted to QE, that the more you maintain it, the more the economy needs to stay high. As the bubble gets bigger, the more air you need to sustain it.

So I don't think $85 billion is enough. They're going to have to take it to $125, $150, $200 billion, $250 billion... They're going to have to do it bigger and bigger. The minute they stop, it's going to implode.

The more easing we do now, the bigger the government gets, as the national debt gets bigger and bigger. The Fed has to monetize more debt.

What happens when the budget deficit is $2 or $3 trillion a year?

The more QE we do now, the bigger the government gets because its able to run bigger deficits, so its just more QE will have to do tomorrow to sustain it all.

Speaking of recession, I just read that the second largest employer in the United States is a temp agency.

Yes, I think something like 10% of the entire nation's workforce is now temp. They can't afford full-time workers, the government has made it too expensive. That's a big sign that we never had a real recovery. We have a smaller labor force.

Only 47% of Americans have full-time jobs. But we actually have fewer people working full time. What we have is part-time jobs to replace the full-time jobs that are being lost.

So some people have two jobs now: The same guy working two places counts as two jobs. But its just one guy.

The economy is shrinking. There's more and more people on food stamps, welfare, and disability. So all the anecdotal evidence says we're still in a recession. It's just the government's phony numbers that say otherwise... It's a phony recovery that will fade if the Fed stops.

The analogy everyone wants to use is that the economy is a bicycle and the QE is the training wheels. The truth is that QE aren't the training wheels, they are the only wheels we got. The economy is just a frame. We're rolling on QE.

To take the analogy further, I'll say the bicycle is heading towards a cliff. If we don't remove the wheels, we'll go over the cliff. Either way, we're aiming for a fall. But it is far better to fall now then to go over the cliff and drop a great distance to your death.

But the Fed doesn't care, the Fed doesn't want that short-term pain, so they'd rather kill the economy in the long run — which is where we're headed.

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