In many ways, it appears the economy is beginning to recover from the shocks of the coronavirus pandemic. GDP growth is way up. The stock market is soaring. A lot of people are optimistic. But during an appearance on the Ben Shapiro Show, Peter Schiff said this isn’t a real recovery, and he explains how all of the government “help” is actually wrecking the economy, distorting the job market and destroying the dollar.
The economy is actually sicker now than it was before COVID. And what’s really been hurting it was not the disease but the government’s cure.”
Peter said government shutdowns were at the root of the problem. When the economies closed, people stopped producing goods and services. When people aren’t productive, they need to reduce their consumption. You can’t consume stuff that’s not produced. But the government didn’t want people to stop spending even though it ordered them to stop working.
Enter the Federal Reserve.
The Fed simply printed money out of thin air. The government then handed that money out in the form of stimulus checks, enhanced unemployment and other COVID relief programs.
So, you have an economy where we’re producing less, but everybody wants to spend more. That’s not economic growth. That’s massive inflation. And what we’re seeing now is the byproduct of everybody spending all this money that we just printed, and that’s what’s goosing the GDP. But this is not a real economy.”
Peter noted the ballooning trade deficit.
What we’ve done is we’ve substituted real economic growth, real goods production, for money printing. And we’re about to pay the price in terms of an enormous increase in the cost of goods and services.”
Peter said we’re ultimately looking at an inflationary depression.
All of this government spending is actually hindering the recovery, because when the government spends money, it deprives the free market of resources. Government spending is effectively taxation – even if the government doesn’t collect direct taxes.
Once the government decides to spend money, the question is: how do we pay for it?”
If the politicians don’t have the guts to actually raise taxes to cover the spending, then they borrow it and ask the Fed to print money.
But that doesn’t mean we get the government for free. It just means the government is robbing us of the purchasing power of our money. And that’s what’s happening. The government is creating money, putting it into the economy, giving it to people to spend — these people are bidding up prices. And that’s what’s driving the GDP. It’s higher prices and more spending as we are producing less.”
On top of rising prices, we’re seeing lots of shortages in the economy. The Fed wants us to believe this is “transitory.” Peter said this is exactly the attitude the central bankers had about the subprime mortgage market in 2005 and 2006.
They told us, ‘Ignore what’s happening in the subprime mortgage market. It’s contained. It’s not going to be a problem for the mortgage market. It’s not a problem for housing. It’s not a problem for the economy. Just ignore it. It’s no big deal.’ Well, the Federal Reserve was completely wrong about the subprime market being contained. They’re now just as wrong, if not more so, about inflation being transitory. We’re at the beginning of a huge escalation in the cost of living. And they are throwing gasoline on the fire right now by continuing to spend more money paid for by the printing press.”
Peter also mentioned the out-of-whack job market. The government is creating perverse incentives for people to stay at home and collect big unemployment checks. Meanwhile, businesses can’t find people willing to work.
It is more lucrative not to work than to go and get a job. And of course, it’s far more enjoyable to have a vacation and get paid more than you would get if you return to work. So, the government is paying people not to produce, and then giving them money to buy the stuff that they didn’t produce — this is going to be an inflationary apocalypse.”
Biden’s tax plan will put a further drag on the economy. A lot of people aren’t concerned because the taxes will target the rich. But it’s the money the rich invest in businesses that drive the economy. People making under $400,000 might not have to worry about a higher tax bill. But they may well end up unemployed when the rich guy can no longer invest in his business.
Peter said the inflationary chickens will really come home to roost when the rest of the world loses confidence in the purchasing power of the dollar.
I think the next real recession is going to be triggered by inflation. As the costs go up so much, businesses start firing people because they need to stay in business. And consumers, even though they’re spending a lot of money, they’re spending it on food. They’re spending it on energy. So, they don’t have money left over to buy other stuff.”
So, what does the Fed do? The normal prescription for a recession is to print more money. But if you have an inflation problem, can you pour gasoline on that fire in order to put it out?
The Fed is in a box that they can’t get out of.”
Peter goes on to explain why the money printing and stimulus didn’t lead to this kind of upward pressure on prices after 2008.
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