Peter Schiff explains his economic view on the important moves in the financial markets past Friday and concludes with his take on gold.
It all started with the US jobs data for May: estimates were that 150.000 new jobs were created, but instead the number stuck at 69.000. That means unemployment rate in the US is now 8.2%. If you have a look at another unemployment number – being the so-called U6 which includes also the discouraged unemployed people – the rate is 14.8% now.
Apart from the bad US unemployment numbers, the expected GDP in Q1 was revised downward and is now expected to be 1.9%. But Peter Schiff thinks it will soon be revised lower again. Peter points to the Q2 GDP number, that will probably look even worse. Furthermore, based on the personal income and spending rate, it appears that current spend is on its lowest level since 2007 (when people had much more housing equities and much more jobs).
Peter Schiff refers to the record amounts of monteray stimulus, that was injected the last couple of years in the US economy. But still, the economy is not able to have a better result than 8% unemployment rate (or 15% if you include the discouraged people), while still having zero procent interest rates and more than a trillion of budget deficit. Peter schiff thinks that this worsening situation is simply part of an ongoing depression. He predicted already many years ago that we would undergo a series of recessions that would be inflated by artificial growth with monetary stimulus. Now of course, stimulus is followed by a hangover: the bigger the stimulus, the bigger the hangover. Imagine what the hangover will be, now that we have had a record number of stimulus by governments (mainly but not only in the US), which in fact didn’t lead to any significant growth. That’s what the new book of Peter Schiff is all about “The real crash“.
When the unemployment number came out, stock markets went south while the price of gold surged strongly. The undervalued gold stocks followed gold higher, so they went heavily against the broader stock markets. What the significance of this movement, in the eyes of Peter ? Some traders start to realize finally that the dollar is not the safe haven they thought it was. We have been writing about this idea recently, in our articles “The truth about gold: it cannot lie” and “What are the gold price and fundamentals telling us this week“.
Peter Schiff points out that if people are afraid about the euro, then it makes no sense to go to the US dollar, because the United States have much more debt than Europe. If you really care about debt, than you want to own real money, which is gold.
Peter Schiff warns people to be extremely careful with converting their assets into the US dollar or US treasuries. The dollar and treasuries is what Peter considers as a real bubble. “Be careful”, he repeats. Peter has to say this about the current situation in the US: “Few people really perceive the gravity of the threat to the US economy.”