The Fed’s Medicine Makes the Economy Sicker – Ep 556

Speculative Asset Bitcoin is a digital risk asset, not a currency. If you own bitcoin you have an asset, but it is not a safe haven. A safe haven is an asset that is not likely to go down in comparison to another speculative investment.  Bitcoin has been extremely volatile; it happens to be going up, but the price is based on speculation.  Does anybody believe that bitcoin has less downside risk than the stock market? Not a Currency Bitcoin is not used as currency.  They trade in bitcoins for dollars or euros or yen to buy things, but very few legal goods and services are priced in bitcoin.  Because the price is highly volatile and backed by nothing, it can not be used as a currency. It is being used as an asset.  The number of top retailers who accept Bitpay is diminishing, not increasing. Merchants will try to make it easy to trade bitcoin for currency which would then buy goods and services.  Most people who own bitcoin are not spending them; they are hoarding them because they think they are going to keep going up. Just Noise At the end of the day, the realized gains from speculation in bitcoin are going to be overshadowed by the speculative losses. All the rest of it is just noise.  The realized profits will be concentrated on a small group of people, whereas the realized losses will be dispersed among a larger population. Reversing the Consequences Bitcoin will end up achieving the opposite of its original goal, which was to challenge the power of central government, to disrupt money, that is would rein in government and have real commodity money in the same way FedEx upended the Post Office or Uber upended taxis. This is going to give more power to government, because when digital currencies collapse, the central bankers will say, "We told you so! This is what happens when you allow the free market to do what government should do.  When the free market creates money it leads to disaster.  You have to stick with currencies backed by government. " No Joke The original currencies that were created by the private sector, and not by government were issued by banks and backed by gold. Today, the private sector could issue digital currency backed by gold just like paper currency backed by gold. What gave the paper currency value was the gold backing. If any bank tried to issue paper currency backed by nothing, it would have been laughed out of existence. It would have been a joke, except now it's not a joke. People actually want digital currency backed by absolutely nothing. Our Sponsors: * Check out Aeropress and use my code GOLD for a great deal: https://aeropress.com * Check out Boll & Branch: https://boilandbranch.com/SCHIFF * Check out Boll & Branch: https://boilandbranch.com/SCHIFF * Check out Infinite Epigenetics: https://infiniteepigenetics.com/GOLD * Check out Justin Wine and use my code SCHIFF20 for a great deal: https://www.justinwine.com Privacy & Opt-Out: https://redcircle.com/privacy

14 Elo 201747min

Fire and Fury Not Strong Enough Donald Trump's saber-rattling against North Korea continues. Yesterday the President was asked to clarify his statement about the "fire and fury" and he came out and said that that wasn't strong enough; he was really sugar-coating it. What he really means is something worse - if anything his statement was not strong enough. Again, today Trump issued another threat that N. Korea had better be careful, if they say anything if they will regret it big time, so the level of rhetoric is rising. A Legend in Trump's Mind He was talking about the booming economy, the stock market at record highs, employment surging, all these jobs coming back. He is spinning this ridiculous phony story about a recovery that doesn't exist.  Just as I pointed out he took credit for building up our nuclear armament to a level higher than it has ever been - all this is happening, unfortunately, in Donald Trump's mind. Volatility Up There was a big down day in the markets; it dropped over 200 points yesterday; there was a small bounce back today  - the Dow was up about 14, not a major recovery, But if you look at the Vix, which is a measure of fear, a measure of volatility, it was near the lows, below 10 mid-week and it spiked all the way up to 16 yesterday, which is the highest it has been since April. It looks like it is above a key moving average on a weekly chart, so that shows a heightened risk in the market. Dollar No Safe Haven Interestingly enough, the dollar index closed near the lows of the day, just at around 93 even.  It is down on the week.  In fact, this is the lowest weekly close for the dollar index for the entire year. Now, you would expect the dollar to have some kind of a safe haven bounce with all of the saber-rattling - all of the worries about nuclear war.  Typically, you would get money going into the dollar. I guarantee you, if the circumstances were the same a year ago,  there would have been a big rally in the dollar this week. But not now. Our Sponsors: * Check out Aeropress and use my code GOLD for a great deal: https://aeropress.com * Check out Boll & Branch: https://boilandbranch.com/SCHIFF * Check out Boll & Branch: https://boilandbranch.com/SCHIFF * Check out Infinite Epigenetics: https://infiniteepigenetics.com/GOLD * Check out Justin Wine and use my code SCHIFF20 for a great deal: https://www.justinwine.com Privacy & Opt-Out: https://redcircle.com/privacy

11 Elo 201738min

Elimination of Deductions for State and Local Tax - "SALT" Tax reform is the one remaining 2018 Republican campaign issue, and the argument over "SALT", or the elimination of deductions for state and local taxes. In general that would be state income tax or state property tax. In some states that do not have income tax, you are allowed to deduct your sales tax, although that is a more complicated deduction. In the wealthier states on both coasts, tax payers rely on those deductions. The Mortgage Tax Deduction Restricts the Free Market No one wants to get rid of the home mortgage deduction, but that is a much better deduction to eliminate, as it does more damage to the economy. The politically popular mortgage interest deduction is aimed at altering behavior, rather than to let the free market work independently. The real beneficiary of the mortgage tax deduction is not the home buyer but the house seller. There are many predominately Democratic states with high taxes but I don't buy argument in favor of eliminating that deduction. Why Should the Federal Government Subsidize the State Government? The argument is, why should the Federal government subsidize state government?  If a state wants to have a high income tax, then, its citizens get to deduct that income tax from their Federal taxes and therefore, they don't feel the full burden of the tax, because some of it is absorbed by the Federal government. As a result of this, tax payers in high tax states are more receptive to those high taxes because they get a tax break on their Federal tax returns. If they could not deduct these taxes, there would be a bigger pushback on the state level. Federal Government Taxing Unearned Income If we are going to have an income tax, we have to tax the actual income. For example, if you earn $100,000, and let's say you live in a state with a flat 10% income tax, then they pay $10,000 in taxes. Did they earn $100,000 for $90,000? I would say they earned $90,000. Now if the Federal government does not want to give a deduction on the state income tax, they should not tax you on income you never earned.  I don't think that's Constitutional. You can't be taxed on money that didn't come to you. The money paid to the state in taxes is not a voluntary donation. It is taken by force. No Double Tax If you go back to the origins of the first Federal income taxes exempted tax paid to the states, it was because the Federal government respected the sovereignty of the states to tax the people first. If you allow the Federal government to ignore state taxes, theoretically they could place an income tax so high that you would have nothing left between the state and Federal tax burden. I would not allow the government to double tax anything, because it is diminishing the power of the state. Defer Income Tax to Employers Here's another thing that no one in Congress is addressing: the states can get around this. Let's say they pass  a law that says you can't deduct your state income taxes from your Federal income tax.  In the previous example, the taxpayer pays taxes on $10,000 he never earned. What if the state then repeals the state income tax on wages and salaries and in its place, imposes a payroll tax on employers? So that, instead of an employee getting paid $100,000 and paying $10,000 in taxes, the payroll tax causes the employer to pay a state tax that would then reduce the salary of the employee by that much. That payroll tax would be deductible for the employer as an expense. So all the states would have to do is change the way they tax wages and salaries and the net effect would be no change for the individual worker.  This would deprive the Federal government of all the extra money they think they are going to get by removing the state income tax deduction. Our Sponsors: * Check out Aeropress and use my code GOLD for a great deal: https://aeropress.com * Check out Boll & Branch: https://boilandbranch.com/SCHIFF * Check out Boll & Branch: https://boilandbranch.com/SCHIFF * Check out Infinite Epigenetics: https://infiniteepigenetics.com/GOLD * Check out Justin Wine and use my code SCHIFF20 for a great deal: https://www.justinwine.com Privacy & Opt-Out: https://redcircle.com/privacy

10 Elo 201731min

Trump Jumps to Tweet on Mediocre Jobs Numbers This morning the Labor Department released the July Non Farm Payroll numbers and Donald Trump tweeted,"Excellent Jobs Numbers just released - and I have only just begun." Many job stifling regulations continue to fall. Movement back to USA!" What is excellent about these numbers?  If you look at the household survey reveals that we created 393,000 part time jobs during the month, and we lost 54,000 full time jobs. Candidate Trump complained about these types of numbers. He talked about the proliferation of part time jobs and the loss of full time jobs on the campaign trail, yet now, it's "excellent news!". Small Rise in Manufacturing Jobs Although the report was not a disaster, it was not greater than many we've seen under the Obama Administration. The expectation was for a gain of 178,000 and we beat it. We came out with 209,000, which is really not a lot of jobs.  Given the size of the American economy, creating 200,000  jobs in a month is really not a lot of jobs.  But exceeding this rather low bar gives rise to over-exuberant headlines over a strong jobs report.  In fact they did revise last month's gain of 222,000 up to 231,000 and this month's was better than estimates. The unemployment rate did tick back down to 4.3; remember it jumped up to 4.4 and now it's back down to 4.3.  We did gain 16,000 in manufacturing jobs and they did revise upward last month's gain from 1,000 to 12,000, so that is somewhat good news, although as a percentage of the overall jobs, it is small. What's the Real Unemployment Rate? The Labor force participation rate did ratchet up one tenth, back to 62.9; still very low.  Wages rose .3% meeting expectations,  and most numbers remained status quo. It's not a disaster of a report but it is not spectacular.  We had plenty similar reports under Obama, which were previously labeled "fraud".  The unemployment rate is low, and candidate Trump was saying, "The real unemployment rate is closer to 49%". What's the real unemployment rate now? Are the Numbers B.S.? The question is, "Was candidate Donald Trump being honest? Did he really believe the numbers were phony or was he just saying that?" Or, was he being dishonest as a candidate and is he being honest as a president? Was he and honest candidate or was he being dishonest? Does he realize that these numbers are B.S. yet embracing them anyway to feather his own nest, when the economy is behaving exactly as it did when Obama was President. Counting Jobs Twice If you look at the jobs, about 40% of the jobs created were in leisure and hospitality, which was the #1 category, and then healthcare and education. We have record numbers of people now tending bar and waiting tables, although these are probably part time workers being counted multiple times as Obamacare drove away full time employment. Our Sponsors: * Check out Aeropress and use my code GOLD for a great deal: https://aeropress.com * Check out Boll & Branch: https://boilandbranch.com/SCHIFF * Check out Boll & Branch: https://boilandbranch.com/SCHIFF * Check out Infinite Epigenetics: https://infiniteepigenetics.com/GOLD * Check out Justin Wine and use my code SCHIFF20 for a great deal: https://www.justinwine.com Privacy & Opt-Out: https://redcircle.com/privacy

5 Elo 201732min

Trump Takes Credit for Dow Jones 22K We have an all-time high in the Dow Jones today, closing above 22K for the first time ever. Donald Trump did not tweet about this today, although yesterday he did put out a tweet that the market was about to hit 22,ooo; of course he is claiming credit for it. In fact he pointed out in his tweet that when he was elected, the Dow was 18,000 and not it is 4,000 points higher and of course he is claiming credit for it.  He says the media is ignoring it. They are reporting on the record highs, but believe me, when the Dow starts falling the media is going to pay a lot more attention to the declines than they do to  the rises, especially when the Dow starts falling the media is going to pay a lot more attention to the declines because Trump has already branded this market with his moniker. Bad Economic News Did not Dampen Stock Market Donald Trump did put out a tweet in which he was bragging about wages rising.  I don't know what Donald Trump is looking at - we got the personal income and spending numbers yesterday, and June income was flat.  They were looking for a gain of .4 and instead they got a flat number. That was the weakest number for personal income growth since November - the month Donald Trump won the election. He's talking about the wage gains, where are they? They don't show up in personal income, and most people's income is comprised of wages.This weak economic news didn't stop the stock market from making new highs today.  Of course, Apple was the main reason - it had almost a 5% gain. Our Sponsors: * Check out Aeropress and use my code GOLD for a great deal: https://aeropress.com * Check out Boll & Branch: https://boilandbranch.com/SCHIFF * Check out Boll & Branch: https://boilandbranch.com/SCHIFF * Check out Infinite Epigenetics: https://infiniteepigenetics.com/GOLD * Check out Justin Wine and use my code SCHIFF20 for a great deal: https://www.justinwine.com Privacy & Opt-Out: https://redcircle.com/privacy

3 Elo 201734min

Obamacare Repeal Charade Over The whole charade surrounding the repeal of Obamacare is finally over. The most recent attempt, labeled "Skinny Repeal" was a big fat lie.  They weren't really repealing anything, leaving the essence of Obamacare and accelerating Obamacare's death spiral. If Congress had repealed the employer mandates and the individual penalties but left everything else the same, then the number of healthy people making the irrational decision not to buy insurance would skyrocket and the sick people who would still be buying, would be facing higher and higher premiums and costing insurance companies bigger and bigger losses to be subsidized by the taxpayer. Let the Democrats Own the Disaster Many Republicans are upset with John McCain, for being one of the 3 Republicans to join all the Democrats in opposing the bill.  I think McCain did the GOP a favor. This bill, if passed, would have let the Democrats off the hook. They would have not owned Obamacare, and they would be responsible for its failure. Now we all know Obamacare is still there, it is exactly the way it was passed, the bill President Obama championed and signed, the one that Nancy Pelosi said, "We have to pass it to see what is in it."  We passed it, we know what is in it (although most people do not understand what is in it) and it is a disaster. Late last year most people thought the Republicans were going to repeal it - everybody but me. I didn't think that they had the guts to do it.  I had this interview on Russia Today in mid-January, it's up on my YouTube Channel; the title is, "Peter Schiff Very Skeptical of Obamacare Repeal". If you watch that video you will see that I say, "I don't think they're going to repeal it." No Guts to Repeal Of course, everybody thought, "of course they are going to repeal it. They've been campaigning on it for years!" The President promised it.  Everybody who has run for office as a Republican says, "Elect me and I am going to get rid of Obamacare!". They voted to repeal it many times when Obama was still President. And, of course, every time they voted to repeal it, Obama vetoed it, which of course, the Republicans knew was going to happen. As it turns out, that was the only reason they had the guts to repeal it because they knew it wouldn't actually happen. I knew that the Republicans would have a tough time taking away the free lunch. I knew that a lot of them were promising to repeal but keep the ban on pre-existing conditions and I knew that was impossible. Pre-existing conditions is the very essence of Obamacare.  You can't repeal it and preserve it at the same time. The Stock Market Has Not Gotten the Message The stock market, however, still doesn't understand the significance.  It hit another record high again today. The Dow was up, it closed at a new high today. The NASDAQ and the S&P were down. The transports managed a slight bounce from yesterday's drubbing.  Transports were down around 300 points yesterday. Again, more cracks in the armor for the stock market.  Look at what happened to Starbucks today.  The latest victim of declining retail sales; it was down around 9% today.  They reduced their guidance based on a drop in sales, now I don't know if you can blame this on people buying their coffee on Amazon. Our Sponsors: * Check out Aeropress and use my code GOLD for a great deal: https://aeropress.com * Check out Boll & Branch: https://boilandbranch.com/SCHIFF * Check out Boll & Branch: https://boilandbranch.com/SCHIFF * Check out Infinite Epigenetics: https://infiniteepigenetics.com/GOLD * Check out Justin Wine and use my code SCHIFF20 for a great deal: https://www.justinwine.com Privacy & Opt-Out: https://redcircle.com/privacy

29 Heinä 201744min

Summary: The Dow and the NASDAQ set new record highs today as the dollar sold off near the end of the day to close at yet another low for the year. Remember, the dollar index rallied 6% between the election and the Trump inauguration. It has now fallen more than 10% since inauguration. Many currencies are at two-year highs.  The Australian dollar is at a 2-year high, certain commodities are at a 2-year high, copper broke to a 2-year high; oil prices have been strong.  Oil was up about $.80 today after being up about $2 yesterday.  We're now above $48.50.  Getting close to $50/barrel again. Federal Reserve: "No Hike" One of the reasons for the strength in commodities is the weakness in the U.S. dollar. The catalyst for the weakness in the dollar today is the Federal Reserve, the FOMC, concluded their 2-day meeting today; their press release came out at 2.30pm ET and they announced that they did not decide to raise interest rates during this meeting. Nobody expected the Fed to raise interest rates, which is one of the reasons why they didn't. Balance Sheet Normalization? There was some anticipation that the Federal Reserve may be more specific concerning when it might start quantitative tightening or 'balance sheet normalization' as they call it. So people wanted to know when that would start, and by how much are they going to let their balance sheet to run down but the Fed did not allude to any specifics. All they said is that the process will begin relatively soon.  Now the last time they put out a statement, they said it would begin this year. Now they are saying it will begin 'Relatively soon'. Why didn't they leave it at "this year"? Because "this year" would be within the next six months. "Relatively Soon" leaves the statement comfortably vague enough to fit within the Fed's slippery parameters. Gold Hanging In There The markets didn't know what to do for the first half hour, but eventually the dollar broke, and gold finally popped up; it was up around $11-12.  It was about unchanged going into the announcement  and the knee-jerk reaction was a $2-3 selloff, then it came back to unchanged and then we had the rally.  Gold stocks had a pretty good day today; the GDX up about 2.5%; the junior minors doing a little bit better.  Yet these stocks have barely moved this year, but this is just getting started. Our Sponsors: * Check out Aeropress and use my code GOLD for a great deal: https://aeropress.com * Check out Boll & Branch: https://boilandbranch.com/SCHIFF * Check out Boll & Branch: https://boilandbranch.com/SCHIFF * Check out Infinite Epigenetics: https://infiniteepigenetics.com/GOLD * Check out Justin Wine and use my code SCHIFF20 for a great deal: https://www.justinwine.com Privacy & Opt-Out: https://redcircle.com/privacy

27 Heinä 201730min

Summary: My recent trip to Las Vegas for The Freedom Fest provided some interesting lessons.  My observations that we are paying more for less were illustrated by the theft of my luggage,  as there are no more luggage security checkers in baggage claim exits.  Also, for the first time, major Las Vegas hotels are charging from $15 - $18 for parking.  This is causing hotel valet workers to lose money, as customers are less likely to leave a generous tip (or any tip) if they are already paying quite a bit to park. So the Las Vegas experience is changing; we're getting less for more money.  Prices are going up and wages are going down. Taking Credit for Phony Statistics This is the real U.S. economy. Forget about all these phony U.S. statistics. The real world reflects the truth about the economy and why Donald Trump is President.  I wish candidate Trump would come back; I would rather see the President questioning phony government statistics instead of embracing them. I'd like to see the President talking about the stock market being a bubble rather than a bull market and claiming credit for the increase. Weakness in U.S. Dollar The big story is the continued weakness in the U.S. dollar, in fact this morning the dollar index hit a new low for the year. It's now back in positive territory as I am recording this podcast, but the low this morning was 93.64 on the dollar index.  Remember, the dollar index rose about 6% between the election of Donald Trump and the Inauguration, and the reason for the rally was the optimism for economic growth as a result of tax cuts, de-regulation, fiscal stimulus and a tighter Fed. Senate Backing Away From Repeal At the time, I argued that that was nonsense, and so far I am being vindicated.  We're six months into the Trump Presidency and nothing has happened. They haven't even been able to repeal Obamacare, nor are they going to.  The Senate already backed away from the version that I said would not work.  Trump did a press conference yesterday talking about Obamacare, assuring everybody that pre-existing ban is going to stay. The very essence of Obamacare is that insurance companies can't charge sick people more for insurance than they charge healthy people. That's the essence of Obamacare that doesn't work and that's what Donald Trump and many Republicans want to preserve. Preserving the Essence of Obamacare Of course, in order to achieve that goal, they had to have employer mandates and penalties.  These are the only things the Republicans want to get rid of. But they want to preserve the very essence of Obamacare and that's the mandates and penalties were designed to deliver. So now they have to come up with another way to deliver the promise of Obamacare. Currency Markets Get the Message The point is, the currency markets have figured this out.  The dollar has dumped better than 10% since the Inauguration, but the stock market has made new highs. The Dow Jones is at a new high today; the NASDAQ hit a new high yesterday, so it's a disconnect.  The initial rally in the stock market happened for the same reason the dollar rallied.  The currency traders have connected the dots. What's the problem with the stock traders?  Why are they oblivious? Dollar Weakness Spark Commodities The weakness in the dollar is also sparking a rally in multinationals, in commodities.  Look at the move today in Freeport-McMoRan a major copper producer; that stock is up better than 13%.  Oil prices are coming back up; oil is up better than a dollar today. Emerging markets are strong. Bullish Conditions for Emerging Markets I have been saying that a weak dollar is extremely bullish for commodities. Why? Our Sponsors: * Check out Aeropress and use my code GOLD for a great deal: https://aeropress.com * Check out Boll & Branch: https://boilandbranch.com/SCHIFF * Check out Boll & Branch: https://boilandbranch.com/SCHIFF * Check out Infinite Epigenetics: https://infiniteepigenetics.com/GOLD * Check out Justin Wine and use my code SCHIFF20 for a great deal: https://www.justinwine.com Privacy & Opt-Out: https://redcircle.com/privacy

25 Heinä 201736min