Author: Peter Schiff

Climbing interest rates are putting the squeeze on the mortgage refi market. Applications to refinance home mortgages fell 5% last week, dropping to an 18-year low. According to CNBC, mortgage application volume was nearly 27% lower than a year ago when rates were lower. The refinance share of total mortgage application volume fell to its lowest level since August 2008, at just 35.3%. As Peter Schiff pointed out in a recent podcast, this is a bad sign for the broader economy. With rising rates, US consumers will no longer have the option of using their house as an ATM. One of … Continue reading →

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Americans have loaded themselves down with debt and some are struggling to pay the bill. Total household debt hit a record $13 trillion in 2017, eclipsing levels seen on the eve of the Great Recession. Americans have been burning up the credit cards. Revolving debt grew by $26 billion in the fourth quarter of 2017 alone, a 3.2% increase. Americans have run up a nearly $1 trillion credit card tab. Meanwhile, flows into serious delinquency have increased steadily since the third quarter of 2016. The delinquency level for subprime credit cards is particularly concerning, having risen to a level higher than at the peak … Continue reading →

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Here’s another sign that the air is starting to come out of the subprime automobile bubble. The default rate on subprime auto loans has reached levels higher than we saw during the financial crisis. As a result, lenders are shutting off the easy money spigot. That’s bad news for the auto industry. According to the latest data from Fitch and reported by Bloomberg, the delinquency rate for auto loans more than 60 days past due hit 5.8% in March. That’s the highest level since 1996. The default rate during the peak of the financial crisis came in at around 5%. And this is … Continue reading →

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Ron Paul talked about bubbles during his Liberty Report last week, noting our articles on the subprime auto bubble, along with housing bubble 2.0. As Ron pointed out, it’s hard to keep up with all of the distortions in the marketplace thanks to a decade of Federal Reserve easy money. How do you cover all the bubbles? The nature of what the Fed does by manipulating interest rates to lower than the market rate, everything has to be affected to some degree by a bubble and a distortion and a malinvestment, and excessive debt.”  Ron pointed out that bubbles are inevitable when central banks … Continue reading →

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There were more signs of a retail apocalypse in the first quarter of this year. Defaults by retail companies rated by Moody’s hit an all-time high in Q1. There were a total of nine defaults among Moody’s-rated retail corporates. According to Wolf Street, total corporate defaults in Q1 were up 22% from last year, and the nine retailer defaults accounted for nearly 1/3 of them. As Wolf Street put it, these are not mom-and-pop stores.  These are retailers large enough to be rated by Moody’s –  “corporations that make up the core of the Brick-and-Mortar Meltdown.” Here are some of the retail companies that defaulted … Continue reading →

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It looks like the subprime auto loan bubble has popped. Last year, we reported that the auto industry’s check engine light was on. Now it looks like the thing is totally breaking down. Small subprime auto lenders are starting to go belly-up due to increasing losses and defaults. As ZeroHedgenoted, “we all know what comes next: the larger companies go bust, inciting real capitulation.” Bloomberg recently reported that not only are subprime auto lenders facing tough business conditions, there are also allegations of fraud and under-reporting of losses. Growing numbers of small subprime auto lenders are closing or shutting down after loan losses and slim … Continue reading →

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In light of the 30-year anniversary of the Black Monday Crash in 1987 (when the Dow lost more than 20% in “one day”, we should be reminded that investor anxiety usually increases when markets get to extremes. If stock prices fall steeply, people fret about money lost, and if they move too high too fast, they worry about sudden reversals. As greed is supposed to be counterbalanced by fear, this relationship should not be surprising. But sometimes the formula breaks down and stocks become very expensive even while investors become increasingly complacent. History has shown that such periods of untethered optimism … Continue reading →

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If government regulations are squeezing your business, and you want to avoid the risk inherent in the mainstream financial system, what do you do? Buy gold! This is true even if your business is – shall we say – not completely above board. In fact, Japanese organized crime is reportedly turning to gold as its traditional revenue streams are squeezed by stepped-up law enforcement. Deutsche Welle reports gold smuggling and theft have risen sharply, particularly in southern Japan. Obviously, we don’t want to get involved in organized crime, but can we learn something from these Japanese gangsters? Buy Gold at … Continue reading →

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Donald Trump has made good on one of his most audacious campaign promises by submitting what he describes as the biggest tax cut in U.S. History. For once, at least, this does not appear to be Trumpian braggadocio. It really may be the mother of all tax cuts. But if passed, what may this bunker buster do to the economy? While I have rarely met a tax cut I didn’t like, this one just may be more likely to send the economy into a downward spiral than it is to send up to orbit. As I mentioned in my January … Continue reading →

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Stunned political analysts are missing the most plausible argument explaining Donald Trump’s unexpected victory. The misreading of the American electorate stems from the political class’ acceptance of mistaken (and increasingly insane) economic dogma that has arisen over the past generation. Based on their flawed understanding of economics, the pundits could simply not understand why the electorate had become totally disillusioned. According to the ideas favored by economists on Wall Street, in government, and in the Federal Reserve, Americans should be enjoying a marginally good economy. Unemployment is low, home values and the stock markets are high, credit is cheap and … Continue reading →

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Currently economists and market watchers roughly fall into two camps: Those who believe that the Federal Reserve must begin raising interest rates now so that it will have enough rate cutting firepower to fight the next recession, and those who believe that raising rates now will simply precipitate an immediate recession and force the Fed into battle without the tools it has traditionally used to stimulate growth. Both camps are delusional, but for different reasons. Most mainstream analysts believe that the current economy can survive with more normalized rates and that the Fed’s timidity is unwarranted. These people just haven’t … Continue reading →

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For years I have argued that ultra-low interest rates act more as an economic sedative than a stimulant. This idea has elicited laughter from the economic establishment. But it is becoming clearer that rates set by central banks that are far below the levels that free markets would have otherwise determined have dragged the world into the economic mud. The simple proof is currently arising in Europe where negative interest rates are now transforming companies from agents of growth, production, and employment into financial sloths that exist solely to borrow money. In a September 7 front page article, the Wall Street Journal reported that as of September … Continue reading →

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Economics is far simpler than most in academics or government would have you believe. To make accurate predictions all you really need is an honest appreciation of the self-interest that is at the heart of free market transactions and an ability to understand how regulations that attempt to “correct” these realities don’t work. This is certainly the case with the completely predictable slow-motion train wrecks that are the signature U.S. domestic policy experiments of the last eight years: Obamacare and Federal Reserve stimulus. From the start, I issued countless commentaries on why both would fail spectacularly. The jury has started … Continue reading →

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Yesterday was the end of some short-lived rallies as stocks fell back from their record highs and the dollar index retreated back to pre-Brexit lows. In the long term, these changes are showing the dollar continues to lose its purchasing power due to central banking’s bad fiscal policy. As the dollar declines, gold prices are likely to respond with upward movements throughout the remainder of the year. The Bloomberg Dollar Spot Index halted a drop of up to 1.2% after William Dudley, Federal Reserve Bank of New York president and chief executive officer, said policymakers could potentially raise interest rates … Continue reading →

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If the Economy were a car, productivity would be the engine. Heated seats, on-demand 4-wheel drive and light-sensitive tinted windshields, are all very nice. But they mean little if the engine doesn’t turn and the car just sits in the driveway. The latest productivity data from the Commerce Department confirms that our economic engine is sputtering. If you strip away all the bells and whistles of economic analysis, the simple truth is that the increased living standards that have taken us from the stone age to the digital age happened because we increased our productivity. Better plows, windmills, bulldozers, factories … Continue reading →

The post Central Bankers Are Choking the Economy appeared first on LewRockwell.