{"id":1182760,"date":"2023-03-06T12:10:33","date_gmt":"2023-03-06T17:10:33","guid":{"rendered":"https:\/\/bugaluu.com\/news\/peter-schiff-all-roads-lead-to-hard-landing-and-higher-inflation\/1182760\/"},"modified":"2023-03-06T12:10:33","modified_gmt":"2023-03-06T17:10:33","slug":"peter-schiff-all-roads-lead-to-hard-landing-and-higher-inflation","status":"publish","type":"post","link":"https:\/\/bugaluu.com\/news\/peter-schiff-all-roads-lead-to-hard-landing-and-higher-inflation\/1182760\/","title":{"rendered":"Peter Schiff: All Roads Lead To Hard Landing And Higher Inflation"},"content":{"rendered":"
\"\"<\/a><\/div>\n

Peter Schiff: All Roads Lead To Hard Landing And Higher Inflation<\/span><\/p>\n

\n

Via SchiffGold.com,<\/em><\/a><\/p>\n

The markets still seem to believe the Federal Reserve can ratchet price inflation back down to 2% while bringing the economy to a relatively soft landing. In his podcast, Peter Schiff throws cold water on this hopeful narrative. He goes through the economic data that came out last week shows that all roads appear to lead to a hard landing and higher inflation.<\/p>\n<\/p>\n

The stock markets finished up last week thanks to optimism that the Fed will pause rate hikes this summer. Atlanta Fed president Raphael Bostic\u00a0stoked that optimism<\/a>\u00a0when he said he\u2019s in favor of lower \u2014 and slower \u2014 rate hikes. \u201cRight now I\u2019m still in very firmly in the quarter-point move pacing.\u201d\u00a0 Even though Bostic tempered his comments, saying he will go where that data takes him, Peter said that\u2019s all the markets needed.<\/p>\n

\n

The bulls were grasping for straws and this is the one they grabbed.\u201d<\/p>\n<\/blockquote>\n

We saw big swings from Thursday\u2019s lows to Friday\u2019s highs in all the major stock indices.<\/p>\n

\n

Basically, all of the weekly gains were attributable to the Thursday-Friday rally, which was 100 percent the result of Fed-speak about the potential for a pause.\u201d<\/p>\n<\/blockquote>\n

There was quite a bit of weak economic data last week as well, including a 4.5% drop in durable goods orders. The Dallas Fed Manufacturing Survey came in at -13, below the low end of expectations. The Chicago and Richmond Fed manufacturing surveys were also weaker than expected. Meanwhile, the\u00a0goods trade deficit<\/a>\u00a0was $91.5 billion.<\/p>\n

\n

We keep getting number after number that disappoints to the weak side on manufacturing. This flies in the face of a soft landing narrative, because it suggests that if we land at all, it\u2019s not going to be soft. But maybe this is one of the reasons that investors are believing that we\u2019re nearing the end of the rate hike cycle, and we\u2019re going to get a pause followed by a pivot where we get our first cut.\u201d<\/p>\n<\/blockquote>\n

But Peter emphasized that just because we have a recession doesn\u2019t mean inflation is coming down. In fact, it could be the exact opposite. Regardless, inflation certainly doesn\u2019t appear to be cooling right now based on\u00a0the productivity and cost numbers for the fourth quarter.<\/p>\n

\n

Anybody who is hoping that the Fed is winning the inflation battle, these numbers throw cold water all over that narrative.\u201d<\/strong><\/p>\n<\/blockquote>\n

Productivity was down to 1.7% in Q4 from the 3.0% pace in Q3. Meanwhile, unit labor costs surged more than expected by 3.2%.<\/p>\n

\n

So, we have lower productivity and higher labor costs. This is not good if you think inflation is under control. The best way to control prices is with increasing productivity. But we\u2019re not getting that. What we\u2019re getting is increasing costs.\u201d<\/p>\n<\/blockquote>\n

Keep in mind that just because unit labor costs are rising doesn\u2019t mean workers are getting paid more. Unit labor costs also include things like health insurance premiums, payroll taxes and regulations.<\/p>\n

\n

In fact, a lot of things the government does to increase labor costs results in fewer people getting hired. Because the government makes it so expensive to hire people that businesses try to avoid hiring where they can. So, they hire fewer people as a result of these rising labor costs.\u201d<\/p>\n<\/blockquote>\n

Peter reiterated that all of this flies in the face of the notion that\u00a0inflation<\/a>\u00a0is coming under control.<\/p>\n

And while there were a couple of better-than-expected economic data points, the rule was weak economic data.<\/p>\n

\n

But not only weak economic data, but inflationary data, not just with the weakness in productivity and spiking labor costs, but the fact that all of the manufacturing output is low. We need more supply. Well, we\u2019re not getting it. We\u2019re not producing more. We\u2019re certainly consuming. So, where are we going to get the goods if we\u2019re not producing them? We\u2019re going to import them. That\u2019s what you saw with the merchandise trade deficit. We\u2019re importing the merchandise that we don\u2019t have the industrial capacity to produce, and this is driving up our trade deficit, which will ultimately drive down the value of the dollar and push up domestic consumer prices.\u201d<\/p>\n<\/blockquote>\n

Peter said most of the optimism about the Fed slowing down its monetary tightening isn\u2019t as much about the economy weakening as it is inflation weakening. But as Peter explained in a previous podcast, once the inflation genie is out of the bottle,\u00a0it\u2019s impossible to get it back in<\/a>.<\/p>\n

Peter reiterates this point by talking about inflation in the Eurozone.<\/p>\n

\n

What the markets still don\u2019t get is even if we end up in a recession \u2014 in fact, even if we end up in a financial crisis \u2014 the inflation rate is not coming down. In fact, I believe the next recession will be a catalyst to send inflation to new highs. \u2026 They still don\u2019t get the reality of stagflation. And they still don\u2019t understand that you can have stronger inflation in a weaker economy. And in fact, this economy is going to be so weak that it\u2019s going to supercharge inflation because the Fed is going to be forced to respond not only to the weakness in the economy, but in particular, the weakness in financial markets and the precarious fiscal position of the US government by unleashing massive inflation \u2014 maybe even more than unleashed during the lockdown periods of COVID, and that is going to send the inflation rate to new highs and bond prices to new lows.\u201d<\/p>\n<\/blockquote>\n

In this podcast, Peter also talks about:<\/p>\n