U.S. Economy: The Recovery is Just An Illusion

I don`t think the economy is actually doing well, that is the problem. It`s just an illusion, it`s the stock market going up, it`s the real estate market going up, it makes people think the economy is doing well but it`s actually doing lousy because the monetary policy that is needed to prop up these bubbles is preventing the kind of restructuring that we need in this economy to actually produce legitimate economic growth and good jobs. That is why when you actually poll the public and ask the people how they feel, to them it feels like a recession.

Peter Schiff is an American businessman, investment broker and financial commentator. Schiff is the CEO and chief global strategist of Euro Pacific Capital Inc.

The Markets Are Going To Continue To Decline

Right now the markets are going to continue to decline as long as the fed stays on this taper timeline. And I think the Fed is going to be connaissance of that. If you remember, they are basing the taper on the recovery which is the result of the wealth effect of a rising stock market and a rising real estate market. That allows us to lever up and borrow more money to buy more stuff that we can`t afford. But as these bubbles deflate, because the Fed is threatening to remove the props, now all of a sudden the recovery disappears, we are heading right back into recession and the only way to stop the markets from falling and reverse the illusion of a recovery is to do more QE and that is what the Fed is going to do, unfortunately.

Peter Schiff is an American businessman, investment broker and financial commentator. Schiff is the CEO and chief global strategist of Euro Pacific Capital Inc.

Video: Investing, Real Returns

Peter Schiff is an American businessman, investment broker and financial commentator. Schiff is the CEO and chief global strategist of Euro Pacific Capital Inc.

The Federal Reserve Will Have To Reverse Course

Peter Schiff is an American businessman, investment broker and financial commentator. Schiff is the CEO and chief global strategist of Euro Pacific Capital Inc.

A Different Housing Bubble

In America now, its a very different housing bubble because the houses now are being bought by institutions, hedge funds, private equity guys, to rent them out to the guys that lost them out to foreclosure the last time around.

So, this housing bubble is very different from the last one. But I think, its even more dangerous because these guys that own these houses, they will sell them quickly just like they are going to cut their losses in their stock portfolio. And you have all these houses now that are owned by hedge funds that are empty because they actually can`t find tenants because people don`t have jobs, so they can`t afford to rent these houses. So, they want to rent small apartments and apartment rents are rising very rapidly in the United States, meanwhile we have all these single family homes for rent sitting vacant, yet we are still building them because of the Federal Reserve. So, if we had a rational interest rate policy, we would have lower home prices, we would`t be squandering our resources.  

Peter Schiff is an American businessman, investment broker and financial commentator. Schiff is the CEO and chief global strategist of Euro Pacific Capital Inc.

Housing Bubbles Everywhere

There are housing bubbles everywhere. Wherever interest rates are artificially low, they are going to impact asset markets, particularly something like housing because most of the houses that are bought are not bought with cash. Usually there is debt involved, people borrow money to buy a house. And the cheaper it is to borrow, the more you can pay for your house. If you have an extended period of time where interest rates are held artificially low, you are going to have artificially high real estate prices.

Peter Schiff is an American businessman, investment broker and financial commentator. Schiff is the CEO and chief global strategist of Euro Pacific Capital Inc.