Debt-funded prosperity isn’t prosperity. From Peter Schiff at schiffgold.com:
A lot of seemingly positive economic data came out last week, but in his most recent podcast, Peter Schiff said it is just feeding into a delusional economic narrative that ignores the most fundamental storyline – debt. Everybody is talking about a new era of prosperity, but Peter said it’s a phony prosperity and it isn’t going to last.
The May jobs report came out Friday, sending another ripple of optimism through the investment world. According to the Department of Labor, the US economy added 223,000 jobs in May. The unemployment number fell to an 18-year low of just 3.8%. Average hourly earnings rose by 8 cents. Average wage growth came in at 2.7% over the past year. Pundits and prognosticators on the major financial networks were giddy at the news.
But the good economic news wasn’t limited to jobs. Analysts were also excited about the personal income and spending data – particularly spending, which rose 0.6% in April. Meanwhile, income was up 0.3%. Peter put this into some perspective.
Consumers are spending money twice as fast as they’re earning it for the month of April — six-tenths up on spending, three-tenths up on earnings. So, what does this tell you? People are tapping into already a pretty shallow savings pool, or they are running up more credit card debt to buy stuff.”
Of course, everybody likes this. In the short-run, this is great because spending feeds into GDP. It can make everybody feel good about this false narrative about the US economy. Despite all of the fundamental issues facing the economy – namely the massive levels of debt – most of the mainstream is exuberant.
America is a sea of prosperity. Our economy is immune. We’re just going to keep on growing, even though we’ve got a rising cost of living, even though we’ve got increasing interest rates, massive debt on all levels, all these big-picture problems that we’ve got, but everybody assumes there’s nothing to worry about. In fact, you look at CNBC, I was watching them, today after the jobs numbers … and they are so excited – to a man. I mean, they’re just giddy, like little schoolgirls, about the stock market. Everything is perfect. Nothing can go wrong. Keep on buying.”
To continue reading: The Problem With Phony Prosperity Is That It’s Phony