Will the Fed Run Out of Excuses as the Weather Warms?

  • Government’s first look at Q1 GDP
  • There was a lot of optimism around Q1 with expectations above 3%
  • Actual GDP was 1/5 of expectations at.2%
  • The rest of the story of Q1 GDP:
  • The deflator this time was negative – meaning that prices dropped by .1%
  • The last time the deflator was negative was 2009 Q2; still in the Great Recession
  • The previous occurrence of a negative deflator was in 1949
  • I believe the true rate of inflation is higher than -.1%
  • Inventory build continued into Q1 – businesses continue to believe the myth of the recovery
  • Inventory to sales ratio are the highest they have been since the Great Recession
  • They are still blaming poor economic performance on the weather. It is always cold in the winter; why is bad weather always a surprise?
  • The Fed just released their official statement on interest rate policy
  • They removed language from statement indicating it is unlikely that rates will rise
  • Continuing give the illusion that they are progressing toward a point when they will raise interest rates
  • The Fed went out of its way to dismiss all the bad economic news we got in Q1
  • The dollar just had its biggest 2-day decline in 6 years
  • The Fed came out and put a smiley face on the whole thing and the dollar recovered somewhat
  • The Fed is never going to confess that they are worried; that’s not their job
  • What evidence is there that things will improve in Q2?
  • Cheap gas windfall is over; oil prices have risen every week in the past month
  • Early April economic data is negative
  • An economy based on spending is a bubble; production grows an economy
  • Consumers have lots of debt, but they don’t have good jobs
  • Decline in the dollar signals that the markets are already sensing this
  • The Fed feels that economic growth will recover in Q2 & Q3
  • They also said they need to see additional strength in the labor market
  • Business are making foolish decisions because they believe the Fed
  • As the economy disappoints, the labor market will continue to deteriorate
  • The Fed can’t raise interest rates and they are headed ror QE4
  • We need more and more stimulus because we’ve built up a resistance
  • The real crisis will be a dollar crisis
  • When the economy heads south and the Fed has to do QE 4, the Fed will lose a lot of credibility
  • Janet Yellen will not be able to deliver on her promise to shrink the balance sheet by the end of the decade

Peter Schiff is an economist, financial broker/dealer, author, frequent guest on national news, and host of the Peter Schiff Show Podcast.



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