The Liberty Tree Lantern

By Peter Schiff
Published 10/03/09

Peter Schiff is president of Euro Pacific Capital and author of The Little Book of Bull Moves in Bear Markets and Crash Proof: How to Profit from the Coming Economic Collapse.

For those market boosters who are prattling on about the possibility of a “jobless recovery,” I offer an invitation to join me for a breakfast of “fat-free bacon,” “eggless omelets,” and “no-carb bread.” As unappetizing as such a meal may sound, it would nevertheless offer more substance than the oxymoronic concept of an economic resurgence without job creation.

Those who do cling to the absurd belief that, absent exponential productivity gains, the economy can expand while workers are being laid off will undergo a massive test of their convictions now that it’s clear the employment picture is bleak. Today’s weaker-than-expected report on non-farm payrolls revealed that employers shed 263,000 jobs in September. The losses propelled the headline unemployment rate to a 26-year high of 9.8%. U6, the Bureau of Labor Statistics’ most complete measure of unemployment, has risen to a dismal 17%. This figure includes those people who want to work full time, but have simply given up looking, or who have accepted part-time work in the interim. As it is similar to the methodology used during the Great Depression, U6 offers better historical perspective on the severity of our current crisis.

Taken together with yesterday’s larger-than-expected pickup in unemployment claims (first time claims rose by 17,000 to 551,000), today’s report makes it certain that the job market is still contracting, even while some indicators like GDP and consumer confidence are moving in the opposite direction.

There is no question that the sense of panic has temporarily subsided. In recent interviews, Treasury Secretary Geithner has been almost giddy in his descriptions of the recovery — all the while crediting his own policies for averting disaster. Americans are once again taking the government’s bait by spending money they don’t have to buy things they can’t afford. Evidence of this trend was contained in data released earlier this week which showed that even while income growth was largely stagnant, U.S. consumers showed the biggest month-over-month increase in personal spending in ten years! With the same report showing a 25% drop in the savings rate, the source of the spending money is clear. But depleting savings and increasing borrowing does not a recovery make.

To really recuperate, the government must allow market forces to restructure our economy. The government and individuals must rein in their spending; we must replenish our stock of savings, allow interest rates to rise, asset prices to adjust to economic reality, insolvent businesses to fail, and wages to reflect productivity. To accomplish these goals, subsidies that distort market forces must be removed and regulations that undermine our competitiveness must be repealed.

None of this can be accomplished without a degree of short-term economic pain. However, if we endure it, the payback will be a real recovery with plenty of new jobs that don’t rely on government stimulus money. If we refuse to allow the economy to experience a real recession, we will never have the benefit of a real recovery. Instead, we get the “jobless recovery,” a veneer of apparently positive indicators that merely obscures the underlying rot.

Over the last few decades, our industrial job market has atrophied while service- and public-sector jobs have grown unsustainably. We must restore balance. New jobs will have to come from areas that produce goods; bloated service and government sectors must be allowed to shrink. By propping up the sectors that need to contract, and running staggering budget deficits, the government cuts off the capital necessary to fund sectors that need to expand.

In truth, many of the service-sector jobs that exist today, such as real estate sales, mortgage finance, home improvement, and auto sales, were created in an environment of ever-increasing home equity, rising stock prices, and almost unlimited access to cheap consumer credit. With home equity gone, stock markets flat, and credit depleted, Americans find themselves needing to save rather than spend. But Washington has put through policies that have counteracted our good instincts.

While we were focusing our economy on consumer spending, much of the rest of the world was saving for the future. As such, we must begin to produce more for export, so that we can sell goods to those who have the savings to pay for them. That is the only way we can repay our debts, replenish our savings, repair our infrastructure, and rebuild our industrial base.

Another prerequisite to any real economic expansion is the potential for business owners to earn profits. With increased regulation and higher taxes on the way, these incentives are being diminished. In fact, via a phenomenon called ‘regime uncertainty,’ our current policy path is actually encouraging businesses to contract in order to prepare for a more hostile business environment.

Robust economies utilize all spare capacity, or restructure it for better use. Having 17% of our able-bodied population sitting at home or working part-time at Cinnabon indicates that our present policies are weakening the economy — even if GDP is growing. There is no “jobless recovery,” only senseless cheerleading. 

Now Liberty Tree Lantern analysis and comment about Peter Schiff’s article and thoughts in the above article:

 Capt. Karl would note that Mr. Schiff’s basic economic theory and concepts, enabling such forecasts are very closely aligned with that of The Liberty Tree Lantern.  However, due to the intense desire of the members of the U.S. Government and The Federal Reserve “System” not wanting to lose their almost absolute power over not only our money but our daily behaviors and decisions and to whom our earnings from our labor goes, the “Powers That Be” are not going to let “The Matrix” like economy collapse as Mr. Schiff RIGHTLY prescribes because it is that very MATRIX that gives them their power over us and our earnings. 

Without The MATRIX, the economy that only exists in our minds believing that Monopoly money printed on glorified computer printers at the office of “The Fed” are worth 100 cents when in reality they are only pieces of paper with ink on them called “NOTES”  Federal Reserve “Notes” as printed thereon, which is an I.O.U. promising to pay with ‘real’ money in the future, in this case a future that will never arrive, our freedom, liberty, unalienable rights and individual wealth for the vast number of our average common working Americans, being able to keep their own earnings and choose for themselves what they want to do with their money, would be restored.  This, to the “Powers That Be”, is a horror that is far too alarming to behold.  Therefore, The Liberty Tree Lantern submits to our dear knowledgeable and noble Mr. Schiff, that the economy over the next 8 – 12 months will boom as the result of pumping an ever increasing level of TRILLIONS of dollars in Monopoly money/Federal Reserve “NOTES” into the economy resulting in cash seeping into our economy, created out of thin air demand for goods and services and millions of people being re-employed and some making more money than ever before.

And that, my intellectual friend (who I hope to meet someday), is when we will KNOW that the total and nightmarish collapse of The MATRIX, our economy, is close at hand.  When almost everybody is lulled into thinking that everything is on the mend, but behind the scenes there will be all sorts of disruptions in the economic forces because an economy based on paper and ink alone is not sustainable due to Natural Laws of economics.  We are well on our way to a BLACK FRIDAY that makes 1929 look like a cake walk.  And the ONLY WAY to tell when it is close at hand is when most everybody is back to work and everything seems, for the most part, honky-dory.  But, in the background, economic analysts will be scratching their heads knowing something isn’t right.  More and more banks will fail to the point that the FDIC will need infusions over and over again.  Taxes on the average common blue collar worker will go up substantially to pay for all sorts of TARP, stimulus, BAILOUTS, untold numbers of Socialist spending  programs and last but DEFINATELY not least Social Security and Medicare, which is a $99 TRILLION Dollar hand to mouth Ponzi scheme that makes Bernie Madoff look like a rank amateur.  Only this ponzi scheme is about to financially cripple 306 MILLION Americans and our entire nation.

And THIS IS A GOOD THING!  THIS IS A BLESSING!  Because IF we then have become motivated enough to learn about the value of freedom, liberty and capitalism, in addition to the 28 Freedom Principles in which The Constitution was drafted, we will become free and after about five years of hardship, turmoil and a possible Re-Revolutionary War, we will restore our INDIVIDUAL freedom, liberty and prosperity.  You see folks as long as ANY PART or hint of The MATRIX exists, we will never have our INDIVIDUAL freedom, liberty, unalienable rights or prosperity that can only be created by them as blessed by God and not the economic and personal slavery by and resultant from Constitutionally contemptuous Socialist, Communist, and/or Fascist “progressive” members in all three branches of the U.S. Government and their  cartel of twelve private banks that make up The Federal Reserve “System”.

Peter Schiff is exactly right.  The Matrix (our current economy based on Monopoly money and Constitutional contempt) has got to comprehensively be shutdown, so that we can rebuild our freedom, liberty and economy, even though it is going to hurt like hell for a few years.