Recession ’100 percent chance’: Peter Schiff

A plunge in recent economic data puts the probability of a double-dip recession [cnbc explains] above 80 percent, according to modeling by Bank of America Merrill Lynch released Wednesday, reflecting the toll the U.S. debt downgrade, Europe’s woes and stock market volatility has taken on economic activity.

The Philly Fed puts a recession probability at 85.7 percent, while the consumer survey puts contraction chances at 80 percent, according to Bank of America’s probability model, which uses a so-called Bayesian technique that “tests if the economy is in a recession based on the interaction of variables that are associated with turns in the business cycle.”

“It’s a 100 percent chance,” said Peter Schiff, CEO & Chief Global Strategist of Euro Pacific Capital. “In fact the recession might have already started.”

“More timely consumer and business sentiment indicators dropped in August in response to a range of bad news,” said Michael Hanson, one of the firm’s economists, in the note. “While we concede the risks are rising, a recession is not baked in the cake. If the economy can avoid further shocks, we would expect a modest bounce in growth into the end of the year.” Source: (1) CNBC

The “financial system” has but one goal now — to prevent people, en masse, from withdrawing their funds from banks. A “run” on the banks would be the end of Depression Lite I and the beginning of Real Depression II. So get ready for more and more fairy tales from the banksters and their political and MSM slaves.

The way economists are trained today, in the Keynesian school, they believe that the economy will pick up if they convince people the economy will pick up. Bernanke is a fool, that is self-evident, but he is not a liar in the strictest sense, because he’s true to his training.

One day this will be completely discredited, and it will be seen that consumption on credit spurred by central banker comments does not produce recovery. It is savings, early-stage investment (that means non-inventory investment for you Keynesians, yes they are very different) and buidling up to production. If that lands when there are healthy savings, you get a healthy economy.

The solution? Less government involvement

It is quite simple really according to the Austrian School of Economics and would appear the Austrians are correct on this score!

The probem of too much debt cannot be corrected by assuming even more debt!

Recessions can be a good thing when wringing bad debt out of the economy in a process Austrians first deemed “creative destruction”.

Central Bankers may delude themselves by futile intervention in vain attempts to correct a liquidity problem when in fact the economy is suffering a solvency problem. Doing so guarantees inevitable and catastrophic depression in lieu of manageable recession as Central Bankers have that Wile E. Coyote moment of realization that the laws of economics inexorably apply no differently than the laws of gravity.