저자: PeterSchiff · 외국인
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9월 PPI 1개월 +1.3%(연율 17%), 수출물가 +2.2%로 인플레 재가속 주장. 유가 $110 돌파 후 150 이상 갈 것이며 에너지·원자재 전반 상승 전망. 주택시장은 2007년형 악화, 2008년과 2021년 인플레가 동시에 오는 구도. 연준은 QE로 대응해야 하지만 인플레 때문에 딜레마, 달러 약세와 금 수요 강조. 패니메이·프레디맥 추가 구제 필요 주장. 금 보유·해외분산 권유.
다듬은 글
There is an inflation bomb that is going to be going off. The September PPI was up 1.3% in 1 month. That annualizes out to 17%. That is a huge number. But, look at the export prices, up 2.2%. That's more than the entire 2% 1-year inflation target in a single month. That annualizes to 30% inflation. Oil prices hit a new 5-month high today.
We hit $110 a barrel. So, oil prices are going to go up towards 150 and then higher. And it's not just oil, it's going to be everything energy-related, all commodity prices. The housing data is so bad. It reminds me of 2007 before we had a financial crisis. So, you've got something similar to 2008 happening in the housing market, something similar to 2021 happening with inflation, except they're happening at the same time.
If you think the cost of living crisis is bad now, wait till you see how much worse it's about to get. The Peter Schiff Show. As I've been looking at all of the recent data that's been coming out both on inflation and housing, I'm reminded of two times in the past where we had what should have been warnings of a problem, but where the mainstream was very complacent in the face of what should have been some very, very problematic evidence that showed that there was a real problem.
This relates to both inflation and housing. And I'm going to start with inflation. That's kind of where I left off on my last podcast. We talked about the CPI numbers on the podcast. We hadn't gotten the PPI numbers or the import export prices, they came out the following 2 days. I did discuss those on my Friday Shift Gold Market Wrap, but I never got a chance to discuss it on the main podcast.
So, I'm going to do that again today. But, what this time period reminds me of is late 2020, early 2021, as the CPI and PPI numbers and the import export prices really began to move up. And it was pretty much similar to what's happening now in that the producer prices were making bigger moves than the CPI, and so were import export prices.
And I remember on my podcast specifically talking about these numbers, the import export prices, how they were more reliable, how they were more valid because of the lack of subjective manipulation, no substitution, no hedonics. But, I also talked about the fact that these numbers were leading indicators of the consumer price increases.
And the rise started in late 2020, and again, Donald Trump was president. And initially, nobody really cared about it. Nobody thought it was of any concern. In fact, that's when the Fed initially adopted its inflation averaging target because inflation rose above 2% even as measured by the CPI. But, instead of reacting to that by tightening policy, the Fed said, "You know, we need to go a little bit above 2%.
We we need to make up for all of the years where we were below it, which at the time I pointed out that that was a bunch of nonsense. There was no reason to make up for the fact that inflation was below 2% as if we got gypped or something. Like, "Hey, you know, I know you guys were really hoping for 2% inflation, but you didn't quite get it.
Your cost of living only went up by 1.8%. So, don't worry, we're going to make it up to you. I know you missed out on that extra 2% increase in the cost of living. So, we're going to let inflation run a little hot so you can catch up because we don't want to feel that you got gypped out of all the inflation that you're entitled to.
So, we're going to make sure." I mean, it was nonsense. And again, one of the other reasons that I remember was a bogus justification for targeting 2% inflation is the Fed said, "We want to make sure that we don't have deflation." So, if you know, if we try to have inflation that's too low, we could slip into deflation.
And so, in order to make sure that prices don't go down because we all know what a disaster that would be. If the cost of living actually went down, all hell would break loose. So, we need to save the public from the pain of the cost of living going down. We want to make sure it goes up. But, we have to make sure it goes up by 2% because we don't want to get too close to zero because we might slip into the negative.
Well, if we avoided deflation for prior years, if we didn't get a negative number, if we got 1% or 1 and 1/2% or 1.8%, there's no reason to try to make up for that because we dodged that that bullet. So, why go back and say, "Hey, now we want to make sure it's 2%" because lower inflation is better than higher inflation.
So, 1% is better than 2%. But, the Fed wanted to come up with an excuse not to tighten policy. And so, they came up with that BS inflation averaging. We're not trying to get 2%. We're trying to have inflation average 2% over time. And again, at the time, I said that eventually they're going to give up on that because inflation is going to be so high, they're not going to talk about averaging it back down.
And that's exactly what happened. But I don't want to get into that particular aspect in today's podcast. The point that I'm making now is that the Fed wasn't worried that inflation was rising. In fact, it welcomed it. It acted as if it was good news because it was helping to average up the too low inflation of the past.
And this should not have been a surprise that the numbers started to move up because we unleashed the most inflationary monetary and fiscal policy in US history during the COVID years, during the pandemic. And I was talking about this. I called this out. Remember, most of the mainstream economists and strategists, when they looked at the pandemic, they thought it was deflationary.
They thought, "Oh, no, the economy is tanking, people are losing their jobs, GDP is going down, and this is going to be deflation." And you know, initially interest rates went way down as if, you know, that was going to happen. The stock market went down. And so, everybody was saying, "Hey, we need stimulus.
We need stimulus to fight off this deflation." And I was on my podcast at the time saying the opposite, that it was highly inflationary. Yes, people were losing their jobs, but they weren't losing their paychecks. In fact, their paychecks were bigger. Remember, a lot of people who lost their jobs, the government replaced their paycheck with unemployment benefits that exceeded what they were earning.
This was for the first time ever where it was better to lose your job than have your job. Because you actually got more money being unemployed than you got working. And for most Americans, you know, that's a great deal because they don't really like their jobs. They're happy not to go to work, especially if they get a bigger paycheck not working than working.
You know, I remember there were a few Republicans at the time that wanted to have a limit where they adjusted these benefits so that you couldn't get more. The most you could get was 100% of what you were earning. And even that was an incentive not to work. Because if you can get paid the same amount not to work as if you work, well, then why work?
Especially since you don't have to commute back and forth. That costs money. That takes time. You got to get ready for work. Women, you know, they spend a long time getting their hair done, getting their makeup done. They don't get paid for that, but they got to do that. So, that's takes time out of their day.
And if you don't have to do any of that, if you can just lie in bed and sleep in and get the same amount of money, but even that that was shot down in a bipartisan way. They said, "No, no, no, this is too big an emergency. We don't have the time to do that. We just have to send out these checks. Everybody gets the same check no matter what they're earning.
It's too important. And how could you be heartless you know, during a pandemic, people are dying, people are quarantined, yet you want to restrict some of this money? No, everybody has to get this money." And so, people were at home and they were shopping. They were buying stuff. They were spending money.
They weren't producing stuff. They weren't working. They weren't productive, but they were buying. That was highly inflationary. What should have happened to the extent that we even did this asinine policy of quarantine and nobody goes to work, we should have said, "Okay, well, then everybody has to stop spending.
If you're not working and you're not earning money, well, you know, you can't spend." And in fact, what the government did, even though the government was flooding consumers with money, they said, "You don't have to pay your rent. You don't have to pay interest on your student loans." So, people were actually earning more money than they did when they had jobs, and they didn't even have to pay their rent.
They didn't even have to pay back their student loans. So, it freed up massive amounts of money for spending. And, you know, it wasn't just the workers that got all this free money. Remember the PPP? Where if you had a small business, you know, you could just apply for a PPP loan, and they weren't even loans, they were gifts, because you didn't have to pay the money back.
So, you know, if somebody loans you money, but you don't have to pay it back, how do you even call that a loan? Right? That's a gift. And I remember at the time, when they were doing this, there was a couple of Republicans that said, "Hey, I think that people should have to validate or verify that the information is accurate.
There should have to be some kind of proof that they actually have a business here." And also, there were some Republicans that wanted to have a a contingency that you actually had to prove that your business suffered a decline in its revenue because of COVID. Because a lot of businesses actually made more money during COVID.
It wasn't like everybody's business suffered. A lot of people had higher sales during COVID. I mean, my bank tanked during COVID. I mean, all of our transactions went down, and so my bank had a tough year. But my asset management company we had a great year. I I had a record year at Schiff Gold. Lots of people were buying gold in 2020.
I had record sales. So, that business didn't suffer during COVID. It actually did well. But I could have just applied for a PPP loan, and I would have got it. Schiff Gold would have got one. I could have lied like everybody else. My asset management company, I could have applied for a PPP loan there.
I would have got one. But there was some Republicans that said yeah, let's make people prove that they actually need the money and verify, and that was shot down. Congress said, "No, we can't do that. That's not fair. That's heartless. We can't ask anybody. Let's just do the honor system. Let's just trust Americans to be honest with their PPP loans." Yeah, what a ridiculous idea that was.
Cuz I pointed it out. Again, I didn't Monday morning quarterback. There are a lot of people years later that came back and said, "Yeah, this was not a really good idea. There was a lot of fraud. There was a lot of abuse." Well, I said that that was going to happen as they were passing these bills, that it was going to be fraught with fraud and abuse.
It was going to be the most abused government program ever conceived, and that's exactly what happened. Sure, there have been a few people that have been prosecuted for fraudulently applying for these loans. But the vast majority of fraudulent loans were never repaid, and the borrowers were never prosecuted.
But the point is that all of these people, whether they were business owners or pretend business owners or employees, the government gave them money, all this money. You know, the Fed's balance sheet exploded. It went from 4 trillion to 8 trillion as we dropped interest rates to zero. We lit an inflationary fire during COVID.
Now, most people again don't understand what inflation is, so they didn't care that we were creating all this inflation. But then when the sparks, you know, became obvious when you started to see the consequence of the inflation in the PPI, in the import-export prices, in the CPI. Nobody cared. Nobody was worried.
But me, I was out there screaming on my podcast, "Hey, we got a big inflation problem here." I've spent my whole career telling people to think about risk. And the biggest risk for anybody with a family isn't the one they argue about on cable news. It's a much simpler question. What happens to the people who depend on you if you're not there?
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Get your free quote at ethos.com/gold. That is e t h o s dot com slash gold. Application times may vary, rates may vary. Now, after many months of the inflation numbers getting worse, the finally started to talk about it. And the Fed actually had to you know, acknowledge it. And what did they say? Well, yes, we do have this increase in inflation, but it's transitory.
Don't worry about it. It's maybe temporary. It's the result of the pandemic and the supply chains and the bottlenecks. So, we don't have to do anything about it. We don't have to rush and just start hiking rates now and be premature. We could just wait and see because it's probably just going to resolve itself, you know.
It's just a transitory thing and so, we don't want to overreact to this transitory thing. And then all of a sudden, it became the biggest problem in the economy. We got that, you know, 9.1% year-over-year was the peak. And all of a sudden, the Fed, oh my god, we got an inflation problem and rates were jacked up.
And they eventually got, what was it, 5 and 1/4% or something like that. But eventually, the Fed reacted. And of course, it was inflation that defined the 2024 presidential race. The reason that Trump won was because inflation was so bad and it got blamed on on Biden. Now, as I said, Biden was the fall guy, not that he's completely innocent.
And plus, he was VP for 8 years as they were running up that. But, the seeds of that inflation were sown under Trump. Trump got lucky. He got out of dodge and he was able to blame Biden by saying, "Oh, look. Look, you inherited low inflation." No, he inherited a ticking time bomb of inflation. The inflation was started on Trump's watch.
It just ended up manifesting itself with the consequences cuz there's always a lag. You create the inflation, you expand the money supply, and then prices eventually go up. They don't go up right away. There is a delay, and that delay benefited Trump because he was able to use that to get a second term because all of the inflation that he basically created didn't become an issue until Biden happened to be in office.
Now, Biden's policies made it worse, and one of the reasons that inflation is going to be so bad now is because of what Biden did once he inherited the high inflation from Trump. Yes, inflation went down the way the CPI measures it every year that Biden was president. 2021, the CPI was up 7% for the year.
That was the highest calendar year. 2022, the CPI was up 6 and 1/2%. But in 2023, it dropped all the way down to 3.4. And Biden's last full year, 2024, it was 2.9. So, all those years, you know, above 2%, but but declining. We had four consecutive years of declining inflation as measured by the CPI under Biden.
Yet the cumulative effect of all that inflation was very bad, and that's why Trump and the Republicans won. Well, it's the same reason that they're about to lose the midterms and probably lose in 2028 in the general election. As I mentioned on my last podcast, we got the CPI numbers. The CPI was up 0.6% in September, and 3.7% was the year-over-year rate.
But if you annualize that 0.6%, you're at 7.4% um inflation. That's a big number. Nobody is talking about these big numbers. But, what I think is is more concerning, we've got the first 9 months of 2026, 6. And during those 9 months, the CPI is up by 4%. So, that's more than the year-over-year increase of 3.7 because, you know, this is a big year, 2026.
4% already. That means that the first 9 months of 2026, prices are up more than the entire year of 2024 or 2023. And in fact, if you look at the PPI numbers that we've got and the import-export numbers, I'm going to mention those in a minute, it's very likely that the next 3 months of the year, last 3 months, are also going to be pretty hot numbers.
And that for the entire year, the CPI will be up 5%, maybe 5.something percent. That is a big number. And what's worse is going to be the next 2 years. And in fact, you know, I hear all these Republicans want to talk about how Trump has, you know, brought down the Biden inflation, that Biden gave us 9.1% inflation, 27%, whatever it is, accumulative over 4 years, and how Trump has brought it back down and it's, you know, in the twos.
This is all a bunch of lies. First of all, it's not in the twos. The most recent numbers are in the threes. But, if you look at the most recent numbers, not just year-over-year, where, you know, four or higher. And the fact that this is going to be the worst year for CPI since 2022. This is not Trump solving the inflation problem.
In fact, I keep hearing the Republicans talk about how much stronger the economy is under Trump, that we had this terrible economy under Biden. According to Trump, it was the worst economy in the history of the world, and now we have the greatest economic boom in the history of the world. Few people would realize that GDP growth under Trump, his first 2 years.
Now, the second year isn't over yet, but you know, we only got one quarter left. But even if it's a good quarter, it's not going to matter. Trump's first 2 years in office, the economy had slower growth than Biden's last 2 years. Think about that. The economy, the way the government measures it, GDP, is weaker under the first 2 years of the Trump administration than it was during the last 2 years of Biden.
Now, how does that square with what the Republicans are saying or what Trump is saying? We have the greatest economy ever. I mean, Trump says that nobody can believe it, that people talk to him and they say, "Sir, I can't believe this. This I've never seen anything like this. We've never seen growth anything like this." Well, yeah, we saw growth stronger than this when Biden was president.
I mean, growth was stronger during the worst economy in the history of the world than it is now during the greatest. And it's not just that the economy is weaker under Trump. And you know, when people blame rising interest rates on the strong economy, I say, "Wait a minute, but there is no strong economy.
Interest rates are going up despite the fact that we have a weak economy. We have a weaker economy than the economy we had under Biden." But not only is GDP growth slower under Trump than it was under Biden, but inflation is higher. Inflation is higher the first 2 years of Trump. The CPI is going to go up probably by more than the last 2 years of Biden.
So, how how is that an improvement? It's getting worse. The cost of living is rising faster. That is why the Republicans are sinking in the polls. In fact, just yesterday there was a Reuters poll where Trump's approval rating in this one poll sank to 31%. That's the low for Trump including his first term and this term.
That's the lowest I think he's ever received. Now, it's just one poll, it's not an average, so we'll see what happens, but that's the most recent poll. 31%. In fact, look at what's happening with the Ohio governor race. So, Vivek Ramaswamy, who's, you know, very much a Trump guy, very big Trump supporter, he's running for governor in Ohio.
Now, Ohio hasn't had a Democratic governor in 16 years. And earlier this year the odds of Ramaswamy winning were over 85%. I just looked at the odds today. They're 26%. Ohio's going to have a Democratic governor the first time in 16 years. Trump won Ohio all three times he ran for office. Yet Ohio doesn't want Ramaswamy.
And I think a good reason for that is because they are betrayed by Trump. They don't want the Trump economy. I mean, sure, there's still some loyal Republicans, you know, that are going to vote for Vivek, but they're going to lose that race, at least if these betting odds are correct. I had no idea that he had sank that much, but this is a harbinger of the problem that the Republicans are going to be facing nationwide as a result of the inflation problem that has gotten worse under Trump.
And what's particularly frustrating about it is that the Republicans deny that it's gotten worse. And you know, I just heard Trump again today talking about prices going down, grocery prices coming way down. Where the hell is the president shopping that he sees grocery prices going way down? There are no prices that are going way down.
In Trump's imagination, and he keeps talking about how oil prices are going to crash, you know, after the war is over. Well, first of all, we have no idea when this war is ever going to be over, if it's ever going to be over, but there's no indication that that's going to happen. Every investor understands counterparty risk.
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We hit $110 a barrel. But, I think oil prices are going to soar after the midterms because that they're going to have to turn off the spigots on the Strategic Petroleum Reserve. So, oil prices are going to go up towards 150 and then higher. And it's not just oil, it's going to be everything energy related, all commodity prices.
This is a huge inflation problem. You know, I mentioned on on X yesterday that I got my electric bill for I think it was September and it was 26% higher than it was for the same month in the prior year. The same house, same appliances. That's a big increase in my electric bill. And you know, this is happening, I'm sure, across the country.
And insurance is going way up. All all kinds of I'm looking at these streaming services. You know, I subscribe to quite a few of them. You know, the Netflix earnings route today, but all these streaming services, every year, there's never been a year that they don't jack up the price. And they price increases are way, way above 2%.
They're usually like 8%, 10% every year, like like clockwork. Everybody keeps raising their prices. So, when Trump is talking about how prices are coming down everywhere, again, that's the same nonsense he said in December when he got me kicked off of Fox News. It's almost going to be a year now. It's about, I guess, 10 months since I was banned from Fox News because I said that prices were going up.
And what did I say on that interview in December? I said that oil prices were going to keep rising. The administration was saying they expect oil prices to go down. I said, "No, they're going to keep rising." And I said that the cost of living was going to keep going up, that the president's policies were not working, they were not lowering inflation, and he went ballistic cuz he said, "I'm a jerk cuz I don't realize that prices are coming way down.
Everything is getting cheaper." Nothing is getting cheaper. Everything is getting more expensive, but the point I'm making here is this should be an alarm. Cuz look at these other numbers, right? So, look at the PPI numbers that came out after we got the CPI. And nobody really talked about these because, you know, they talk about the CPI.
They don't bother to look at the PPI, even though the PPI is a glimpse into the CPI because before consumer prices go up, producer prices go up because that's that's the chain. I run a business, my costs are going up, all this stuff I'm buying is more expensive. Now, I got to raise my prices. I got to recover that.
I got to maintain a profit margin. So, there's a step of how prices go up. And so, you can't just ignore what's happening to producers and just wait until, you know, it trickles down to the consumer. But, the September PPI was up 1.3% in 1 month. That annualizes out to 17%. That is a huge number. What are the producers going to do with these higher prices?
They're going to pass them on. But even now, year-over-year, the annualized increase in producer prices is 6.3%. That is a big number. People should be alarmed, like, "Oh my gosh, we got a problem here. You know, the Fed is is too loose. We need some serious hikes." No, in fact, the odds of a rate hike this month crashed because of some comments from Warsh.
So, the markets don't even expect another quarter point rate hike until December. Warsh has been Fed chair for 5 months. All he's done is 125 basis point hike. And maybe we'll get a second one 7 months in. Meanwhile, look at what's happened to inflation. Inflation has risen so much more than rates. If we end up let's say with just 5% inflation this year versus about 3% last year.
That's a 200 basis point rise in inflation. And maybe we'll get a 50 basis point rise in rates. That's not tight money. That means that interest rates have come down. The Fed has eased policy because in the face of a 200 basis point increase in inflation the Fed only raised interest rates by 50 basis points.
That's 25% of the increase in the inflation rate. You're not going to bend the curve when you're that far behind the curve. But the numbers are suggesting that next year it's going to be a lot higher. In fact, I would not be surprised if inflation in 2027, in fact, I would forecast this for the whole year the CPI will go up by more than 7%.
That will be more than the highest year 2021 under Biden. And I've already said this from the beginning that the cumulative increase in consumer prices during the four years that Trump is president will be bigger than the four years when Biden was president. And what makes it worse is that the huge increase in the cost of living under Trump is on top of the huge increase in the cost of living under Biden.
That's what makes it so much worse because it already was so bad. And instead of solving the problem, which is what Trump promised, he promised that prices would be coming way down on day one, he made the problem even worse. And the core PPI that we got last week was up 0.6. That's the core. Annualize that, that's 9%.
But the worst numbers were the import-export prices. And that's exactly what was happening in 2021. Go back and listen to my own podcast. When everybody was talking about the CPI, I was talking about import-export prices. I was saying, "Hey, wake up. Look at what's happening to prices." Import prices were up 1.1% in September.
In 1 month. That annualizes to 14%. The year-over-year increase in import prices, 8.1%. There is a lot of inflation in the pipeline, because the import prices even come before the producer prices. They're They're the earliest indicators of what's going on. But look at the export prices, up 2.2%. Now, I look, I know a lot of there's energy in there, but still, 2.2%.
That's 1 month. That's more than the entire 2% 1-year inflation target in a single month. That annualizes to 30% inflation. But even the year-over-year increase in export prices is 11.6%. And again, people may think, "Why should we care about export prices?" Cuz we don't pay those. Well, the stuff that we export, we don't export it all.
We We produce it. We consume some, and we export the rest. So, that means the cost of the stuff that we're producing here is going way up. So, Americans are going to pay higher prices, too. It's not just the Europeans or the Canadians or the Mexicans or whoever is buying this stuff from us, Americans are, you know, looking at the same increase in prices.
So, there is a inflation bomb that is going to be going off. And everybody is so complacent. Nobody cares. They're talking about, "Well, we might have another 25 basis points or, you know, That is nothing. That is nothing. And again, if Walsh really was a tough inflation fighter, we wouldn't have had a lot more than 125 basis point rate hike in the face of all this horrible data on inflation and consumer prices.
And of course, you know, the precious metals market still is not reacting. They're still looking at, "Oh, the Fed's going to hike rates by another 25 basis points in December. We better sell gold. We better sell silver." These rate hikes mean nothing cuz again, by then, the inflation numbers are going to be a lot worse.
So, the Fed is going to be even further behind the curve when it hikes rates by 25 basis points in December than it is right now. So, there's going to be even more reasons why people should be buying gold and silver in December than they're doing right now. Now, the other numbers that are reminding me of a prior period are the housing numbers.
The housing data is so bad. It reminds me of 2007 before we had a financial crisis that was the result of a collapse in home prices. It was falling home prices that ultimately caused the problem. It wasn't just that we had adjustable rate mortgages that were resetting because had real estate prices not go down, even if borrowers couldn't afford to make those higher payments, they could have sold their houses.
Or even if the bank had to foreclose, if the home prices held up, they wouldn't have had the losses. The problem was that the lenders lost money on defaulted mortgages. That's where all the losses came from in the financial sense. But, I was talking, you know, going on television, I was writing articles, pointing out all of this data related to the housing market.
I was talking about all the inventory of homes that couldn't sell. You can go back and look at the Peter Schiff was right video. When I'm talking about how real estate prices are going to collapse, and I think, "Aren't you looking at all the inventory? All these homes that are on the market that aren't selling?" And people are saying, "Yeah, so what?
Nothing is happening." Nobody could look forward to see what was obvious. And one of the reasons is because people kept saying, "Well, real estate prices never fall. They've never fallen in the past, so you're crazy, Peter. They're not going to fall." And I would say, "Well, wait a minute. But, real estate prices never went way up like this before.
So, if we had an unprecedented rise, why can't we have an unprecedented fall? It doesn't make any sense that real estate prices are going to go way up and then just never go down because they haven't gone down in the past. Well, they've never been this elevated." And I knew why they were so high. The Fed slashed interest rates to 1% in 2001.
And it raised rates very slowly, and it allowed Wall Street to create the securitized mortgages and the subprime market. And you had Fannie and Freddie and buying subprime and and doing all this stuff. So, I knew that there was a bubble in the housing market. And when I started to see all the evidence in 2006, 2007, go look at my Mortgage Bankers speech from 2006 on YouTube.
The evidence was already there. You could see the data that there was going to be a big drop in home prices and that was going to create a problem and no one cared. Complete complacency until after the fact. Until after Bear Stearns went bankrupt, Lehman went bankrupt, Fannie and Freddie went bankrupt, we're in full-blown crisis and now all of a sudden, oh, I guess there was there's a problem there.
Same thing is happening again in the housing market. Look at some of the data that we just got. So, today pending home sales this is an index of pending home sales dropped by 7.3% in September. This is the biggest drop since December last year, but more importantly is the level of the index. It's at 66.
That is the lowest in the history of this index which started in 2001. So in the last 25 26 years this is the lowest the pending home sales index has ever been. Of course, it's headed a lot lower than this, but it's already the lowest. But if it's the lowest right now that means it's lower than it was at any point during any of the years associated with the 2008 financial crisis.
So, you have fewer homes being sold than in 2007, 2008, 2009. Home builder confidence is collapsing. September housing market index fell to 29. That's the lowest since 2012. 43% of the builders are slashing their prices and in fact, if you go and look now in a lot of the markets around the country the new homes are selling for substantially lower prices to the existing homes.
Think about that. A brand new home can be bought for less money than a used home. It should be the other way around. The new homes should be more expensive. But the reason they're not is because the developers need to get rid of them. So they are marking them down. See, right now the existing home market the homeowners are not motivated yet.
They're sitting there with a 3 4% mortgage. They're in no hurry to reduce their prices. And you know, you just own one home. So you know, you can sit there and pay your mortgage and you can wait until you think you're going to get the price that you believe your house is worth. But if you're a home builder and you've just got all this inventory you have to have a more realistic outlook.
You know, you need to move the product. You need to sell. So they're slashing their prices. But what builders are also realizing is, you know what? We really can't sell these homes because nobody can afford to buy them. Mortgage rates are at 7 and 1/2% and construction costs are soaring. Inflation is pushing up construction costs, tariffs are pushing up construction costs, the immigration policy, you know, Trump has succeeded.
Yes, we don't have as many illegals in the country. Well, a lot of those illegals were building homes. And if they're not there, well, now they got to hire illegals and they want a lot more money. And so home builders are in a very difficult spot. They really can't build a home that an American can afford.
So now they got to get rid of the homes they've already built, but they can't do that unless they slash their prices. So this is going to lead to a lot of unemployment in in the housing sector. I think this is going to be the weakest housing market as far as construction and sales that we've ever had until the bottom drops out.
But you're going to see like it's going to completely freeze over, right? Activity is going to keep shrinking because of where the prices are relative to affordability. But the fact that the new homes are being marked down, you know that the existing homes are going to have to follow. Because why would anybody buy a used home when I could buy a brand new one for less?
Because the problem with a used home is there's a lot of problems there. You buy a new home, you get a warranty, you know it's brand new. But home is 10, 15, 20 years old, there could be a lot of problems there. You may have to spend a lot of money on maintenance, on repairs. I mean, probably a lot of the the appliances are going to start going.
Your air conditioners are going to start going. Your roof, if you buy a brand new home, all that stuff is brand new. So, it's obvious that the new homes are a leading indicator. Real estate prices are going to fall. But they're not just going to fall by a little because a little's not going to help.
They're going to have to fall by a lot, at least as much as they did in the 2008 financial crisis, which was a 30% drop. And even then, I think it would be hard, especially if mortgage rates keep rising because they're at 7 1/2% now. They can easily be at 8 1/2% early next year and then 9% You know, at 9% if a mortgage is 9% in order for the payments to be the same as when mortgage rates were 3% the house price has to be cut in half.
So, if you can afford to buy a $500,000 house when you can borrow at a 3% mortgage the same income will only afford a $250,000 house at 9%. So, prices are going to have to collapse. And again, I think incomes are already stretched. So, most people don't even have as much money to buy a house as they did, you know, back when mortgage rates were 3% because food is a lot more expensive, electricity, the cost of living.
So, they don't have as much money left over to even qualify for a mortgage. So, this is going to be a huge problem for the lenders. But, there's another reason that this mortgage crisis could be a lot worse than 2008. And nobody is talking about this. And I talked about it 10 years ago. I knew that this was going to happen the minute I saw banks selling 30-year mortgages, you know, at 3%, 4%.
I knew this was going to come back to bite the lenders eventually. Nobody else seemed to care because all they focused on was how great it was for the borrower that they could keep refinancing their mortgages. Meanwhile, the banks that had 8% mortgages on their books, then 7%, then 6%, then 5%. People kept refinancing.
And every time they refinanced, they went back to a new 30-year mortgage. They reset the clock. So, the banks kept getting stuck with brand new 30-year fixed-rate mortgages at ever lower rates. Now, when the Fed was sitting back at 0%, they were making money. And as mortgage rates kept falling, yes, the mortgages until they got refinanced, they were gaining in value.
But, today, it is a completely different story because now the interest rates have risen. Now, mortgage rates are 7 and 1/2%. And now the banks are stuck. There is about 8 and 1/2 trillion dollars of fixed-rate mortgages outstanding with an average maturity left of 25 years. 25 years. And the average coupon, the average rate on that 8 and 1/2 trillion is 4.6.
Now, of course, there are some that are a lot lower. I mean, I've got one myself. I'm at 3 and 3/8 on on the one mortgage I still got. But I I've talked to people that that are actually under three. That's great for the borrower because, you know, you're paying these low rates, but it's lousy for the lender because you're sitting on a huge liability.
The unrealized losses right now on 8 and 1/2 trillion in mortgages is about 2 trillion dollars. If the lenders had a mark-to-market, if you had to sell your book of mortgages today and you had a book of mortgages with this 4.6% coupon and 25 years left, you would have huge losses. Collectively, the losses are about 2 trillion on 8 and 1/2 trillion.
Now, the lenders will say, "Well, you know, they're not real losses because, you know, all we have to do is hold on to these mortgages for the next 25 years and we're golden." Yeah, the problem is you may not be able to do that. That's why, you know, Signature Valley Bank failed because their customers wanted their money.
And so they had to sell. They had to realize losses on their underwater portfolio of Treasuries or whatever they had. I mean, the the entire financial system is insolvent because it has collateral that it can't sell, assets that can't be liquidated. If there's a run on the bank, if depositors want their money back, the lenders, if they own these mortgages, they can't give the depositors their money back because they lost it.
You know, they can't say, "Well, you know, yeah, we got your money, and we can give it back to you over the next 25 years as we get the money back from our mortgages, but, you know, we can't just give it to you today because, you know, we lost it because the mortgage is worth 80 cents on the dollar." But, it's going to get worse when mortgage rates hit 8 and 1/2%.
It's a $3 trillion loss. This is on the mortgages that that aren't going bad. All the mortgages. Remember, that we had the financial crisis in 2008 because there was about $450 billion of realized losses on defaulted mortgages. We have $2 trillion in unrealized losses right now. That's four times the actual losses during the years of the uh financial crisis, but another thing nobody talks about, only 10% of the mortgages went bad.
So, 90% of the people paid, and those mortgages gained in value cuz the Fed slashed interest rates to zero, mortgage rates collapsed, so if you had a book of mortgage loans, it appreciated. I think the unrealized gains initially on the mortgages that were outstanding was about $1.3 trillion. So, the unrealized gains exceeded the realized losses.
So, in general, the lenders were were in good shape. Yeah, they lost some money, but the the value of their portfolio went up by more than the losses that they had to cover. This is the opposite. The banks are losing money on 100% of their mortgages, even if none of them go bad. The losses are worse because they were dumb enough to make these loans.
And I was saying this at the time, how stupid it was to loan somebody money, especially that last round of refinancing during COVID when interest rates were zero and the banks were dumb enough to issue brand new 30-year mortgages with a three handle. Did they really think that interest rates were going to stay that low for that long?
No, they didn't give a damn. They just wanted to do the refis and generate the fees. They didn't care. All of those mortgages are huge money losers. That the lenders would have been better off had they just denied all these loans. But they were dumb enough to do it. Yeah, it was great. I said on my podcast, I encouraged all my listeners, go out and borrow for 30 years, get the biggest mortgage you can and lock in this rate.
I said it was going to be the best thing that you could do as you're not going to make money as a homeowner, I said, you're going to make money as a debtor. You're going to make money because you got all this cheap money locked up. Well, the reason the borrower makes money is because the lender loses it, right?
It's a negative-sum game. Normally, the lender makes money because, you know, he gets interest. But in this case, the lender loses money because he's not getting enough interest. It's the borrower who's got all this cheap money. I mean, you could just take the money that you got from your mortgage. If you've got a 3% mortgage, you could just take the money and put it in the bank and get four, you know, not in the bank, but in money market.
The banks still don't pay anything. But you can get over 4% out of money market and just arbitrage the difference. But what happens when those rates go to 5%, 6%, 7%? The banks are screwed. You're locked in for another 25 years. So, the banks have lost all this money before anybody defaults. But, there are going to be defaults once real estate prices fall.
Even if you've got a fixed-rate mortgage, you're not going to struggle to make the payments if you're upside down and have negative equity. Yes, there's a lot of equity in homes now. Donald Trump makes a big deal about that. He wants to I don't want real estate prices to go down because I don't want all these old people to lose their equity.
Well, it's going to happen. And you know, some of these old people are going to die. The kids are going to want to sell their houses. They don't need them or they have to divvy it up. Let's say you die and you got three kids, you know, you got to sell the house so that they can each get, you know, a third of it.
But, you know, people divorce, people move, people lose their jobs. And you know, let's say you own a home and you got a $400,000 mortgage and your house was worth 500,000. Okay, I got a 100 grand here. Well, let's say the house is now 300,000 and you're upside down 100,000. And then all of a sudden, you know, you got a problem with your roof and it's going to cost you $40,000 to fix it.
Are you going to flush $40,000 down the toilet? Because you're already, you know, negative 100,000. So, none of that money is going to go into your pocket. You're just helping out the bank. What the people are going to do is say, "Screw it. I'm not fixing the leak. I'm leaving this problem to the bank.
I'm out of here." And that's what's going to happen. So, you're going to get the defaults. And you're going to get losses because prices are going to go down. So then, you're going to have another mortgage crisis where the banks are going to lose hundreds of billions of dollars again on defaulted mortgages.
But instead of having a trillion dollars in unrealized gains to offset that on the mortgages that don't go bad, they're going to have trillions in unrealized losses, and some of these banks may be forced to realize those losses, in which case they fail. And you know, all of the big banks that were bailed out in 2008, they're all bigger now.
And if they fail now, it's even worse. But, the whole banking sector has got a much bigger problem. As I've been saying about Fannie and Freddie, they're going to need another bailout. The losses are going to be horrific. They insure 7 trillion plus of those 8 and 1/2 trillion mortgages, and the ones that are going to go bad, too, are the ones that were the borrowers are the most underwater.
And so, that will impose the biggest losses. And remember, not everybody had one of these 30-year fixed-rate mortgages. There are some people that have a 5-year arm, where they had it fixed for 5 years. Some people actually had a 15-year mortgage that, you know, could be coming up. People 10 years ago, 12 years ago, took out a 15-year mortgage.
They might have to refinance that thing pretty soon, because, you know, so, there is a time bomb coming in the mortgage market. So, you've got something similar to 2008 happening in the housing market, something similar to 2021 happening with inflation, except they're happening at the same time. This is what makes it particularly problematic, because what did the Fed do?
How did the Fed solve, or try to solve, the housing problem? By creating inflation, quantitative easing, you know, all the bailouts. Well, you can't do that when you have high inflation, because now you're basically going to throw gasoline on the fire. The markets are expecting the Fed to hike rates and be an inflation fighter.
How do you turn around and just become an inflation creator? And one of the reasons they were able to justify the QE is because they said we don't have enough inflation. Look, we're conveniently below 2% and that's our target. So we can create inflation. We could do QE because we killed two birds with one stone.
A, we can help, you know, bail out the financial sector and prop up the housing market, but we also get to get closer to our inflation goal because, you know, we're underneath 2%. We need higher inflation. Well, if we have this collapse in the housing market when inflation is 5%, 6%, 7% and going higher, which it's going to do, look at the debt that we have.
Look at the massive, you know, 8% of GDP. They keep saying, "Oh, it's 6% because we have a $2 trillion budget deficit." No, we have a $2.5 trillion deficit because you got to count all the off-budget stuff that we still have to borrow. You know, you look at what's happening in France and now other parts of Europe and a lot of Americans are like, "Wow, you know, that's Europe, you know, they got a real problem there.
They have too much debt." We got more debt than they do. And yes, we have the reserve currency. The euro is second only to the dollar as far as reserve currency assets. So, you know, there are plenty of banks that are holding euros and that's not stopping that problem. So people are very complacent that, you know, because we have the reserve currency, we don't have to worry.
We better worry because we're losing that status. Central banks are already de-dollarizing. They're buying gold. So we are setting ourselves up for a crisis, a financial crisis, a currency crisis, a debt crisis that is much worse than what we had in 2008 and for inflation that's much higher than we had in 2021.
That is why you've got to protect yourself. You've got to make sure that your financial house is in order. You've got to take advantage of the fact that so few investors seem to appreciate exactly what's going to be happening. They underestimate the severity of these problems and what the Fed is going to do and how the markets are ultimately going to react to that policy.
I'm confident that we've got the right strategy. So, I would encourage everybody at this point again go to Euro Pacific Asset Management europac.com and talk to my advisors about the strategies that we are implementing that we believe will provide protection from both inflation, stagnation, economic crisis.
The dollar is going to be at the epicenter of this. The Fed is going to sacrifice, I believe, the dollar in order to try to prop everything else up. We're going to be going back to QE to prevent a worse financial crisis than the one that we had in 2008. But then, if you think the cost of living crisis is bad now, wait till you see how much worse it's about to get.
You don't want to just wait. You want to act preemptively to protect what you can. Protect your wealth. Protect your assets. A lot of people are going to get wiped out when it comes to inflation. Now, I was speaking to someone the other day about he had a large muni bond portfolio and of course people have municipal bonds because they don't want to pay income taxes.
And I said to the guy, "But the inflation tax is your bigger threat. You need to protect yourself from inflation because that is the way the government is going to deal with its expenditures, especially after the Democrats win the midterms. The Democrats are going to have the House and the Senate most likely.
And it's not going to be gridlock. Trump is going to sign on to the even more reckless spending of a Democratic Congress than we had under a Republican Congress. We're going to have even bigger deficits. As big as they are now, they're about to get worse. So, that is going to compound the the inflation problem.
So, before that happens and before other investors start to wake up to the risks that are going to be imposed not just by this spending spree of a Democratic Congress, but what happens when we have a Democratic president in 2028? Because the 2028 election or 2029 is when that person will take office.
But, the cost of living inflation is going to be an even bigger issue in 2028 than it was in 2024. Only now the shoe is on the other foot. Yes, the Republicans are going to try to blame the Democratic Congress, but I think the Democrats will have an easier time blaming Trump. And so, because of that, you're going to have who knows what Democratic socialist in the White House.
But, before investors start contemplating the implications of that, you need to take action now. Because the closer we get to that reality, I think the weaker the dollar will be and the more expensive it will be to diversify internationally, which is why I recommend that you do that now. So, again, go to europac.com.
That's it for today's podcast. Again, don't forget to subscribe to my YouTube channel. If you're not currently a subscriber, don't forget to like the video, leave me a comment. And if you'll notice, you know, I do reply. Not to all all them because I get, you know, thousand comments, but but I'll look through them.
Keep them brief because the short comments are the ones that are more likely to get a response. Bye for now.
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