"Third quarter "growth" was largely driven by a 23% increase in residential construction (the largest quarterly increase since 1986) and a 3.1% increase in consumer spending, which included a 22% jump in durable goods purchases – mostly automobiles – and 2.3% gain in government spending.
Since the increase in consumption outpaced the increase in production, the trade deficit expanded, reversing the positive trend for most of 2008 and 2009. Because the increase in spending outpaced the increase in incomes, the savings rate plunged from 4.9% in the prior quarter to 3.3%."
Schiff expects the Fed will soon have to take tough decisions of either having to supply the carry traders with an endless amount of cheap dollars or put a halt to the carry trade and aggressively raise interest rates that could “bring on a much more severe recession than anything we’ve experienced so far,” Shiff said in a recent CNBC interview.
Peter Schiff`s comments on the economy, stock markets, politics and gold. Schiff is the renowned writer of the bestseller Crash Proof: How to Profit from the Coming Economic Collapse.