Schiff on Mining Network: Trump is Packing the FOMC

Peter recently joined Peter Gadsdon from the Mining Network to discuss a grab-bag of issues, from the latest showdown between the Fed and the White House to why gold is still the best hedge against a weakening dollar. He walks listeners through recent inflation readings — including the CPI for December — and ties those numbers to politics, markets, and why investors should rethink where they keep their wealth. Throughout, Peter stresses that sound money and global diversification are the right answers when central bankers and politicians push policy in opposite directions.

He frames the conflict between the Federal Reserve and the executive branch as the predictable result of decades of easy money and deficit politics, pointing to the jump in the CPI (Consumer Price Index) as evidence the Fed’s inflation experiment is over its head:

Well, you know, first of all, it’s been inevitable that eventually you might have this type of a clash between the Fed and the government, the president, because the Fed has been enabling all the deficit spending and all the profligacy of both parties for decades now. And recently their excuse was that, well, we’re below 2% inflation target, so we can print money, we can create inflation because the rate’s too low. We need to move it up to the target. But now that the rate is well above their so-called target, we got the CPI out again today for December– 2.7. We’re further above 2% than we were really ever below it.

He then turns from policy to politics, dismissing the pretense of innocence around investigations and highlighting the double standards in Washington:

Ironically, they’re going after him, not for the building, it’s for lying to Congress about the renovation. So it’s basically for lying, which, I mean, they all lie, everybody in Congress lies, the president lies. In fact, when the president was asked about this investigation of Powell, he said he didn’t know anything about it, which of course was a lie. There’s no way that he doesn’t know about this investigation. In fact, there’s no way that he’s not the one behind it.

Peter is blunt about the motive: the president wants a Fed that will inflate on demand. He likens the effort to pack the Federal Open Market Committee to FDR’s court-packing gambit, arguing the move would tilt policy toward easier money and higher inflation:

Trump just wants to make sure that his flunkies are in control of the Federal Open Market Committee. He wants to basically pack the FOMC in the way Roosevelt wanted to pack the Supreme Court. He wants the Fed to be far more aggressive in creating inflation than they would be if left on their own. We spoke, I think it was around four or five months ago, and we spoke about this shift from, obviously, long-term debt is becoming too expensive. We’re now starting to see a bit more reliance on short-term borrowing.

That political pressure has a clear market implication for Peter: fiat currency risk goes up, and so does the case for gold. He sketches a scenario where a weakening dollar produces a dramatic rally in bullion, even if the path there is volatile:

Again, it could drop by 50% against gold. It may not drop by 50% against the euro. But I think if we get a break in the dollar, if the dollar index, which is right now, 98, 99, if we break down to about 70 by the end of the year, yeah, we can easily see gold. I don’t know if gold will hit 10,000 this year. It may take till next year, but I mean, it’s going there.

Peter is not carried away by every shiny tech headline. On AI, he cautions that a lot of current investment may not produce durable gains and that spending on one area necessarily displaces spending elsewhere in the economy:

We don’t even know how much of this AI investment is gonna end up being viable. I mean, maybe the technology that is being bought will be obsolete soon and there’ll be something a lot better, maybe even a lot cheaper, I don’t know. But that’s where a lot of the GDP growth is coming from. It’s all of this AI spending. But obviously, if we’re spending on AI, we’re not spending on something else.

Finally, Peter widens the lens to the international consequences of persistent U.S. deficits and dollar weakness. He urges investors to rethink home-country bias and to prepare for de-dollarization by shifting assets abroad and capturing overseas growth:

But the key is to get out of US assets, out of US stocks, out of US bonds, diversified globally to protect your purchasing power. And to participate in the overseas growth that is going to occur as a result of de-dollarization. As the dollar loses its reserve status, that is a massive weight that’s lifted from the world. The world no longer has to subsidize the US economy, which means those resources can be used more productively to grow their own economies. And I think as an investor, you want to profit from that.

For Peter’s latest solo analysis, check out his most recent podcast!