Peter Schiff: Fed Cuts Signal a Weak Economy

On Tuesday’s episode of the Peter Schiff Show, Peter contends that the recent market bounce is being driven less by real economic strength and more by Fed signaling that rate cuts are coming. He walks through how central bank rhetoric, rising yields abroad, and domestic affordability pressures paint a picture of an economy strained by monetary policy, and he warns that sound money — not political fixes or crypto fantasies — remains the right hedge.

He begins by explaining why Fed officials are talking cuts even as they pretend otherwise, and how politics factors into their messaging:

There’s a lot of behind-the-scenes pressure from the Trump administration. So they’re getting a cut. But what helped revive the markets over the last couple of days was FOMC members coming out, including again today, and expressing that they want to cut rates, that the Fed is now, or they are, more worried about the labor market and softening in the labor market than inflation.

Next he turns overseas to Japan, where a move in yields signals a looming financing problem for a heavily indebted government:

This is a new 20-year or so high as we continue to march towards and then I believe through 2 percent yields. Now, 2 percent yield on a 10-year may not sound like a lot, but in the land of the rising sun it is when you’re used to, or they were used to, yields of 25 to 50 basis points. So this is a huge move and it’s not going to stop at a round number, but I think that round number is going to be a significant event because the cost in Japan to the government of financing this massive debt is going to be significant. 

He connects those global pressures back to American households, arguing that consumer sentiment is dropping because people feel prices bite at every turn:

That’s a big monthly drop in consumer sentiment, and I think a lot of this is being driven by inflation, despite the fact that the president seems to believe that inflation is under control. If it’s under control or nonexistent, everybody is talking about the affordability crisis, whether it’s housing, whether it’s healthcare, it’s all about ‘things are not affordable anymore.’ People have a hard time making ends meet, and of course, of course they have a hard time making ends meet because of all the inflation that the government has created.

He keeps that theme when evaluating affordability in healthcare policy, saying the very fixes meant to bring affordability have raised costs instead:

The Affordable Care Act was supposed to make healthcare affordable. It was passed a long time ago, yet healthcare is more expensive than ever, even though we have the Affordable Care Act. It’s not that healthcare is getting more expensive, despite the Affordable Care Act. The Affordable Care Act is actually helping to make healthcare even more expensive than it would have been if we didn’t have the Affordable Care Act.

Shifting back to monetary appointments, Peter warns about the political capture of the Fed and the risk of a pliant chair picked for loyalty over sound policy:

And Kevin Hassett is now the odds-on favorite to be the next Fed chairman. And of all of the candidates that Trump was considering for the job, Hassett is the most dovish. But not only is he likely the most dovish, but he’s also likely to do what the president wants. He’s probably the most loyal Trump supporter being his chief economic advisor. And I think that if Trump wants to put a puppet as Fed chairman so he can pull the strings, Kevin Hassett is the puppet that he’s going to pick.

Finally, he takes aim at crypto believers who thought Bitcoin was a modern version of gold, suggesting that real metal stands to benefit as confidence in crypto falters:

There certainly is a percentage of people in Bitcoin that were under the delusion that they were buying some kind of supercharged version of gold, that it was digital gold. And so they bought it. But now that its performance is so bad and the performance of actual gold is so good in comparison, I think a lot of that money is going to start moving into gold.

If you missed it, be sure to check out Peter’s latest interview on VRIC Media!