Peter Schiff: Fed Fires up the Money Printers

On Wednesday’s episode of The Peter Schiff Show, Peter walks listeners through the week’s highly anticipated Fed announcement and Jerome Powell’s press conference, arguing the event was more about rhetoric than reality. He lays out how market expectations, shaky employment estimates, tariff pass-through, and backdoor guarantees all paint a picture of a central bank and government papering over underlying weakness.

Peter opens by describing the fevered expectations leading into the meeting and how rare a surprise move would be:

Well, today we had probably one of the most highly anticipated Fed rate announcements and press conferences as I can remember, because everybody has been waiting for the Fed to deliver the much hoped for rate cut. And you know there even was some hope out there that the Fed might go for a 50 basis point move. But it’s rare that the Fed does that and it’s rare that the Fed does something that is not expected. And it was widely expected. The odds were overwhelming 95% that we would get a quarter point cut.

He then warns that the Fed’s talk about future cuts often matters more than the cut itself because markets price in expectations — and missing those expectations can feel like a hike to investors and borrowers alike:

He said that is going to have a bigger impact than the actual cut. It’s not what we’ve done but what the markets now expect us to do. And of course the problem with that is now that the Fed is building in the expectations of rate cuts and the consensus that the Fed basically supported today was we’re going to get at least two more quarter point cuts between now and the end of the year. So that would bring the Fed funds down to three and a half. But since the Fed is now baking these expectations in, if it doesn’t deliver on what the market expects, that counts as a hike even though it’s not a hike.

Peter spends time repeating a long-running critique of official jobs data — the so-called birth-death model the Bureau of Labor Statistics (BLS) uses to estimate startups. He says those assumptions can mask real weakness in payrolls and economic activity:

He said, look, you know, they have this thing called the birth death model, and it’s just based on how many companies they think were started, new companies. And he said, look, you know, it’s really just a guess. Nobody really knows exactly. That’s the point I’ve been making every Friday, every first Friday of every month. When I talk about the birth death model and say, look, when you have two or three hundred thousand jobs that are just assumed by the birth death model and the whole job creation is one hundred twenty five hundred fifty thousand.

On trade policy, Peter highlights a striking admission from Powell that undercuts optimistic claims from policymakers: exporters are not absorbing tariff costs. That means tariffs act as a tax on U.S. buyers rather than a penalty paid by foreign sellers:

I think the most important observation that Powell offered on the tariffs was that they are not being eaten by exporters. He made that clear. He said the data is clear that foreign producers are not paying the tariffs. They are not reducing their prices to make up for the tariffs. Now, that’s something that a lot of members of the Trump administration and Trump are claiming.

Peter is blunt about the Fed’s 2 percent inflation target, calling the whole exercise a forecast tailored to a goal rather than an accurate promise of price stability. He reminds listeners that headline measures like the CPI (Consumer Price Index) are projections influenced by methodology and policy choices:

And he basically let the cat out of the bag and said, we don’t know. He basically said, look, our goal is 2 percent inflation. And so that’s our forecast. We make a forecast that’s consistent with our goal. So in other words, it’s just wishful thinking.

Finally, Peter calls out the contradiction in how the government handles mortgage giants Fannie Mae and Freddie Mac. He argues officials say there is no explicit guarantee, yet they describe steps that amount to a de facto pledge to backstop their debt — a dangerous signal that encourages moral hazard and market complacency:

But what we’re going to get is a definitive statement in writing by the government that the government stands behind all these mortgages, all their debts. And if anybody buys Fannie and Freddie debt, we will let everybody know that the U.S. government will bail them out if they get into trouble. So if Fannie and Freddie are ever in trouble, the U.S. government will stand behind them and make sure that nobody who bought any Fannie and Freddie debt loses any money. Now, wait a minute. The guy just said there was going to be no explicit guarantee. And then he described an explicit guarantee.

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