Peter Schiff: Spirit Airlines Will Be a Government Boondoggle 

On Wednesday’s episode of The Peter Schiff Show, Peter dissects Fed Chair Jerome Powell’s final Federal Reserve conference and what it signals about monetary policy going forward. He tackles the surreal optics of a central banker promising to remain on the decision-making committee after his term ends, questions the Fed’s inflation credibility, and connects the dots between credit creation, crypto, and the regulatory squeeze on his own business.

He begins by recapping the Fed’s latest decision and the small surprise in the vote tally:

And earlier today, Fed Chair Jerome Powell chaired his last Federal Reserve conference. And prior to that conference, about a half hour before, the Federal Reserve made an announcement that surprised nobody and left the Fed funds rate unchanged at three and a half to three and three quarters percent. Now what might have surprised people was not that there was one dissent. There was one lone vote out of 11 to lower rates by 25 basis points.

Peter is blunt about Powell’s post-chair plans and what they reveal about incentives in and around the Fed:

What did surprise some people is Powell said that when his term is up, he is not going to go quietly into the night and give speeches for a quarter million or half a million a pop. He is going to stay on the FOMC. Now that is a big sacrifice. The best time to make money as a Fed chair is when you step down and you’re the last Fed chair. That’s when you have, I think, your highest market value to give speeches on Wall Street. … So maybe he’s sincere because the reason he’s giving for hanging around is that Fed independence is in jeopardy and he wants to protect the institution.

He pushes back on the standard defense of central banking—“Fed independence”—by invoking the long stretch of American growth before 1913:

In fact, in the Q&A, one of the things that Powell mentioned was how important Fed independence was. And he said that what separates the successful countries from the unsuccessful countries is an independent Federal Reserve. Well, what about the fact that before 1913, we didn’t have a Federal Reserve? We went 80 years without any central bank. And those were the most prosperous years we ever had. We were far more successful as a country without a central bank than we are with one.

Peter then turns to the Fed’s inflation record and the puzzling idea of cutting rates when inflation is above target:

Now, of course, inflation has been above 2% for six years. It doesn’t sound like much of a commitment to me. And if they’re committed to 2% inflation, and inflation is closer to four than two, even the way the government measured it, why are they thinking about cutting rates? If you’re committed to 2% inflation and you’re almost at four, shouldn’t you be hiking rates? Yes, they should.

Railing against President Trump’s interest in buying Spirit Airlines, he argues that the idea shows Trump doesn’t understand capitalism at all:

But anyway, another horrible thing, I guess, that the Trump administration wants to do is buy Spirit Airlines at bankruptcy. And Donald Trump said that if he can get a good deal, he’ll do it to save jobs. In other words, so the people who work there can keep working there. And what that proves is that Trump either doesn’t understand capitalism or doesn’t believe in capitalism. … He’s supposed to be a capitalist, right? But he’s not. I mean, he’s a businessman, but that doesn’t mean he understands capitalism. The purpose of a company is not to provide jobs. That’s a byproduct of a company. The purpose of a company is to satisfy the needs of the customers.

Peter wraps up by stating the reason he’s so insistent in fighting the government corruption that shut down his bank in Puerto Rico. Tolerating injustice only leads to worse abuse:

I can’t stop talking about it because it’s not just about me. It’s about the country. It’s about the country that my kids are going to grow up in and your kids are going to grow up in. What kind of country do you want it to be? Do you want it to be a corrupt country or do you want your kids to grow up in a free country? Right. I prefer freedom and we’re not going to have freedom if we give it up. And if we allow corruption and the government knows they can get away with it, then it’s more and more and more. You’ve got to defend it.