Peter Schiff: The Fed’s Hike is a Bluff

In his post-FOMC podcast, Peter breaks down the Federal Reserve’s latest rate hike and explains why the modest move signals much bigger economic problems ahead. He connects the dots between runaway fiscal policy, rising interest rates, and the political theater surrounding Donald Trump’s threats against Fed Chair Jerome Powell, all while warning listeners that crypto is no place to hide from the coming downturn.

Peter opens by dissecting the Fed’s latest rate decision, arguing that the central bank had no real choice in the matter. He notes that the hike was as small as possible and unanimous, a sign of just how boxed in policymakers really are:

The Fed didn’t hike rates because it wanted to. They hiked rates because they had to, because they had no choice. So they did the minimum they could possibly get away with, a quarter point, which is irrelevant, meaningless in the scheme of things. And they also made it unanimous.

From there, Peter explains why a quarter point hike is nowhere near enough to actually tame inflation. He argues that the real problem is fiscal, not monetary, and that the Fed simply isn’t willing to make the hard choices required:

So you can’t really fight inflation unless you get the fiscal policy under control, unless you are willing to completely crash the economy with dramatic increases in interest rates, and you have to refuse to monetize any of the debt. You have to let the government know that if you’re going to sell all these bonds, we ain’t buying them. You need to find buyers in the private sector because the Fed is not going to accommodate your budget deficits, but our Fed is not willing to do that.

Given that unwillingness, Peter predicts rates are headed much higher than markets currently expect. He warns that borrowing costs across the board, not just for Washington, are about to get a lot more painful:

This is not the top. This is a stepping stone to 6% and higher. And of course, everything is going up. It’s not just going to be more expensive for the federal government to borrow. It’s going to be more expensive for everybody to borrow. You know, I think mortgage interest rates now are close to seven and a quarter on a 30-year fixed.

Shifting gears, Peter turns to the political drama surrounding Trump’s public jabs at the Fed. He compares Trump’s threats to a scene straight out of a Mel Brooks film, arguing that Powell knows an empty threat when he sees one:

It’s like you’re holding a gun to your own head and threatening to pull the trigger. The Fed obviously called that bluff because the Fed hiked rates, and the Fed does not expect Donald Trump to follow through with that blazing saddles-esque type threat.

Peter then takes aim at the broader pattern of misleading rhetoric coming out of Trump’s orbit. Rather than chalk it up to ignorance, he suggests the confusion is deliberate, a calculated strategy rather than a genuine misunderstanding of markets:

So you have a Secretary of the Treasury that thinks it’s a good idea to give everybody $5,000, and he doesn’t even think it’s going to increase the deficit. Is there any way this guy is actually that dumb? I don’t think he could possibly be that dumb. I mean, he worked on Wall Street for a long time. He made money. So he’s got to be a liar. And I said this, this is what Trump hires people to do.

Peter closes with a direct warning to listeners still holding onto crypto as some kind of safe haven. He urges them to get out while they can and rotate into gold before the broader unwinding of loose money policy catches up with digital assets too:

So before that happens, get out, sell your Bitcoin. You can get more than seventy five thousand dollars for a Bitcoin. Go to SchiffGold, buy yourself some gold, go to TGold, set up an account. You got to get out because everything that is being done is going to undermine not only the value of the dollar, but the value of crypto and Bitcoin and all this stuff.