Peter Schiff: Rate Hikes On The Horizon?
Peter’s back to recap the last week in markets and economic news. This episode starts with April’s dismal stock performance and also discusses Jerome Powell’s most recent appearance. Peter wraps up the episode by recounting the Bitcoin debate he participated in on Friday.
Peter notes that April’s losses in the stock market were in part created by doubt about the Fed’s future rate cuts:
“The reason for that was heightened talk not just about the Fed not cutting rates, but for the first time, I heard people discussing the possibility that the Fed might have to raise rates, that the next move may in fact be a hike and not a cut. Now that‘s the first time that I’ve heard any mainstream discussion of that possibility. … I’ve been saying that that is the correct policy. If the Fed really is data-dependent, and if the Fed really wants to fight inflation, based on the data, they should resume their hikes.”
Despite this possibility, markets are unduly optimistic. The Fed’s historical record is not very successful, even decades ago when America’s fiscal health was much better:
“The markets believe that the Fed is going to succeed. This is pure nonsense! I look back at the inflation statistics for the 40 years before the 2008 financial crisis— so 2008, 2007, going back to 1968, those 40 years— there were only 3 years where inflation was 2% or lower. The average inflation rate over those 40 years was 4.8%. … If the Fed wasn’t able to come close to 2% during those 40 years, why does anybody think it’s going to come anywhere near it over the next 30 years?”
Fed Chair Jerome Powell still refuses to criticize federal fiscal policy, despite the apparent need for rate hikes:
“Not only is he allowed to do it, he’s really required to do it! That’s the whole point of an independent central bank...
...so you can criticize the government when it makes a mistake, not hide behind your independence and fail to criticize the government. Paul Volker was Congress’s biggest critic!”
After stock prices plummeted last week for large companies like Starbucks, Peter sees the declines as a sign of future stagflation:
“I think that this is the beginning of a trend. I think Starbucks is going to have a hard time with sales in the stagflation environment that Jerome Powell doesn’t want to acknowledge. And Starbucks wasn’t the only company! I remember Clorox came out and warned it had a big drop. Remember Peloton! Peloton missed as well.”
Peter also mentions some highlights from his Bitcoin debate on Friday. He argues again that “Know Your Customer” (KYC) and anti-money laundering (AML) regulations are primarily used to prevent tax evasion, not violent terrorism:
“If they can catch a few terrorists, ok fine, that’s the icing on the cake. The cake is tax evasion. That’s what all these governments are trying to prevent when they require all these AML KYC rules at banks. How many terrorists do you think there are in the world? Out of a hundred people, how many of them are going to be a terrorist? Very few. … I don’t think there was ever a point where a terrorist tried to deposit money at my bank.”
U.S. tax policy has strayed quite far from that of the country’s Founding era:
“The country was founded by tax protesters. The country was founded by people who didn’t want to pay a tiny tax to the British crown! There’s no way King George would’ve ever imposed an income tax on the colonists. He would never do something that draconian. No! He’s talking about excise taxes. Taxes on tea, taxes on stamps, little things! We had a whole revolutionary war because of those tiny little taxes. … No government has the right to take half of what somebody earns.”
While Peter agrees on a lot with his debate opponent Erik Voorhees, they still disagree on Bitcoin’s importance to the free market movement:
“I just don’t think that Bitcoin is part of the solution. Ultimately, it’s going to be part of the problem. Part of the solution to reigning in government is a return to sound money, a return to real money, and unfortunately, Bitcoin doesn’t fit that bill. But gold does.”