Peter Schiff, a veteran Wall Street investor and well-known economist, analyzes two events, including Trump's decisive victory and the Federal Reserve's announcement of another interest rate cut. Peter opposes the unlimited economic optimism of Trump's supporters and criticizes Powell's position on the independence of the Federal Reserve and his astonishing indifference to the possibility of stagflation in the future.
Peter begins by highlighting the awkward trade-off between taxation and government spending. Trump has promised new tax cuts, but these must be offset by spending cuts or the national debt will swell even more out of control.
Peter said Trump may need to have a fireside chat with the American public and be candid. "He can say, when I ran for president, I promised a lot of things. I promised a lot of tax cuts, and if we can't make big spending cuts, we really need to raise taxes. That's what we're going to try. I'm asking the American people to do their part and tighten their belts."
While both Republicans and Democrats like to take credit for the nation’s economic growth, the reality is that much of this “growth” is an artificial boom induced and sustained by decades of expansionary monetary policy by the Federal Reserve.
"The problem is we don't have a strong economy, we have a bubble, we have a fragile economy. In fact, we've been blowing a bubble in this economy since the 1990s," Peter said. "Alan Greenspan was the architect of this house of cards. He kept pumping air into the economy, and every president since Clinton has hidden behind his bubble and taken credit for false economic growth, which was the result of an ever-expanding bubble."
With the stock market rising on Trump's success, Peter believes the best time to buy US stocks will be when the aforementioned bubble bursts. It will be painful in the short term, but stocks will be bargains then.
Peter said the best time to buy US stocks is not when they are historically overvalued. "I'm waiting for blood on Wall Street. I hope the crash happens..."
He added: “I know when we do this the economy is in a recession and everyone is pessimistic, but I will be optimistic then because I will know this is a bitter pill we should have swallowed a long time ago.”
Regarding the Fed's interest rate cuts, Peter pointed out that if Harris instead of Trump was elected, the Fed might reduce the extent of the rate cuts.
“You could assume that if we had a stronger economy, the Fed would reconsider the rate cuts, or even pause or raise them. I thought, the Fed would never do that. Trump would throw a tantrum — and the Fed officials would cut rates. And that’s exactly what they did.”
One reason the dollar has been so strong is the expectation that the U.S. economy will be stronger and the Federal Reserve may not cut interest rates as often as before.
Peter blasted Powell’s political cowardice, as he used the Fed’s independence as an excuse to avoid criticizing bad fiscal policy.
"Being independent doesn't mean you have to keep your mouth shut, don't express your opinion, don't criticize. In fact, it means the opposite. When you are independent, you are not influenced by politicians, so you can say whatever you want. You can criticize anyone, and that's exactly what his job is," he said.
At the Fed press conference on Thursday, Powell dodged a question about the possibility of stagflation. Peter thought it was a major misstep. Powell said, "Well, our plan for dealing with stagflation is to hope that there is no stagflation." Then he laughed, realizing how ridiculous that sounded.
Peter demanded, "What kind of plan is that? Your plan is to hope that stagflation doesn't happen. Obviously, stagflation is likely to happen. So, what do you do? That's the question, not what you hope will happen. What is your plan? They don't have any plan, and that's why they hope it doesn't happen."
He added: "But, you know, Murphy's Law says that, right? Everything that can go wrong will go wrong, and we're going to have stagflation."
Article forwarded from: Jinshi Data
