Peter Schiff: Fed Perfectly Happy to Give You a Haircut on the Dollar (Audio)

On his most recent Peter Schiff Show podcast, Peter broke down Janet Yellen’s recent testimony before Congress.

He focused on her apparent cluelessness about the state of the US economy and talked in depth about why the Fed won’t raise rates. He also noted that Yellen’s comments about the impossibility of stagflation seem to indicate she has no clue about Murphy’s Law – what can go wrong will.

Peter went on to reiterate a point he made on his recent appearance on CNBC – that the Fed will ultimately sacrifice the dollar on the altar of the stock market and that the US economy is heading toward a currency crisis.

Peter pointed out that somebody asked Yellen about Donald Trump’s comments regarding a Treasury default. She said, “Yes. It would be a real disaster if there was a haircut on US Treasuries.” Peter then zeroed in on the real looming disaster.

Janet Yellen said it would be a real disaster if there was a haircut on US Treasuries. That’s a disaster as far as the Fed is concerned. But the Fed thinks nothing about giving people a crewcut, in fact shaving them bald, when it comes to a haircut on the dollar…When the Treasury defaults, or there is a restructuring, the only people who are hurt are the people dumb enough to buy the Treasuries in the first place. But when Janet Yellen runs the printing presses non-stop, when we have massive inflation, or hyperinflation, everybody dumb enough to have dollars gets hurt.”

Highlights from the podcast:

“The forces of big government are very hard to overcome these days, and of course nowhere is big government better exemplified than with the Federal Reserve, which is a combination of big government and central planning, or central banking.”

“Janet Yellen keeps saying we’re on the road to recovery; the rate hike is just around the corner; maybe it’s a bigger corner than she used to think, but we’re going to round that corner; we’re going to end up with these rate hikes. And again, all of this is nonsense.  I think if the Fed were going to raise rates they would have already done so.”

“When push comes to shove, [the Fed] may be more willing to go there [negative interest rates] than they are admitting right now because they still want to pretend that the recovery is on track. So why even bring up negative rates when you’re talking about raising rates? So I think once the conversation turns, negative rates may be a more serious consideration.”

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“Apparently the Federal Reserve has no problem buying up toxic mortgages, but they wouldn’t touch Puerto Rican sovereign debt with a 10-foot pole, which leads you to believe – how risky must that paper be if the Fed, which basically will buy anything…It’s like Life Cereal…Yeah, Janet Yellen, yeah, she’ll buy anything. But she won’t buy Puerto Rican sovereign debt. But I wish the Fed would do the same thing for the US government – force the US government to make those tough choices.”

“I believe one of the reasons specifically Janet Yellen doesn’t want to raise rates is she knows that will complicate the budget situation in Washington, because the federal government can’t afford to pay higher interest rates…I don’t believe for a second Janet Yellen’s tough talk about how independent the Federal Reserve is, and how if the situation warranted it they would raise interest rates and Congress would have to deal with the consequences. There’s no way that the Fed is going to do that.”

“How can the Federal Reserve create jobs? What can they do? I mean, in order to have jobs, you need capital; you need a profit motive; you need an entrepreneur. Certain things have to come into existence in order for there to be jobs. What does the Fed have? The Fed doesn’t have anything.”

“If the Federal Reserve gave us sound money, then we’d have a sounder economy, and that sound economy would produce jobs.”

“The Fed, in general, is responsible for elevated unemployment for everybody, because their monetary policy is stifling economic growth. They inflate bubbles, and prop up Wall Street and the federal government; they diminish real economic growth. So that hurts job creating for everybody, black, white, male, female, whatever.”

“There was a congressman that was asking, ‘What is Janet Yellen doing for the poor.’ Because, you know, quantitative easing is helping the rich, because it’s pushing up stock prices, and the poor people don’t own stocks…And Janet Yellen said, ‘Well, real estate prices are also up.’ As if that’s good for the poor. I mean, how are higher home prices good for the poor? According to Janet Yellen it is. She thinks poor people are benefiting from higher home prices. Maybe Janet Yellen doesn’t realize this, but poor people don’t own houses. But what they do do is rent…and rents have been going up a lot thanks to the Fed.”

“Everything the Fed is doing is hurting the poor. And of course everything the Congress is doing is hurting the poor. They all stand up there and pretend that what they’re doing is helping.”

“What if the reason that the Fed has to raise rates more than it thinks is not because the economy is stronger than it thinks, but because inflation is higher than it thinks? What if we get stagflation? Then of course, it’s a complete catastrophe. But Janet Yellen doesn’t even think that’s a possibility. How can that be?…You know there’s a law called Murphy’s Law…Murphy’s Law says that anything that can go wrong will go wrong. Now apparently Janet Yellen doesn’t even know who Murphy is. Because obviously, if it’s possible we could have stagflation then it’s going to happen. And why does the Fed not even have a contingency plan for it? Why does the Fed not even entertain the possibility of stagflation?”

“Janet Yellen knows that even if inflation were to pick up, that no matter how high it goes, the Fed will never raise rates. The Fed doesn’t care, because Janet Yellen knows that if the Fed ever tried to raise rates to rein in inflation absent strong economic growth that the whole economy would implode. Rather than doing that she’s just going to allow inflation to run out of control, which is exactly what I have been saying all along.”

“Janet Yellen said it would be a real disaster if there was a haircut on US Treasuries. That’s a disaster as far as the Fed is concerned. But the Fed thinks nothing about giving people a crewcut, in fact shaving them bald, when it comes to a haircut on the dollar.”

“When the Treasury defaults, or there is a restructuring, the only people who are hurt are the people dumb enough to buy the Treasuries in the first place. But when Janet Yellen runs the printing presses non-stop, when we have massive inflation, or hyperinflation, everybody dumb enough to have dollars gets hurt.”

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