Peter Schiff: The Fed Is Not Done Cutting Until It Gets to Zero
Peter Schiff recently appeared on Kitco news with Daniela Cambone to talk politics, the economy and the Fed. He said that no matter what Jerome Powell is saying, the Fed central bank isn’t finished with rate cuts.
Lisa started out the interview asking Peter what he thought about the impeachment hearings and Trump’s prospects for reelection. Peter said it certainly looks like the House will impeach Trump. He doesn’t think it’s likely the Senate will remove him from office, but he also doesn’t think the president will be reelected in 2020 unless the economy can hold together.
I thought it was far more likely that he was elected originally, but I don’t think his prospects are as great now as they were then, although the conventional wisdom is the opposite. Most people thought he had no chance of winning last time and they think he can’t lose this time because they think we have this great economy, but we don’t. We just have another stock market bubble.”
Lisa pointed out that unemployment is supposedly at 50-year lows.
Well, sure. The unemployment rate was very low when Obama left office. I mean, the unemployment rate, at least the official rate, was declining for almost the entirety of the Obama presidency, and when Donald Trump ran against low unemployment, he said that the numbers were fake. That they were phony. That it was a fraud. That it was a hoax, and if you look at the real unemployment rate, where you look at all the people that were working part-time that wanted to work full-time, all the discouraged workers who had dropped out of the workforce, that the real unemployment rate was much higher. And that’s still the case today. We still have a lot of people with part-time jobs that want full-time jobs. We still have a lot of discouraged workers who are not in the labor force. So, you could certainly make the same argument against Trump that Trump made against Obama. The reason that Trump won is because … Hillary Clinton was selling a lie that we had a real recovery under Obama. Well, the voters knew that there was no real recovery. Well, we’ll see if they have the same realization in 2020, because Trump made a lot of promises that he hasn’t kept about raising the standard of living of average Americans, about revitalizing manufacturing, about making America great again, about paying off the national debt, about making government smaller. There are a lot of boasts that Trump had but the only thing he can really claim credit for is a record high in the stock market. But again, we had record highs under Obama and Trump said, ‘Well, who cares about the stock market because that’s just a bubble.’ Well, now the only thing he does care about really is the stock market and the same fake unemployment numbers that he once criticized. Because the GDP growth under Trump is not measurably different than it was in Obama’s second term.”
Peter said that if the economy slips into a recession before the election, it won’t matter who the Democrats nominate. He said if the economy holds together, Mayor Bloomberg might have the best chance of knocking off Trump, but he probably won’t get the nomination.
As far as the Fed goes, Peter said despite projections that the central bank will hold rates steady through 2020, it is not finished cutting.
No, they’re not done until they get to zero, and then we’ll see if they’re done or if they want to try to go negative … What the Fed has assured the markets is that under no circumstances will they raise rates. That no matter what the data is, the only decision that the Fed has to make is do rates stay the same or do they go down. And I think that’s the only reason that the stock market has rallied. It’s based on that ‘Powell Put,’ where the fear of a rate hike is no longer in the market. But I do think at some point next year, the economy will be weakening, or maybe we will get a sell-off in the stock market, and the only way for the Fed to try to prop the market back up would be to start doing more rate cuts. And they will supply them as soon as the market demands them.”