Peter Schiff: Fed Announces More Price Controls

On Wednesday night, Peter took to his podcast to analyze the Fed’s 50 basis point rate cut. He discusses the Fed’s motives in cutting interest rates, why the move is another mistake in a long sequence of policy errors, and also points out the irony in campaign rhetoric surrounding price controls. Make sure you also see Peter’s appearance on Fox Business, where he also discusses the Fed decision.

Peter predicted a 50 basis point cut, even though some expected 25. Powell doesn’t like to disappoint the market:

“In fact, once I saw that the markets were anticipating 50 basis points, it was pretty much a done deal that the Fed would deliver on that expectation, because the Fed never wants to disappoint the markets. Had the Fed cut rates by 25 basis points, the markets would have tanked because it would have been a big disappointment.”

Americans are so used to low interest rates that they ignore both the benefits of high rates and the role of interest in coordinating saving and investment:

“Now, absent the government’s intervention, interest rates would have to be much higher to restore some type of balance where the higher rates would encourage people to save, because they would earn more interest on their savings and reduce borrowing because borrowing would be more expensive.”

Monetary policy bears an uncanny resemblance to the irrational behavior of addicts, and this week’s decision is no different:

“It’s the overdose. The Fed has been injecting the economy with this monetary heroin for over 20 years, and every time we come down off our high, we need a bigger fix. Well, the size of the dose that would be required now to get us high again, given how much debt we now have, it’s basically an overdose. We end up dying from the drug.”

The conversation around price controls reminds Peter of price controls that everyone, including Republicans, forget about:

“Ironically, there’s a lot of talk about price controls now because Kamala Harris proposed price controls on groceries, and of course, all the Republicans jump on her for advocating price controls. But I pointed out the irony of that because the minimum wage is a price control, yet a lot of Republicans don’t want to repeal the minimum wage.”

More recently, Donald Trump promised caps on credit card rates, revealing a GOP blind spot on economic policy. The biggest blind spot on price controls, however, is the Federal Reserve:

“But it’s a promise that [Trump] made, and the irony should be obvious, because you can’t criticize your opponent for advocating price controls and then advocate price controls of your own. But the ultimate price control is the Fed controlling the price of money– interest rates. So all these Republicans who are condemning (and rightfully so) Kamala Harris’s plan to put price controls support the Fed.”

Rhetoric aside, no politician actually intends to address the national debt:

“The debt problem is going to keep getting bigger and bigger and bigger again, regardless of whoever wins the election, because everybody is promising tax cuts, including Harris.”

No one in Washington actually realizes the gravity of America’s economic woes:

“The mistakes that were made– the monetary and fiscal policy mistakes that we’ve made during the 2000s, the 2010s, and now in the 2020s– they dwarf the mistakes that we made in the 1960s, which sowed the seeds for the 1970s. We’ve sowed even more seeds of an even bigger crisis that we are going to experience soon.”

While dismal, the future of the economy is increasingly set in stone with each Fed decision:

“It’s going to be a far worse crisis for average Americans than we’ve ever seen, because it’s going to be a much more severe recession. People are going to lose their jobs, but they’re not going to have the offsetting benefit of a lower mortgage or lower inflation. They’re going to have the worst of all worlds with soaring inflation, soaring interest rates like the 70s, only much worse than the 70s.”