The Nasdaq and the S&P 500 closed on record highs Friday after a stronger than expected jobs report. But in his podcast, Peter Schiff said that the stock markets aren’t surging because of a great economy. They’re surging because of bad monetary policy.
As expected, the Federal Reserve cut rates for the third time this year. We’re now down to 1.5%. The Fed hinted that cuts are likely on pause for now. But should we believe it? Was this the end of a mid-cycle adjustment? Or should we expect more moves by the central bank? In this episode of the Friday Gold Wrap podcast, host Mike Maharrey breaks down rate cut 3.0 and what it could mean for the precious metals markets.
As expected, the Federal Reserve cut interest rates another 25 basis points on Wednesday.
The mainstream read the post FOMC meeting comments to be relatively hawkish, saying Powell and Company seemed to indicate that future rate cutting is on pause.
Peter Schiff opened up his podcast reminding us that just one year ago, the Fed was raising rates and telling us it would continue to do so through 2019. It also claimed that quantitative tightening was on “autopilot.”
Last Tuesday, the S&P 500 made a record high as markets anticipated another Fed rate cut. Some analysts say the big risk is that we’re seeing a boost in asset prices but no real uptick in the actual economy. Peter Schiff appeared on RT Boom Bust to talk about it. He said investors buying onto all of this Wall Street hype are in for a painful awakening.
As I write this, the Federal Reserve is in the midst of its October FOMC meeting. The central bank is widely expected to cut interest rates another 25 basis points. If the Fed follows through, it will be the third cut in three meetings, totaling 75 basis points since July.
Although the Fed continues to call this a “mid-cycle adjustment,” Peter Schiff called the rate cut in July the first one on the road to zero. There’s nothing so far to cast any doubt on that view.
But the Fed is not alone. It joins the majority of the world’s central banks on a race to lower rates and inject more easy money into the world’s economy. As of this month, a total of 54 central banks in both developed and emerging markets have cut their policy/base interest rates.
We’ve talked a lot about government debt and consumer debt. In this episode of the SchiffGold Friday Gold Wrap, host Mike Maharrey highlights the massive corporate debt bubble. As he explains, it’s eerily similar to the mortgage debt bubble the blew up in the years prior to the 2008 crash. It’s a little like deja vu all over again. He also covers another round of gloomy economic data that came out this week.
Rene Magritte’s 1929 painting “The Treachery of Images,” depicts a tobacco pipe with a caption that reads “Ceci n’est pas une pipe,” (French for “This is not a pipe”). Everyone who has taken a course in modern art knows that Magritte’s exercise in contradiction was meant to draw a distinction between a real thing and a representation of that thing. Perhaps we should send Federal Reserve Chairman Jerome Powell a beret and an easel as he is attempting a similarly surrealistic take on monetary policy.
Last week, Keynesian extraordinaire Paul Krugman called for more fiscal stimulus in the form of a “government investment program.” Mike Maharrey poked fun of him in his Fun on Friday column. But while it might be amusing to crack jokes at the expense of Keynsians and their obsession with both fiscal and monetary stimulus, the policies they promote are actually quite pernicious.
In fact, the do the exact opposite of what they’re supposed to.
“In case the people in this room didn’t know, the financial crisis of 2008, which I had been forecasting for some time, and the Great Recession that ensued, was caused predominantly by the Federal Reserve.”
This was the opening line of Peter Schiff’s talk at the Las Vegas MoneyShow.
The Fed managed to “rescue” the economy after the financial crisis, but in the process, it created an even bigger bubble than the one that popped in ’08. This bubble is about to burst and the Fed will try to repeat the process. The difference is this time it won’t work, as Peter explains.
The Federal Reserve is set to begin what a MarketWatch article called a “massive” bond-buying program.
Jerome Powell announced the program last Tuesday and the central bank released more details about the plan on Friday. The Federal Reserve will buy $60 billion in short-term Treasury bills each month. According to a statement, the purchases will continue, “at least into the second quarter of next year.” That would amount to around $400 billion worth of Treasurys added to the Fed’s balance sheet.