Peter Schiff: Jerome Powell Doesn’t Believe in Basic Economics

Last month, Federal Reserve Chairman Jerome Powell testified before Congress. In his answer to one question, it sure did sound like he doesn’t believe in the basic economic principle of supply and demand. Peter Schiff talks about it in this clip from one of his podcasts.

During questioning, a congressman asked Powell about currency debasement with all of the Fed money printing. Powell insisted that not happening.

He said once upon a time in ancient history, expanding the money supply did have an impact on the value of the dollar. But he said that’s not the case anymore.

He said there’s no longer a relationship between the quantity of money and the value of money. Meaning, we can print as much money as we want and the money itself is not going to lose value.”

Peter called this “ridiculous.”

So, according to Powell, the law of supply and demand no longer applies. We can supply as many dollars as we want and the price of the dollar is not going to fall. I mean, that is absurd in its face.”

The Fed has expanded the money supply at a record pace. And prices are going up. Anybody who has gone to the gas station or the grocery store knows this. We also see it in the rapid increase of commodity prices.

Meanwhile, the dollar has been going down.

Now, has the dollar crashed yet? No. Not yet.”

Peter said he did agree with Powell to an extent. The US government and the Fed have managed to get away with printing a lot of money in recent years without creating an even bigger increase in prices or an even bigger drop in the dollar.

Why?

Because of the incorrect perception of the dollar as a safe haven because the dollar is the world’s reserve currency. And so, we’ve been given a lot of slack and you have a lot of people around the world who have loaded up on dollars. And because the Fed was successful in conning all these dollar holders that the short-term zero percent interest rates and the bloated balance sheet were temporary — that the Fed was going to normalize interest rates and shrink its balance sheet. And that is what enabled the Fed to keep on printing money without the value of that money collapsing because our creditors were willing to hold on to that money because they were anticipating this rate normalization, which was going to be bullish for the dollar.”

But at some point, they’re going to realize this isn’t going to happen. Then they will dump the dollar.

And that is exactly what the technical picture is showing you right now. We are very, very close to the dollar basically going over the edge of a cliff.”

Nevertheless, the Fed controls the printing press, and Powell and Company seem to believe that they can run off as many dollars as they want and it will never result in inflation. Peter called this sheer nonsense.

They are creating the inflation. The only thing that’s happened is we’ve been spared the consequences. But they haven’t been eliminated. They’ve just been delayed. But because they were delayed, they’ve been exacerbated. And so the Fed sowed the wind and now we’re going to reap the whirlwind.”

Not even the chairman of the Federal Reserve can suspend basic laws of supply and demand. The bottom line is economics always wins in the end — whether people want to believe it or not.