Peter Schiff: Powell Caved — Inflation Wins | SchiffGold

On the latest episode of The Peter Schiff Show, Peter examines the latest turn in Fed policy and the political forces steering it. He argues that the Federal Reserve has reversed course under pressure, that credit expansion still drives price rises, and that foreign central banks are accelerating a move into gold. He also warns that growing government intervention in industry risks turning markets into state-directed economies.

He points out that last week in Jackson Hole, Powell himself admitted the economy is weaker now, with growth roughly half of what it was a year earlier:

Powell said that there can be no doubt that the economy today is weaker than it was a year ago. GDP growth. In fact, he mentioned it was about half. According, I think, to his assessment, he talked about how it was running at a little over 2% a year ago, and now it’s slowed down to 1% or just over 1%. So in other words, the economy is growing at half the pace that it was growing at under Biden.

Peter says the Fed’s rationale for backing off is revealing — they claim to have overshot their targets, but the overshoot is massive when you look at inflation instead of the short-term numbers:

Now, the reason that Powell gave for giving it up is he basically said, look, we tried it. We tried to overshoot a little bit, and it didn’t really work out for us. Meaning, yeah, we tried to overshoot by a little bit, and we did it by a mile, right? They went for 2.1, 2.2, and they got 9.1, right? So, yeah, they tried to overshoot a little bit, and they overshot by a mile.

He reminds listeners that money isn’t the only thing that bids up prices — credit does, too — and that expanding credit without restraint is another form of inflationary policy:

Credit is very important because you don’t need money to buy stuff. You can buy stuff with credit. And so if you can bid up prices with credit without having any money, and we’ve raised that to an art form in America, well, expanding credit is inflation. You’ve got more credit available to buy goods. And even though the Fed was hiking, the hikes were never substantial enough to restrict the credit growth.

Peter warns that foreign central banks are already responding to this shift by diversifying away from dollars and Treasuries and buying gold, a trend he expects to accelerate as the Fed prioritizes political considerations over price stability:

The rotation that we’ve had with foreign central banks out of dollars and out of Treasuries into gold is going to accelerate as a result of this shift in Fed policy. Central banks are going to be more interested and more aggressive in their movement out of U.S. dollars because the Fed has basically said we are going to sacrifice the inflation side of the mandate because of the political pressure put on us by the Trump administration, which is still early days. We’ve still got three and a half years left of Trump and wait till Trump gets complete control of the Fed. Wait till Powell is gone and some flunky has taken his place. And they get some more FOMC members. He’s going to completely have control of the Fed.

Finally, Peter connects the dots between an inflationary currency regime and the growth of government power, warning that state involvement in private firms—whether by purchase or coercion—slides markets toward nationalization and away from capitalism:

And of course, this is the slippery slope to communism, because if you allow the government to buy into companies, and in this case, they didn’t even buy their way in, they extorted their way in. But you know, the government, if they control the printing presses, they can just print out money and buy everything. They can basically nationalize the means of production by buying everything with the money they print. They can effectively nationalize the whole economy and become a communist country. This is not capitalism when the government buys into companies or shakes them down and demands a piece of their action.

Be sure to watch Peter’s recent appearance on CapitalCosm, where he discusses dedollarization in foreign central banks.

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