Peter Schiff: Fed Independence in the Crosshairs | SchiffGold
On his latest podcast, Peter takes aim at a string of recent policy choices that are undermining the dollar, inflating asset bubbles, and exposing taxpayers to risk. He walks through the latest jobs data, the anomaly of easing into an inflationary cycle, the privatization of profits at the expense of public losses, and the constitutional stakes for who controls the money supply.
He opens by framing the new jobs report as politically charged and worse than expected, and he worries about the credibility of the data source itself because of recent White House interventions in the Bureau of Labor Statistics (BLS):
We got the jobs report for August that came out today. For a while I wasn’t even sure if we were going to get the August report because remember Trump fired the head of the Bureau of Labor Statistics because last month he didn’t like the report because it was really bad. So he said it was rigged just to make him look bad, so he fired her. … This jobs report actually paints a bleaker picture than the last one.
Peter follows up by stressing a policy paradox: the Federal Reserve is poised to cut rates even as inflation is clearly rising, and he warns that easing into an upward inflation trajectory is historically unprecedented and dangerous:
The problem is the Fed is cutting into rising inflation and rising inflation pressures. We have never seen this, at least in modern times. Normally when the Fed is cutting inflation present pressures are not there; the Fed was able to hide behind the fact that we were below their 2% target or pretty much right on it. But this is gonna be the first time that we’re starting an easing cycle when inflation is above target and rising; it’s not just that it’s above target, it’s the trajectory.
He then turns to housing finance, criticizing a proposal to “privatize” Fannie Mae and Freddie Mac that really shifts future losses onto taxpayers while letting private investors keep the upside:
Trump is talking about how much money Fannie and Freddie are making and he wants to privatize them. Well they’re going to lose a fortune once housing prices drop, and of course all those losses are on the taxpayer. … They’re not being privatized; they’re only privatizing the profits. They’re socializing the losses to a degree that they’ve never been socialized before.
He warns of an even bigger structural shock if the Supreme Court upends the Fed’s independence — a ruling that could make monetary policy directly political and send investors toward hard assets:
I think the biggest threat now to the dollar, and one of the reasons that I think the price of gold could go ballistic, is because I think there is a good chance that the Supreme Court is going to side with Donald Trump in his ability to fire Lisa Cook, a Fed governor. … The only way I think that the Supreme Court could approve this is if they actually rule on the independence of the Fed and they rule that a truly independent Fed is unconstitutional, which I believe it is. I never believed that the Federal Reserve Act would hold up to constitutional scrutiny, but it was never really challenged.
Finally, Peter roots his case in constitutional text, reminding listeners that the framers tied monetary authority to specie — gold and silver — and that the modern paper dollar departs from that original design:
The monetary powers of the Federal Reserve are created in Article 1, section 8; in Article 1, section 8, the Federal Government is given the power to coin money and regulate its value. Coin money, that’s it; what does coining money mean? Well, it means taking money and making a coin out of it, right, not a paper bill, a coin. What is money? Well, money is defined in the Constitution as gold and silver; Article 1, section 10 says no state shall make anything but gold and silver coin legal tender.
Make sure you check out Peter’s analysis of last week’s stellar week for metals on the SchiffGold Gold Wrap Podcast!
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