Last week, the Federal Reserve held its September FOMC meeting. Peter Schiff appeared on the Claman Countdown after the meeting ended, along with Natalie Securities Global Fixed Income Chief Andy Brenner. During the interview, they discussed inflation, the impact of Fed policy, the bubble economy and they even touched on modern monetary theory. Peter said ultimately the Fed isn’t helping. In fact, it’s the biggest enemy of economic growth.
Peter said eventually the Fed will have to let interest rates rise unless it wants the dollar to become worthless. He said one of the most amusing comments Federal Reserve Chair Jerome Powell made during his post-meeting news conference was saying the Fed had to fight low inflation because it could lead to interest rates being too low.
But he wants low interest rates. They’re already at zero. The Fed’s goal is low interest rates. So, how can the Fed say low inflation is a problem if the only problem that we get from low inflation is low interest rates when he thinks that’s the solution to every problem?”
Brenner pointed out that the Fed wasn’t as dovish as the markets wanted it to be. Nevertheless, people continue to pour into equities. This raises the question of bubbles. Peter said of course there are bubbles and the Fed knows it.
The Fed knows there’s a bubble because any time the air starts coming out of it, it’s there to blow more into it. I mean all of its policies are deliberately designed to maintain that bubble. And the irony, Liz, is that everything the Fed is doing to inflate asset bubbles is actually deflating real economic growth on Main Street. The Fed is the biggest enemy of legitimate economic growth because it’s so fixated on maintaining these asset bubbles that it now denies exist.”
Brenner said the economy doesn’t need a stimulus plan, but it does need an infrastructure plan. He also said it won’t really matter who wins the presidential election, “because the Fed is going to be there.”
Peter said the Fed doesn’t need to be there — that’s the problem.
We don’t need more infrastructure spending either. We can’t afford that. We’re broke. We don’t want the government creating money and spending it. We want the government to stop spending so that they can free up those resources back to the private sector where they’re needed. Everything the government is doing, all these government spending programs, are making the economy weaker, not stronger.”
Brenner responded, “I guess Peter’s not a believer of the modern monetary theory.”
No. Nothing modern about that and it’s not even theoretical because it deosn’t work.”
But Peter said it is working for him — “Because I own gold!”
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