Peter Schiff: The Markets See Stagflation

Via SchiffGold.com,

On Sunday’s podcast, Peter recaps the economic excitement from the tail of last week and the weekend.

He starts by analyzing the market’s downturn from Friday and then proceeds to cover more government waste, global interest rates, and the Fed’s policy path moving forward into 2025. He concludes by discussing the legacy of his late father, Irwin Schiff.

To kick off the episode, Peter explains the news that sent markets into a tailspin last week:

What was the news that drove the stock market down on Friday? And I think it’s more confirmation of stagflation, which is exactly what I have been predicting all along. And of course, stagflation is the one economic condition for which the Fed has no contingency plan. When Powell was asked what his plan was for stagflation, he knocked wood. He banged on the podium. And he said, well, we’re just going to hope we don’t have it. Well, hope is not a plan. But the reason the Fed doesn’t have a plan is because there’s nothing in their toolbox that will work.

Peter critiques the Federal Reserve’s overreliance on inflation expectations, a tactic he compares to misguided faith in a self-fulfilling prophecy:

Now, the Federal Reserve puts a lot of stock in expectations. Powell says that all the time, right, because these guys think that inflation is like the field of dreams. If we build it, they will come, right? If people expect inflation, we’ll get inflation. They think it’s kind of like a function of a self-fulfilling prophecy. They think if people expect inflation, well, they’ll demand higher wages. Businesses will expect inflation, so they’ll raise their prices and anticipation. So it’s part of the Fed’s strategy for blaming the public for inflation. Well, we have inflation because the public irrationally expects it, and because they expected it, they made it come true. They raised their prices thinking that there was going to be inflation and that’s why we have it.

Peter tags an anecdote onto his previous episode on government waste, recounting a government program from Italy that appears defies common sense:

I just read about this ridiculous program in Italy and I wanted to bring it up just as a tangent because it really goes well with my last podcast on waste, fraud, and abuse of government programs. I said you can’t have a government program without waste, fraud, and abuse. Well, the Italian program is a perfect example of this. They actually launched a program during COVID where the government would cover 110% of the cost to remodel your house. I mean, can you imagine that? So the government says, “Hey, go spend money on remodeling your house and we’ll give you more than you spent, 110%.” So basically it’s free. We’re going to pay you to remodel your house.

Discussing the AfD party’s success in Germany’s elections, Peter criticizes the narrative surrounding “far-right” political movements. When it comes down to it, the far-right and the far-left are both full of authoritarian socialists:

The Nazis are socialists. Fascism and communism are two forms of socialism. … Now, people might think, oh, no, they’re opposites because, you know, the Nazis fought the Russians, they were bitter enemies. The Nazis and the communists, yeah, like the Crips of the Bloods, right? They’re bitter enemies, but they’re both gangs. So you think of the fascists and the communists as rival gangs that are fighting over the same turf.

Finally, on what would have been his father’s 97th birthday, Peter elaborates on why the income tax is so pernicious:

I pay income taxes not because I believe the law requires me to pay it, but because I’m afraid of what the mafia will do to me if I don’t, right? That’s the reason that you pay protection money. We know when the mafia extorts you, and you pay. It’s not because you’re legally obligated, it’s because you’re afraid. And I don’t want to insult the mafia by comparing them to the government, because at least the mafia is honest when they rob you, right? They let you know that they’re criminals and you know, they’re robbing you. The government pretends that they’re not right. So it’s very dishonest.

If you missed it, be sure to check out Joel’s analysis from last week on the Friday Gold Wrap.