Via SchiffGold.com,
Peter caps off a very newsworthy week, in which the decisive Trump victory shocked the media class and another Fed rate cut was announced. Peter analyzes both events, arguing against the unbridled economic optimism of Trumpâs supporters and criticizing Jerome Powellâs stance on Fed independence and his alarming lack of concern for a future of stagflation.
Peter starts by highlighting the inconvenient trade-off between taxes and government spending. Trump promises new tax cuts, but these will need to be offset by spending cuts, lest the national debt balloons even further out of control:
Trump would have to maybe have a fireside chat in front of the American public and level with them.
He can say, when I was running for president, I promised a lot of things.
I promised a lot of tax cuts⌠we really need higher taxes if we canât get some serious cuts in spending.
And so thatâs what weâre going to try. Iâm going to ask Americans to pitch in and tighten their belts.
While both the Republicans and Democrats like to take credit for for the countryâs economic growth, the reality is that much of this âgrowthâ is an artificial boom induced and sustained by decades of expansionary monetary policy by the Federal Reserve:
The problem was we didnât have a strong economy. We had a bubble. We had a fragile economy.
In fact, weâve been blowing a bubble in this economy ever since the 1990s. Greenspan is the architect of this house of cards.
Heâs been blowing all the air in and every president going back to Clinton has been hiding behind his bubble and has been taking credit for the fake economic growth that has been a consequence of this ever-expanding bubble.
With the stock market lifted by Trumpâs success, Peter argues the best time to switch into US equities is when the aforementioned bubble pops. Itâll be painful in the short-term, but thatâs when stocks will be a bargain:
The time to load the boat with US stocks is not when theyâre historically expensive. Iâm waiting for blood in the streets. I want the collapse to happen…
Now, I know when we initially do that and the economy is in recession and everybody is pessimistic, thatâs when Iâm going to be optimistic, because Iâm going to know that this is the bitter tasting medicine that we should have swallowed a long time ago.
Pivoting to the Fed rate cut, Peter points out that the Fed may have cut rates by less than they would have had Kamala Harris been elected instead of Donald Trump:
You would assume that if weâre going to have a stronger economy, the Fed should reconsider the rate cuts, maybe even pause or hike rates.
I thought, well, thereâs no chance the Fedâs going to do that. Trump would go ballisticâtheyâre going to cut. And thatâs exactly what they did.
One reason the dollar has been so strong is that people are thinking, well, maybe the Fed wonât cut as much now that weâre expecting a stronger economy.
Peter takes aim at Jerome Powellâs political cowardice, in which he uses the Fedâs independence as an excuse to avoid criticizing bad fiscal policy:
Being independent doesnât mean you have to keep your mouth shut and you canât speak your mind and you canât be critical.
It actually means the opposite of it.
When youâre independent, youâre not influenced by politicians, so you could say whatever the hell you want to say.
You can criticize whoever you want to criticize, and that is exactly what his job is.
At Thursdayâs Fed press conference, Powell dodged a question about the possibility of stagflation. Peter sees this as a major gaffe:
He [Powell] kind of says, âWell, our plan for stagflation is to hope there is no stagflation.â
Then he laughed, realizing how ridiculous that sounded.
I mean, what kind of plan is that? Your plan is to hope it doesnât happen. .. Because obviously, itâs possible.
So, what are you going to do? Thatâs the question, not what you hope will happen. Whatâs your plan?
Theyâve got no plan. Thatâs why they hope it doesnât happen.
But, you know, Murphy has a law, right?
Anything that can go wrong will go wrong. Weâre going to have stagflation.
Donald Trumpâs has likely halted economic progressivism from corrupting the White House, but with the debt still expanding and the Federal Reserve still setting price controls on interest rates, the economy is far from healthy.
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