Federal Reserve Chairman Jerome Powell recently participated in an IMF roundtable with European Central Bank President Christine Lagarde and several other figures in global politics and banking. In his podcast, Peter Schiff broke down Powell’s comments and revealed that just about everything Powell said was wrong.
Moderator Sara Eisen, a CNBC anchor, said she was honored to be in the presence of these great economic minds. Peter said these are the last people you want to listen to if you want to know what’s going on in the global economy.
These are politicians disguised as economists or bankers. They’re either incompetent or liars. So, either way, you’re never going to get a valid answer.”
Powell started his presentation by talking about how strong the economy was prior to the pandemic.
As Peter said, we didn’t have a great economy.
We had a great bubble, a gigantic bubble. That’s what we had.”
Then Powell said the pandemic came along and screwed up this great economy. Peter said Powell was wrong again.
No. The pandemic maybe pricked the bubble. But it also exposed the underlying weaknesses in the economy. Because had we truly had a strong economy, we could have weathered the pandemic to a much greater degree than we did. And of course, we would have weathered it better had we not had the horrific government response to the pandemic.”
Of course, Powell had a different take. He talked about the “remarkable” fiscal and monetary response.
And wrong again.
It wasn’t remarkable. It was the worst possible response you could have made. It sowed the seeds for the inflation that we’re experiencing now. But more importantly, the even greater inflation we’ve yet to experience, but that we will experience.”
Then Powell talked about the great economic recovery we’ve experienced thanks to this “remarkable” policy.
And once again — wrong.
We didn’t have a great recovery. We never recovered at all. We got even sicker. It’s just that Powell didn’t know that. All we did was spend the money that the Fed printed, and we’re experiencing the consequences.”
Powell mentioned inflation as if it came around out of nowhere and just rained on the parade. He acted as if this inflation freight train just came out of nowhere. Nobody expected it and there was nothing anybody could do about it.
Powell made it out as if everything was great and then, all of a sudden, we had inflation and a war. And so now, we’ve got this big problem. But of course, he fails to acknowledge or accept any responsibility for having created the problem.”
Powell continued to talk tough about his war on inflation, saying a 50 basis point interest rate hike was definitely on the table for May and saying that the central bank would “front-load” the rate hikes. These comments tanked the US stock markets on Friday. He said the Fed needs to get interest rates to “neutral” more quickly and that will require bigger hikes earlier in the cycle.
Peter said all of this is a bunch of nonsense.
Everybody wants to point to the rhetoric of Powell and some other FOMC members. … Everybody says we’ve got this hawkish Fed that’s really aggressive. They’re not aggressive. They’re not hawkish. If they really were aggressive and hawkish, they wouldn’t just be talking about rate hikes. They would have already hiked rates by way more than 25 basis points. They wouldn’t be talking about shrinking the balance sheet in the future. They would have already shrunk it substantially in the past. So, this is not a hawkish Fed. These are a bunch of chickenhawks. They’re doves in hawks’ clothing. But even the clothing they put on is not really hawkish because what they’re talking about is not going to do anything about the inflation problem.”
Powell was asked if the Fed wanted the stock market to go lower. He didn’t say yes. But he didn’t deny it either. He basically sidestepped the question but gave the impression that the Fed doesn’t care.
The scenario is similar to 2018. The Fed is continuing to talk tough about tightening monetary policy despite signs of a slowing economy and the market. Peter said if we do get a crash – and that seems more likely every day – we’ll see how tough the Fed really is.
In this podcast, Peter also talked about the labor market, Bill Ackman losing big on Netflix, the possible impact of Musk’s Twitter bid on Tesla stock, losses in the ARK Innovation Fund and the Skybridge Fund, gold, and bitcoin.