Peter Schiff: We’ve never seen anything like this. Not even under Obama

Peter Schiff discusses how the Federal Reserve plays an integral role in the economic recessions of the past. Peter covers cause and effect, and how different functions of the markets, politics, national debt, and central banks influence and shape the future of the world economy. He also gives insight on where he sees the economy heading, and how his prediction is likely to pass in the near future. Las Vegas MoneyShow 10/13/2019

Time to ditch CNBC and get Real (Vision)

The key value that Real Vision adds stems from its “long-form documentaries, in-depth interviews and actionable analysis.” These contrast starkly with CNBC’s 60-second sound bites.

For example, Williams’ recent interview with David Stockman, Ronald Reagan’s former budget director, ran nearly 90 minutes.

Real Viewers who invested the time got an in-depth overview of how America’s 1971 default on its gold debts (which few CNBC viewers have even heard about) may be setting the stage for a colossal reset.

“Major media are perpetual bulls because this draws advertisers,” jokes Williams. “Imagine running a mutual fund ad right after an analyst says the market is overvalued. That wouldn’t work well. But we don’t run ads. So we can offer a wider range of opinions.”

Fed employees not allowed to speak to the press

With Real Vision broadening its content, Williams has increasingly focused on digging deeper into the Federal Reserve and the shady world of central banking. The process has heightened his conviction about the role that physical gold needs to play in investor portfolios.

That said, it hasn’t been easy. As John Maynard Keynes noted, central banks go to huge lengths to hide their primary roles as government tax collectors.

Federal Reserve employees, for example, are forbidden from speaking to the press. To make sure that they don’t, the Fed only hires the most obsequious candidates, from universities whose graduates have a reputation for towing the line.

The process works.

With the exception of Danielle DiMartino Booth, whose book Fed Up! appeared after the last financial crisis, the Fed—which some argue is running a colossal Ponzi scheme—has not had a major whistle blower in its 100+ year history.

The same applies to the big banks, which according to Keefe, Bruyette & Woods have paid nearly $250 billion in fines for fraudulent activities, without one of their key executives having “blown the whistle” to warn the public.

Williams, though not a journalist by training, has picked up a decent bag of tricks over the years.

For example, this week Real Vision ran a 90-minute interview with William White, an obscure former Bank of Canada, BIS and now an OECD official, who has been out of central banking for more than ten years.

CNBC journalists, who are only interested in sound bites, wouldn’t have given White two minutes of their time. Yet his importance cannot be overstated.

Williams knew that because White was no longer affiliated with the central banks (but remains connected with the key players), he was thus able to speak relatively candidly.

Central banks’ steady incompetence

White’s warnings—that central banks’ steady incompetence has dug them into a huge hole, that they are likely all working for themselves (as opposed to colluding, as some suspect) and that global debts will not be paid back—thus need to be taken with utmost seriousness.

White also reminded Real Vision viewers that he had worked closely with Claudio Borio, the current head of the economics department at the BIS, and suggested that the two thought alike.

This provides a strong hint that Borio’s commentaries during the coming months will be “must-reads” for all who are monitoring the international financial system.

A broad range of sources

Critics argue that viewers of CNBC and other mainstream media have more than made up their losses since the dot.com and housing bubble crashes.

However, that only applies to investors who were wealthy enough to hold on throughout and after the crises. Ordinary and poorer investors weren’t able to risk their remaining assets. Many left the market, never to return.

A market crash today would be particularly catastrophic to baby boomers, many of whom are simply too old to be able to wait out another boom-bust cycle. Hence the importance of Williams’ reasoning.

With consumer, business and public sector debts and most major markets all near record levels, investors do need to consult a broad range of sources.

But those who only have time to follow just one financial network should probably ditch CNBC and get Real Vision.

Fed Could Hit Back at Trump, a Former Top Official Suggests

WASHINGTON — A former top Federal Reserve official implied that the central bank should consider allowing President Trump’s trade war to hurt his 2020 election chances, an assertion that drew a firestorm of criticism and a rare pushback from the Fed itself.

William Dudley, the former president of the Federal Reserve Bank of New York and now a research scholar at Princeton University, said in a Bloomberg Opinion piece that “Trump’s re-election arguably presents a threat to the U.S. and global economy.” Mr. Dudley added that “if the goal of monetary policy is to achieve the best long-term economic outcome, then Fed officials should consider how their decisions will affect the political outcome in 2020.”

It is a controversial statement, particularly coming from an official who ranked among the Fed’s most powerful policymakers as recently as 2018. It also comes at a sensitive moment for the Fed, which has been under attack from Mr. Trump and trying to assert its independence from the White House and politics in general.

“The Federal Reserve’s policy decisions are guided solely by its congressional mandate to maintain price stability and maximum employment,” Michelle Smith, a Fed spokeswoman, said when asked about the column. “Political considerations play absolutely no role.”

Mr. Trump has waged a yearlong campaign to pressure the Fed to cut rates, accusing the central bank of hurting the economy by keeping rates too high and putting the United States at a disadvantage to other nations, like China and Germany.

The Federal Reserve loves watching our manufacturers struggle with their exports to the benefit of other parts of the world,” Mr. Trump said in a tweet on Tuesday. “Has anyone looked at what almost all other countries are doing to take advantage of the good old USA? Our Fed has been calling it wrong for too long!”

The attacks have put the Fed on the defensive, prompting top officials including Jerome H. Powell, the Fed chair, to insist that the central bank sets policy to achieve economic goals without taking politics into account.

The Fed cut rates for the first time in more than a decade in July and has kept the door open to future cuts, with Mr. Powell saying the central bank is prepared to act to protect the economy against slowing global growth and as Mr. Trump’s trade fights stoke uncertainty.

Mr. Dudley essentially said the Fed should wade into politics, arguing that the central bank should consider the political ramifications of the policy decisions it makes. By lowering interest rates to offset economic harm caused by Mr. Trump’s trade war with China, Mr. Dudley said the central bank could give the White House room to ramp up trade tensions.

“The central bank’s efforts to cushion the blow might not be merely ineffectual,” he wrote. “They might actually make things worse.”

The opinion piece comes as the Fed has been under attack from Mr. Trump and trying to assert its independence from the White House and politics in general.
CreditLexey Swall for The New York Times

Fed watchers responded to Mr. Dudley’s piece with widespread concern, asserting that it could feed conspiracy theories that the central bank is trying to influence political outcomes.

“The Fed for decades has scrupulously avoided doing that, and has tried to avoid giving that perception,” said Adam Posen, the president of the Peterson Institute for International Economics. “And this isn’t some ‘deep state’ fake: They genuinely don’t want to get into it, because ultimately they are accountable to Congress.”

Mr. Trump announced an escalation of the trade war with China just a day after the Fed cut rates in July, and the concern that Fed policy is enabling the tariffs is often repeated by analysts. Michael Strain at the American Enterprise Institute said it was a valid point to raise and consider.

But Mr. Strain pushed back against the idea that the Fed’s policymakers should try to guide political outcomes.

“It’s wildly irresponsible,” he said. “The Fed is not elected; it is appointed. It has a responsibility to adhere to a narrow reading of its mandate.”

The central bank’s leadership consists of 12 regional presidents, who are selected by businesspeople and community leaders from their districts and who share four annually rotating votes on interest rates. The New York Fed president is the most powerful regional leader and has a constant vote on policy.

The rate-setting committee also includes seven governors who are nominated by the president and confirmed by the Senate. Only five of those positions are currently filled, although Mr. Trump has said he intends to nominate another two members to the Fed.

The Fed does not answer to the White House by design: It is removed from politics so that it will make better long-term decisions for the economy, rather than trying to goose the economy going into election years. It is, however, responsible to Congress, which can change the rules that govern it.

That insulation has, historically, helped to fuel criticism that the Fed is removed from the public and in the pocket of bankers. The central bank has long been the target of conspiracy theories, and popular books about it have borne titles like “Secrets of the Temple.”

More recently, the president has placed the central bank firmly in political cross hairs. In a Twitter post last week, he asked whether Mr. Powell or President Xi Jinping of China was a “bigger enemy” of the United States. Mr. Trump has reportedly considered firing or demoting Mr. Powell in the past, and he recently told reporters that he would accept Mr. Powell’s resignation if it were offered.

Despite that pressure campaign, Fed officials have repeatedly pushed back against the idea that they would in any way take the White House’s comments or potential actions into account when setting policy.

“We’re never going to take political considerations into account or discuss them as part of our work,” Mr. Powell said at a news conference in January. “We’re human. We make mistakes. But we’re not going to make mistakes of character or integrity.”

Summers warns Fed not to be too confident it has tools to combat recession

Summers warns Fed not to be too confident it has tools to combat recession

In tweet storm, former Treasury Secretary crashes Jackson Hole party

Former U.S. Treasury Secretary Larry Summers isn’t on the agenda to speak at this year’s Federal Reserve economic symposium in Jackson Hole, Wyoming. But he didn’t let that stop him.

In a series of tweets, Summers said the Fed should not be confident it has the tools to combat the next recession and called for a “revolution in Fed” thinking.

Summers was once President Barack Obama’s top pick to lead the Federal Reserve, but his nomination was blocked by progressive Senate Democrats like Sen. Elizabeth Warren of Massachusetts. Obama then tapped Janet Yellen for the top Fed spot. Since then, Summers has become a leading outside commentator on monetary policy.

Summers was also a director of the National Economic Council under President Obama and chief economist at the World Bank.

In his tweets, Summers said the economies of Europe and Japan are now stuck in black holes — negative interest rates are expected for a generation and the U.S. economy is only one recession away from joining them.

In a world where the U.S. 10-year Treasury yield TMUBMUSD10Y, +0.91%   is 1.50%, Fed officials confidence in their toolkit is “misplaced,” he said.

Summers said the Fed’s traditional recession-fighting tool of lowering short-term interest rates may be counterproductive in this new global economy of low interest rates and economic stagnation.

Comparing the Fed’s current challenge to the central bank’s famous battle with inflation in the late 1970s, Summers called for revolution in monetary policy thinking.

But he said he wasn’t so hopeful.