Wall Street tycoon warns: Powell cannot solve the stagflation problem!

Veteran Wall Street investor and renowned economist Peter Schiff analyzed two events, including Trump's decisive victory and the Federal Reserve's announcement of another interest rate cut. Peter opposes the unlimited economic optimism of Trump supporters and criticizes Powell's stance on the independence of the Federal Reserve as well as his astonishing indifference to the potential for stagflation in the future.

Peter first emphasized the awkward trade-off between taxes and government spending. Trump promised new tax cuts, but these must be offset by cuts in spending; otherwise, national debt will balloon out of control.

Peter stated that Trump may need to have a fireside chat with the American public, being candid. “He could say, when I ran for president, I promised a lot of things. I promised a lot of tax cuts, but if we can't significantly cut spending, we really need to raise tax rates. This is what we are going to try. I want to ask Americans to contribute, to tighten their belts.”

Although both Republicans and Democrats like to take credit for national economic growth, the reality is that much of this “growth” is an artificial prosperity induced and maintained by the Federal Reserve's expansionary monetary policy for decades.

Peter said: “The problem is that we don't have a strong economy; we have a bubble, we have a weak economy. In fact, we have been inflating this economy since the 1990s. Greenspan is the architect of this house of cards. He has been injecting air into the economy, and every president since Clinton has hidden behind his bubble, taking credit for false economic growth, which is the result of an ever-expanding bubble.”

As the stock market rises due to Trump's success, Peter believes that the best time to buy American stocks is when that bubble bursts. It will be painful in the short term, but at that time, stocks will be a bargain.

Peter stated that the best time to buy American stocks is not when they are historically overvalued. “I am waiting for Wall Street to show some ‘blood.’ I hope the crash happens…”

He added: “I know that when we do this, the economy is in recession, and everyone is pessimistic, but at that time I will remain optimistic because I will know this is the bitter medicine we should have swallowed long ago.”

Regarding the issue of the Federal Reserve cutting interest rates, Peter pointed out that if Harris, rather than Trump, were elected, the Fed might reduce the extent of the rate cuts.

“You can assume that if we had a stronger economy, the Fed should reconsider the extent of the rate cuts, or even pause or raise rates. I thought the Fed would never do that. Trump would be furious—the Fed officials would cut rates. And that is exactly what they did.”

One reason the dollar is so strong is that people expect the U.S. economy to be stronger, and the Fed may not cut rates as frequently as before.

Peter criticized Powell's political cowardice, using the independence of the Fed as an excuse to avoid criticizing poor fiscal policies.

He said: “Independence does not mean you have to keep your mouth shut, cannot express opinions, and cannot criticize. In fact, it means the opposite. When you are independent, you are not influenced by politicians, so you can say whatever you want. You can criticize anyone; that is exactly what his job is At the Federal Reserve press conference on Thursday, Powell dodged a question about the possibility of stagflation. Peter considered this a major mistake. Powell said, "Well, our plan to deal with stagflation is to hope that there is no stagflation." Then he laughed, realizing how ridiculous that sounded.

Peter questioned, "What kind of plan is that? Your plan is to hope that stagflation doesn't happen. Clearly, stagflation is a possibility. So, what will you do? That's the question, not what you hope will happen. What is your plan? They have no plan, which is why they hope it won't happen."

He added, "But, you know, Murphy's Law says it like this, right? Anything that can go wrong will go wrong, and we will have stagflation."