by Peter Schiff, Schiff Gold:

Stock markets have been getting hammered, ostensibly because of the economic impacts of the coronavirus. Peter Schiff has been saying this isn’t really about the virus. It was the pin that pricked the bubble. If it wasn’t coronavirus, it would have been something else.

Regardless, the Fed hit the panic button last week and slashed interest rates by half a percent. Peter has described this as throwing gasoline on a fire. In other words, the central bank is exacerbating the problem.

Peter isn’t alone in thinking that the Fed is doing more harm than good. In an article published on the Mises Wire, economist Daniel Lacalle said the Fed’s panicked response is actually making the economy worse.

The Federal Reserve’s monumental mistake of cutting rates this past week can only be understood in the context of the rising God complex among central planners: an overwhelming combination of ignorance and arrogance.

Less than a week ago, several members of the Federal Reserve board reiterated—rightly so—that cutting rates would not have a significant impact in a supply shock like the current one. We must also remember that the Federal Reserve already cut rates in 2019 and inflated its balance sheet by 14 percent to almost all-time highs in recent months, completely reversing the virtually nonexistent prior normalization. Only a few days after making calls for prudence, the Fed launched an unnecessary and panic-inducing emergency rate cut and caused the opposite effect of what they desired. Instead of calming markets, the Federal Reserve’s 50–basis point cut sent a message of panic to market participants.

If the jobs and manufacturing figures are better than expected, and the economy is solid, with low unemployment, what message does the Fed’s emergency cut transmit? It tells market participants that the situation is much worse than it seems and that the Fed knows more than the rest of us about how dire everything can be.  It is a communication and policy mistake driven by an incorrect diagnosis: the idea that the market crash would be solved with easy monetary policy instead of understanding the impact on stocks and growth of an evident supply shock due to the coronavirus epidemic.

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