Economist Peter Schiff has a simple message for Federal Reserve Chair Kevin Warsh: stop talking, start doing. In a pointed post on X, Schiff accused the Fed of talking out of both sides of its mouth, claiming that while Warsh preaches inflation fighting, the central bank's actions are actually fueling the very problem it claims to solve.
"Forget about what Warsh says; pay attention to what the Fed does," Schiff wrote. The Fed's balance sheet expanded by $11.388 billion last week, a move Schiff says contradicts the Fed's stated 2% inflation target. "If the Fed was serious about its 2% target, it would be shrinking its balance sheet," he added. "While Warsh talks about fighting inflation the Fed is creating it."
The Balance Sheet Tells the Story
The numbers back up Schiff's point, at least on the surface. The Fed's total assets stood at $6.76 trillion as of Aug. 12, up $11.38 billion from the prior week and up $116.3 billion from a year earlier, according to the central bank's most recent data. That's still a far cry from the nearly $9 trillion peak reached during the pandemic-era stimulus, but the trend is clear: the balance sheet is growing again.
This comes after the Fed officially ended its quantitative tightening program in December 2025. The multi-year effort to shrink assets had been running since June 2022, when then-Chair Jerome Powell pulled the plug to ensure the Fed maintained what officials call 'ample reserves' in the banking system. Now, with the balance sheet expanding, Schiff's critique hits a nerve: is the Fed really committed to fighting inflation, or is it just paying lip service?
A Cooler CPI Print, But Schiff Isn't Buying It
The debate comes on the heels of Wednesday's Consumer Price Index report, which showed inflation rising 3.4% year-over-year in July, in line with estimates and down from June's 3.5% increase. Core CPI also eased to 2.5% from 2.6%. On the surface, that looks like progress. But Schiff isn't impressed.
He called the print "misleading," arguing that it still reflects May's oil price collapse rather than July's rebound. The report drew mixed reactions from economists, with former Fed economist Claudia Sahm seeing it as a sign of building disinflation. Schiff, ever the contrarian, sees it as a temporary blip that masks the real inflationary pressures building beneath the surface.
Echoes of Volcker, But a Different World
Since taking the helm at the Fed, Warsh has struck a hawkish tone, emphasizing his commitment to the 2% inflation target and a smaller central bank balance sheet. That rhetoric has drawn comparisons to former Chair Paul Volcker, who famously tamed runaway inflation in the early 1980s with aggressive rate hikes. But Schiff's point is that the economic landscape today is vastly different.
The U.S. federal debt now stands at about 123% of GDP, compared with roughly 31% in 1980. That's a staggering difference, and it raises the stakes for any central banker trying to channel Volcker's playbook. With debt levels that high, the room for aggressive tightening is limited, and the pressure to keep borrowing costs low is immense.
Schiff's critique is a reminder that in the world of central banking, actions speak louder than words. Whether Warsh can walk the walk remains to be seen, but for now, the balance sheet is doing the talking, and it's saying something Schiff doesn't like.
