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Inflation Is a Policy That Cannot Last
Inflation Is a Policy That Cannot Last
Are we heading toward a Fed policy that fixes inflation at a permanent rate of five to six percent?
We could be.
But inflation is a policy that cannot last.
We’re currently experiencing a massive wave of price inflation. This should come as no surprise. The Fed has increased the M2 money supply by around 40% since the end of 2019. The US government showered that newly created money on American consumers in the form of stimulus. Meanwhile, governments effectively shut down the US economy. That led to a big drop in production. This created the perfect inflationary storm. We have more money chasing fewer goods and services.
Prices are rising.
Now the Federal Reserve has a big problem. It needs to tighten monetary policy to take on inflation. But the economy depends on easy money. Economic growth is built on borrowing. Any significant tightening of monetary policy will pop the bubble and the whole house of cards will fall down.
The Fed has finally abandoned the “transitory” inflation narrative and it appears to be getting more serious about addressing the issue. But how will the central bank really play this?
In an article published by the Mises Wire, economist Thorsten Polleit asserts there are basically two scenarios in play.
(1) The Fed means business; it really wants to lower consumer goods price inflation back toward the 2% mark.
(2) The Fed just wants to keep inflation from spiraling out of control, but it does not want to abandon the new regime of increased inflation.
Scenario (1) is not impossible, but it is relatively unlikely. Under the prevailing economic and political doctrine, the Fed is not meant to curb inflation at the expense of triggering another economic and financial crisis…
…click on the above link to read the rest of the article…
The Mainstream Has the Inflation Story Backwards
The Mainstream Has the Inflation Story Backwards
The mainstream blames inflation on “supply chain bottlenecks.” But they have it completely backward. In reality, Federal Reserve-created inflation is causing the supply chain mess.
According to Biden administration talking points, the economy is booming. Americans are flush with cash. And they are demanding lots of goods. The supply chain simply can’t keep up. That’s why we’re seeing empty shelves and rising prices. Transportation Secretary Pete Buttigieg summed up the mainstream mantra.
Demand is up … because income is up, because the president has successfully guided this economy out of the teeth of a terrifying recession.”
White House spokeswoman Jen Psaki told a similar tale. She said we have supply chain problems because “people have more money … their wages are up … we’ve seen an economic recovery that is underway.”
This sounds like a lot of spin. But in one sense, the mainstream is right. As Mises Institute Senior Editor Ryan McMaken pointed out in a recent article on the Mises Wire, they are correct when it comes to consumer demand and spending, even if they got it right for the wrong reason.
As Mihai Macovei showed earlier this month, the global volume of trade and shipping volume in 2021 have actually exceeded prepandemic numbers. For example, in the port of Los Angeles, ‘loaded imports’ and ‘total imports’ for the 2020–21 fiscal year (ending June 30, 2021) were both up when compared to the same period of the 2018–19 fiscal year. In other words, it’s not as if little is moving through these ports. In fact, more is moving through them than ever before. That suggests demand is indeed higher.”
But why is demand so much higher? As Psaki said, Americans have more money in their pockets. Wages are up nominally. But it’s not because the economy is booming. As McMaken points out, it’s due to inflation.
…click on the above link to read the rest of the article…
Artificially Low Interest Rates? So what?
Artificially Low Interest Rates? So what?
The Federal Reserve has held interest rates artificially low for decades. Even after pushing rates to zero in the wake of the 2008 financial crisis, “normalization” only managed to raise rates to 2.5% — hardly “normal.” The central bank began cutting rates in 2019, even before the coronavirus pandemic.
But what difference does it make? Why do artificially low interest rates matter? Peter Schiff explains in this clip from his podcast.
In the first place, artificially low interest rates screw up the way the economy allocates resources and production.
The interest rate is the price of money. Prices send signals in an economy. Think of them as street signs. In a free economy, low interest rates would come about through an abundance of savings.
And if you have a lot of savings, what does that mean?
That means that people are not consuming today. Their time preference for consumption is in the future. And so the signal that sends to the economy is, hey, you don’t need to produce a lot of stuff for today because Americans are saving. They’re not spending a lot of money. So, you can invest in these long-term projects that aren’t going to pay off for years and years and years. And so then you end up investing in those types of projects that don’t have immediate returns because you got these low interest rates that are sending the signal that Americans don’t need the money right now. They’re going to save and they’re going to spend the money in the future.”
But in today’s economy, that’s not why interest rates are low. The only reason interest rates are at zero is because the Fed is artificially suppressing them.
…click on the above link to read the rest of the article…
Peter Schiff: Stock Up Now! Inflation Could Get Very Ugly
Peter Schiff: Stock Up Now! Inflation Could Get Very Ugly
The price of pretty much everything is rising precipitously. The CPI for September came in above expectations with a month-on-month increase of 0.4%. Peter Schiff appeared on Unfiltered with Dan Bongino to talk about inflation in Joe Biden’s America. Peter said you should stock up now because things could get ugly really quickly.
Bongino pointed out that while wages are rising, they aren’t rising as fast as prices. Wages have risen 4.6% while inflation has surged by 5.4% — according to government numbers. Peter said that is typically the trend.
The price of labor never keeps up with the price of stuff.”
Peter said the real problem is during and after COVID, a lot of Americans stopped working.
Unfortunately, they didn’t reduce their spending because the government made the mistake of replacing the incomes they lost with new money that the Federal Reserve was printing. So, we were making fewer things to buy, but everybody had more money to buy stuff, and so, prices just went ballistic. And they’re going to keep going up.”
Bongino pointed out that the rich have accounts and hedge mechanisms to shield themselves from the impacts of inflation. But what does an average middle-class family do to avoid the financial apocalypse of inflation coming down the pike?
Peter said, first of all, remember that inflation is a tax.
So, when the Biden administration says they’re not taxing people that make less than $400,000, they’re hitting them with this huge inflation tax.”
So, how do you avoid it?
Peter said, “Stock up now!”
Buy the things that you think you may need a year from now, two years from now. Buy it now. Especially the stuff that is nonperishable…
…click on the above link to read the rest of the article…
One Ring to Rule Us All: A Global Digital Fiat Currency
One Ring to Rule Us All: A Global Digital Fiat Currency
We’ve written extensively about the “war on cash.” In a nutshell, governments would love to do away with cash in order to better track and control their citizens. There have been numerous moves closer to a cashless society in recent years, from capping ATM withdrawals to doing away with large-denomination bills. Last year, China launched a digital yuan pilot program and the US has floated moving toward a digital dollar.
We got a first-hand look at what happens when governments restrict access to cash when India plunged into a cash crisis after the country’s government enacted a policy of demonetization in November 2016.
It’s bad enough that various countries are exploring ways to move toward cashlessness, but there’s an even worse scenario — a global digital currency.
Economist Thorsten Polleit compares it to the “master ring” in J.R.R. Tolkien’s classic Lord of the Rings.
The following article was originally published by the Mises Wire. The opinions expressed are the author’s and do not necessarily reflect those of Peter Schiff or SchiffGold.
1.
Human history can be viewed from many angles. One of them is to see it as a struggle for power and domination, as a struggle for freedom and against oppression, as a struggle of good against evil.
That is how Karl Marx (1818–83) saw it, and Ludwig von Mises (1881–1973) judged similarly. Mises wrote:
The history of the West, from the age of the Greek Polis down to the present-day resistance to socialism, is essentially the history of the fight for liberty against the encroachments of the officeholders. (1}
But unlike Marx, Mises recognized that human history does not follow predetermined laws of societal development but ultimately depends on ideas that drive human action.
…click on the above link to read the rest of the article…
Peter Schiff: Government Serves Grade-A B.S. on Inflation
Peter Schiff: Government Serves Grade-A B.S. on Inflation
Both the Federal Reserve and the Biden administration continue to insist inflation is transitory. And they are also trying to shift the blame for rising prices so they avoid any responsibility. In this clip from his podcast, Peter Schiff explains why the government inflation narrative is Grade-A B.S.!
The Fed has finally acknowledged that inflation is running hotter than they’d expected. During the September FOMC meeting, the central bank raised its forecast, anticipating core inflation to increase 3.7% this year. That compares with a 3% projection in June. But the Fed and US government officials insist that rising prices are simply a function of supply chain issues and that it will be “transitory.”
Meanwhile, they ignore the elephant in the room – the increasing money supply. The central bank created new money at a record pace in response to the economic chaos caused by government shutdowns for COVID-19. And while money creation has slowed in recent months, it continues at a very high pace. Last month, M2 grew at the fastest rate since February.
If inflation is always and everywhere a monetary phenomenon, and you have this record increase in money supply, and then you also have this big increase in consumer prices, how can you not bring up the possibility that all of this money printing is potentially responsible for prices going up?”
But the central bankers continue to focus solely on the supply chain.
Peter suggested the money printing could account for the supply chain problems.
Whenever there is a surplus of money, there is automatically a shortage of stuff, because the government can print money very easily…
…click on the above link to read the rest of the article…
Facing Inflation Threat, German Investors Loading Up on Gold
Facing Inflation Threat, German Investors Loading Up on Gold
While most American investors have faith that the Federal Reserve can and will successfully tighten monetary policy to fight inflation — or have simply bought into the “transitory” inflation narrative — Germans are loading up on gold as a hedge against growing inflationary pressures.
Through the first half of the year, gold coin and gold bar demand in Germany hit the highest level since 2009 – the aftermath of the 2008 financial crisis. First-half demand for bar and coins in Germany increased by 35% from the previous six months, compared with a 20% increase in the rest of the world, according to World Gold Council data.
Raphael Scherer serves as the managing director at Philoro Edelmetalle GmbH. He told Bloomberg that gold sales for the company are up 25% on what was already a strong 2020.
We have a long history of inflation fear in our DNA. Now the inflation risk is picking up. The outlook for precious metals is very positive.”
Given Germany’s experience with hyperinflation under the Weimar Republic, it comes as no surprise that Germans are wary of inflation.
Gold investment took off in the country in the wake of the 2008 financial crisis and has been strong ever since. The global recession after the ’08 meltdown led to extremely loose monetary policy in Germany. The country has been in a negative interest rate environment for several years, and the Bundesbank has done billions in quantitative easing. Two and five-year government bonds have traded at negative yields since 2015.
The World Gold Council summarized why Germans tend to turn to gold when inflation looms.
…click on the above link to read the rest of the article…
Peter Schiff: Less Loose Fed Monetary Policy Isn’t Tight Fed Monetary Policy
Peter Schiff: Less Loose Fed Monetary Policy Isn’t Tight Fed Monetary Policy
There’s been a lot of talk about the Federal Reserve tapering its asset purchases. Peter Schiff talked about it during his podcast, saying even if the Fed does getting around to tapering, that doesn’t equate to a legitimately tight monetary policy. Furthermore, any tapering today sows the seeds for its own destruction.
The minutes from the July Federal Reserve meeting came out last week. They revealed the Fed is starting to talk about tapering asset purchases later this year. That sent stocks lower as traders continue to anticipate Fed monetary tightening. The hardest-hit sectors were economically sensitive cyclical stocks and anything that was part of the reflation trade.
Peter said there was really nothing new in the minutes.
The Fed did not reveal anything that hadn’t already been revealed by other FOMC members in their various talks.”
Nevertheless, according to all the experts, the Fed is Johnny on the spot. It is now tightening. And because it is tightening, inflation is no longer a concern.
Peter said the markets are reacting to this anticipated tightening cycle in the same way they have to past tightening cycles without appreciating the difference between this tightening cycle and those that preceded it. In fact, it’s hard to call the Fed’s next step a “tightening cycle.”
So far, the only thing that has happened during this cycle is that the Fed has talked. That’s it. It’s all talk and no action.”
Peter conceded that the central bank may well taper and slow down quantitative easing.
…click on the above link to read the rest of the article…
Peter Schiff: When It Comes to Inflation, We’re Just Getting Started
Peter Schiff: When It Comes to Inflation, We’re Just Getting Started
The July Consumer Price Index (CPI) data came out this week. For the first time, the numbers were in line with expectations, leading many mainstream pundits to declare “transitory” inflation is already starting to cool down. Peter Schiff broke down the report in his podcast. He said inflation is far from cooling off. In fact, when it comes to rising prices, you haven’t seen anything yet.
July CPI rose 0.5% month-on-month. This was in line with expectations for the first time this year. Every other CPI report had come in hotter than expected.
The year-on-year CPI came in at 5.4% – a high number, but in line with expectations. Core CPI, stripping out more volatile food and energy, charted below estimates at 0.3%.
Adding up the monthly CPI increases gives us a 4.1% inflation rate through the first seven months of 2021. As Peter pointed out, that’s more than double the Fed’s target of “slightly above 2%,” and we’re barely over halfway through the year. If you annualized the first seven months, you get around 7.2% inflation for 2021.
Clearly, nobody can define that as ‘slightly above.’ It’s more than triple 2%. I mean, it’s getting close to quadruple.”
And as Peter points out, it would be a lot worse if we had an honest measure of price increases.
I think if we measured inflation today using the same CPI we used to measure inflation in the 1970s, this year could end up being a worse year than any single year during the 1970s.”
More disturbing, Peter said this is just the beginning.
…click on the above link to read the rest of the article…
Peter Schiff: Central Banks Have Created the Mother of All Bubbles
Peter Schiff: Central Banks Have Created the Mother of All Bubbles
The Federal Reserve and other central banks around the world have pumped trillions of dollars into the global economy and depressed interest rates to artificially low levels to blow up the mother of all bubbles. In his podcast, Peter Schiff explained how the recent acquisition of Afterpay by Square reveals the extent of this global bubble economy that will inevitably have to pop.
Square paid $29 billion in an all-stock deal to purchase payment processor Afterpay. It was the biggest corporate takeover in Australian history.
Shares of Square rose 10% on the deal. As Peter noted, this isn’t typical. Normally, when a company buys another company at a premium and issues a bunch of stock, the acquiring company’s stock price drops.
But not in today’s crazy bubble world. In this bizarro world, the acquiring company goes up.”
Peter said Square overpaid for a company that he doesn’t think has much value whatsoever.
Afterpay is touted as an alternative to a credit card. When you buy something using Afterpay at a participating retailer, you only have to pay 25% at the point of sale. You then make three more payments to Afterpay over a six-week time period. In effect, the consumer gets a six-week interest-free loan.
Afterpay has been viewed as a big competitor for traditional credit card companies, but Peter pointed out this really isn’t the case.
Everybody, or most of the people, who are using Afterpay, are using their credit cards to pay Afterpay. All Afterpay is is another middleman that is getting in the way between the transaction.”
Afterpay generates revenue by charging merchants between 4 and 6% for every sale. Visa and Mastercard typically charge about 2%.
…click on the above link to read the rest of the article…
Peter Schiff: It’s Game Over if the Markets Call the Fed’s Bluff
Peter Schiff: It’s Game Over if the Markets Call the Fed’s Bluff
The Federal Reserve insists inflation is “transitory” and the economy is making “progress.” Yet, it continues with the extraordinary monetary policy it launched at the onset of the COVID-19 pandemic. Meanwhile, we’re seeing all kinds of data hinting that the economy may not be as great as advertised. Despite this, and even as prices continue to spiral higher, the Fed’s only monetary policy is talk. Peter breaks it all down on his podcast and drills down to the key question: what happens if the markets call the Fed’s bluff?
The July Federal Reserve meeting took center stage this week, but there was a lot of economic data that got lost in the shuffle. Peter said the data “really evidences the stagflationary environment that we’re in.”
On Wednesday, the trade deficit in goods data came out. It exceeded the high end of estimates and set another record high, rising 3.5% to $91.2 billion. Peter said he doesn’t think this record will last long.
These records are going to fall like dominoes. And this is not happening because we have a strong economy. It’s happening because we have a weak economy.”
A lot of mainstream pundits keep looking at these numbers as if they somehow reflect strength because Americans are buying so much stuff. But as Peter pointed out, the strength of an economy isn’t measured by what you buy but by what you produce.
Strong economies produce more. They don’t simply consume more. We are consuming more despite the fact that our economy is weak. How are we doing that? Well, the Fed is printing money and we are spending it. But that does not constitute strength. That really evidences profound weakness.”
…click on the above link to read the rest of the article…
Peter Schiff: Political Hypocrisy Provides Cover for Fed on Inflation
Peter Schiff: Political Hypocrisy Provides Cover for Fed on Inflation
From 2016 to 2020, Republicans were constantly trying to play up the economy. You’ll recall Donald Trump claiming it was the greatest economy in history. Meanwhile, Democrats were trying to play it down. Now, the roles have reversed. Since the Democrats own the economy now, they’re talking about how great the recovery is while Republicans are sounding warnings. As Peter Schiff explained in his podcast, this political hypocrisy is letting the real culprit get away without blame.
We saw this political hypocrisy on display during Jerome Powell’s recent testimony before the House Select Committee on COVID-19. The Democrats on the committee took the opportunity to grandstand about how great the economy is doing. As Peter put it, “They own the economy and they want to pretend that everything is great.” Their questions and statements focused on what a good job Powell is doing.
It’s interesting in that the Democrats are the ones that are trying to play down the inflation fears. They’re the ones that are trying to agree with Powell and reiterate the fact that everything is transitory and so we’ve got nothing to worry about.”
The Democrats don’t want to admit there is an inflation problem because that would be a blemish on this otherwise wonderful economy.
Meanwhile, the Republicans are pushing Powell on inflation and talking about it as a tax. But they’re not blaming Powell or the Fed. They’re placing the blame on Biden and the Democrats’ spending.
They’re not even really trying to blame the Fed for all the money printing. They’re just blaming Biden for all the money spending. But of course, Biden couldn’t be spending any money if the Fed wasn’t printing it…
…click on the above link to read the rest of the article…
Peter Schiff and Tucker Carlson: The Financial Crisis Will Be Worse Than the Pandemic
Peter Schiff and Tucker Carlson: The Financial Crisis Will Be Worse Than the Pandemic
Consumer Price Index (CPI) data for April came in much hotter than expected. Year-on-year, inflation is up 4.2%. The big number even prompted Federal Reserve Vice Chairman Richard Clarida to say, “We were surprised by higher than expected inflation data.”
Peter Schiff appeared on Tucker Carlson’s show to talk about the consequences of more printed money chasing fewer goods. Peter said inflation is going to hit the middle class harder than the pandemic.
Peter said this hot CPI print is a cause for concern and ultimately it is a tax.
It is the inflation tax. And if you look at how much the cost of living went up, measured by the CPI in the first four months of this year, it’s 2%. So, if you triple that to annualized it, we have consumer prices rising at 6% annually. But if you look at the monthly numbers, every month it accelerates. So, if you extrapolate the trend of the first four months of this year for the entire year, you’re going to get a 20% increase in consumer prices in 2021.”
Tucker asked a poignant question. If the value of the US dollar is falling as quickly as the CPI suggests, why would any country want to invest in US bonds? Doesn’t this threaten to cause a shake-up?
Peter said they won’t want to invest. They’ll be selling US Treasuries.
Anybody that can connect these dots is going to be selling US Treasuries. And the problem is there’s a lot of US Treasuries to be sold.”
Peter noted that a lot of people are talking about a shortage of goods.
…click on the above link to read the rest of the article…
Jim Grant: The Fed Can’t Control Inflation
Jim Grant: The Fed Can’t Control Inflation
Federal Reserve Chairman Jerome Powell insists inflation is “transitory.” As prices have spiked throughout the economy, Powell’s messaging has essentially been, “Move along. Nothing to see here.”
Peter Schiff has been saying the central bankers at the Fed can’t actually tell the truth about inflation because even if they acknowledge it’s a problem (and it is) they can’t do anything about it.
In a recent talk, Jim Grant, investment guru and founder of Grant’s Interest Rate Observer, echoed Peter, saying the Fed can’t control inflation.
During a webcast sponsored by State Street SPDR ETFs, Grant said he thinks “there’s a gale of inflation of all kinds in progress,” adding that he believes it will take the Fed by surprise and “overwhelm our monetary masters.” Grant said, inflation is “clear and present and will manifest itself in our everyday lives.”
That sounds like the exact opposite of Powell’s “transitory” mantra.
Peter has said that once the Fed is forced to admit that inflation isn’t transitory, it will be too late to take action. Grant made a similar prediction, saying inflation will “catch the Fed flatfooted. In response it will “prevaricate” – meaning speak or act in an evasive way. In fact, that already seems to be the central bank’s strategy.
The question is can the Fed actually control inflation. Grant doesn’t think so.
I think the Fed is under the misconception that it controls events. Sometimes, events control the Fed, and I wouldn’t be surprised if this was one of those times. The Fed thinks that not only can it control events, but it can measure them. It believes it can pinpoint the rate of inflation.”
…click on the above link to read the rest of the article…
The Mainstream Is Wrong About Rising Bond Yields and Gold
The Mainstream Is Wrong About Rising Bond Yields and Gold
Prices are going up. The Federal Reserve is printing money at an unprecedented rate. The US government continues to borrow and spend at a torrid pace. As Peter Schiff put it in a recent podcast, we’re adrift in a sea of inflation. Gold is supposed to be an inflation hedge. So, why isn’t the price of gold climbing right now?
In a nutshell, rising bond yields have created significant headwinds for gold. And the mainstream is reading rising yields and their relationship to gold all wrong.
It really comes down to expectations. Most people in the mainstream view rising yields as an inflation signal, and they expect the Federal Reserve to respond to this inflationary pressure in a conventional way. They expect the Fed to tighten monetary policy, raise interest rates and shrink its balance sheet.
As Peter Schiff has explained on numerous occasions, this won’t happen. The Fed won’t fight inflation because it can’t. It will ultimately surrender to inflation.
Right now, the markets sense that inflation is going to be moving higher. And maybe even higher than what the Fed is acknowledging. But I think the markets still believe the Fed — that the Fed will be able to contain the inflation problem before it really runs out of control. So, it’s the expectation that the Fed’s going to fight inflation by raising rates — that’s what’s pressuring gold. But the markets are wrong. The Fed is not even going to attempt to fight inflation. It’s going to surrender. Inflation is going to win without a fight…
…click on the above link to read the rest of the article…
MICHAEL MAHARREY, schiffgold, inflation, money printing, credit expansion, central banks, qe, quantitative easing, peter schiff, fed, us federal reserve, gold,
