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Transitory Inflation Turning Into an Inflationary Spiral

Transitory Inflation Turning Into an Inflationary Spiral

Consumer prices have been rising precipitously this year. If you annualize the Consumer Price Index through the first five months of 2021, you get a CPI increase of over 6%. Federal Reserve Chairman Jerome Powell continues to push the narrative that inflation is transitory, but not everybody buys into this storyline. On the Wolf Street Report, Financial Analyst Wolf Richter said Powell’s temporary inflation is turning into an “inflation spiral.”

Richter said some measure of inflation will likely tick down in the months ahead, but to steal Powell’s term, the relief will be transitory and only serve to offer false hope before inflation starts rising again.

The first bout of inflation always looks temporary. But during those first bouts of inflation, that’s when the triggers of persistent inflation, namely the inflationary mindset and inflation expectations are being unleashed.”

The markets seem increasingly skeptical of Powell’s insistence that inflation is transitory. Last week, the IMF warned of a “sustained” inflation rise in the United States. Many people are starting to talk about the Fed tightening monetary policy sooner rather than later to fight rising prices and worry this could cause a slowdown in the economic recovery. But Peter Schiff says the markets are bracing for the wrong impact. The Fed won’t fight inflation because it can’t. There is no way to tighten monetary policy without collapsing the economy.

It’s not that inflation is going to turn out to be not transitory and therefore the Fed is going to fight it,” Schiff said. “It’s that inflation is not transitory and the Fed is not going to fight it. And because the Fed is not going to fight the non-transitory inflation, it’s actually going to end up getting much worse than people think.”

…click on the above link to read the rest of the article…

Peter Schiff: The Box That the Federal Reserve Is In

Peter Schiff: The Box That the Federal Reserve Is In

Jerome Powell and Janet Yellen testified jointly before the US Senate last week. Inflation was a big topic of conversation. The Fed chair continued to insist that the central can fight inflation if necessary, but that it really isn’t a problem we need to worry about right now. In his podcast, Peter Schiff said the truth is inflation is a problem. And when it comes to dealing with that problem, the Fed is in a box. It will never pick a fight that it can’t win.

The Federal Reserve balance sheet has swelled to a new record of over $7.72 trillion. It was up another $26.1 billion on the week last week. Peter said he expects this number to continue increasing at an even faster rate in the near future.

I would not be surprised to see the balance sheet hit $10 trillion by the end of 2021 because we have a lot of deficit spending in the pipeline and there is no way to pay for it other than the Federal Reserve.”

One of the questions directed toward Powell was about the Federal Reserve’s independence. Powell talked about how important it is. But Peter said the actions of the Fed chair show there’s really no independence at all.

There’s independence in form only, but not in substance. We pretend we have an independent Fed, but in reality, the Fed acts as if it’s just a branch of the US Treasury Department. The fact that both the secretary of the Treasury and the Fed chairman are testifying together shows a degree of cooperation. They’re working together and it seems that they are trying to coordinate their policies.”

The reason the Fed is keeping interest rates so low and expanding its balance sheet is to accommodate the US government as it spends more and more money.

…click on the above link to read the rest of the article…

peter schiff, schiff gold, jerome powell, janet yellen, fed, us federal reserve, us treasury department, us senate, inflation, balance sheet

Peter Schiff: Government Tries to Replace the Economy With a Printing Press

Peter Schiff: Government Tries to Replace the Economy With a Printing Press

Peter Schiff recently spoke at the “virtual” Los Vegas Money Show and explained why we are near the endgame for the dollar.

Peter opened up his talk speculating that the Money Show could be close to the end of its run.

I think the money that most people have, or at least what they think is money isn’t going to be money much longer.”

What in the world is he talking about?

The looming dollar crisis.

The dollar is going to fall through the floor and inflation is going to ravish the United States. What’s about to happen is that the world is going to go off the dollar standard and go back to the gold standard. That is where we are headed.”

Peter warned that we’re about to see a loss of wealth on an unprecedented scale.

He reiterated that this isn’t about COVID-19. We were already on the cusp of a crisis. The coronavirus simply made it worse.

It’s one of many problems,  but it’s not why we’re about to go through this massive economic collapse. But it is the monetary and fiscal policy response to COVID-19. The government’s cure is what’s going to kill the economy.”

In fact, the problems started long before the pandemic. As Peter reminds us, interest rate cuts and QE were already ongoing before the government shutdowns started last March. In fact, it goes back much further than that.

Everything the US government did in the aftermath of the 2008 financial crisis was a mistake. All the monetary policy was wrong. All the fiscal policy was wrong. As a consequence, we never actually recovered from that crisis.

…click on the above link to read the rest of the article…

Peter Schiff: Americans Are in For a Rude Awakening

Peter Schiff: Americans Are in For a Rude Awakening

All eyes have been on the stock market in recent weeks as it has reflected the fears about the coronavirus-induced economic shutdown and the hopes of massive stimulus. It’s been quite a rollercoaster ride. But in his podcast on March 27, Peter Schiff said there’s an even bigger problem looming on the horizon that people aren’t paying any attention to – the potential destruction of the dollar. He said Americans are in for a rude awakening.

The Dow Jones finished its best week since the Great Depression with a 915.39 point drop. But even with that big plunge, the Dow was up about 13% on the week, all on the strength of the spectacular rally on Tuesday, Wednesday and Thursday. In fact, the Dow had a bull market condensed into three days. But Peter said it was not really a bull market. He called it a “vicious correction in a horrific bear market.” And he said that bear market is “a long way from over.”

But while most eyes are on the stock market, Peter said we’re missing a more significant looming bear market — the bear market we’re going to have in the US dollar.

Peter has already explained how the actions of the Federal Reserve and the US government has set the stage to devalue the dollar, saying the dollar is cooked. He said that with the central bank and government response to the coronavirus, hyperinflation has gone from being the worst-case scenario to the most likely scenario.

A bear market in the dollar can mask some of the other problems in the economy. Consider in the 1970s, the dollar fell by nearly 70%. That means that while nominal stock market losses in the decade weren’t terrible, the real losses were significantly larger.  It was a destruction of the value of US stocks and Peter said it’s going to happen again.

…click on the above link to read the rest of the article…

Peter Schiff: They’re Going to Need a Bigger Rate Cut!

Peter Schiff: They’re Going to Need a Bigger Rate Cut!

Stop and pause for a moment and think about what just happened. The Federal Reserve says the US economy is strong, but it just initiated emergency monetary policy last seen during the worst financial crisis since the Great Depression.

Something doesn’t add up.

The Fed cut rates 50 basis points on Tuesday. It was the first interest rate move between regularly schedule FMOC meetings since the 2008 financial crisis. The Fed funds rate now stands between 1.0 and 1.25%.

The decision to cut rates was unanimous.

As the Wall Street Journal pointed out, this kind of Federal Reserve move has been reserved for “when the economic outlook has quickly darkened, as in early 2001 and early 2008, when the US economy was heading into recession.” The 50-basis point cut was the first cut of such magnitude since December 2008. Pacific Management investment economist Tiffany Wilding called it a “shock-and-awe approach.”

It may have been shocking, but the results weren’t awesome.

Stocks tanked anyway.

The Dow Jones closed down 785.91 points, a 2.94% plunge. The S&P 500 fell 2.81%.  The Nasdaq experienced a similar drop, closing down 2.99%.

Meanwhile, gold rallied, quickly pushing back above $1,600 and gaining over $50. Wednesday morning, the yellow metal was knocking on the door of $1,650.

Bond yields sank again as investors continued their retreat into safe-havens. The yield on the 10-year Treasury dipped below 1%.

In a press conference after the announcement, Federal Reserve Chairman Jerome Powell said the central bank “saw a risk to the economy and chose to act.”

“The magnitude and persistence of the overall effect on the US economy remain highly uncertain and the situation remains a fluid one. Against this background, the committee judged that the risks to the US outlook have changed materially. In response, we have eased the stance of monetary policy to provide some more support to the economy.”

…click on the above link to read the rest of the article…

Peter Schiff Doubles Down on the Dollar

Peter Schiff Doubles Down on the Dollar

Last year at the Vancouver Resource Investment Conference, Peter Schiff bet Brent Johnson a gold coin that the Fed’s next move would be a rate cut. At this year’s conference, Peter collected his gold coin.

Brent and Peter went on to debate the future of the US dollar. Brent says the dollar will go up this year. Peter thinks it’s going down. Peter put his money where is mouth is and went double or nothing against the dollar. 

Peter’s Highlights from the Discussion

“The central bankers are going to continue pursuing this policy as long as they can do it without some type of a crisis that intervenes. But the problem is the longer they do it the worse it’s going to be.”

“I don’t think it can go on that much longer. Decades – no way! I mean, can it go on four more years. Sure.”

“The US market has never been this overvalued, overpriced as far as I’m concerned. You know, people were optimistic in 2000.”

“The market is very, very dangerous. It can easily go down. Trump will tweet as much as he can to try to prop it up. But whether that and the Fed’s printing press is going to be enough, we’ll see.”

“I think the whole fiat system that we have is nearing the end of its life. And the fact that were at these zero percent rates or negative rates, and all the stuff that’s going on is the death knell of this system, which was doomed from the start.”

“I think gold is going to reassert itself as the primary reserve monetary asset in the world for central banks and that threatens the dollar.”

…click on the above link to read the rest of the article…

Peter Schiff on the Ultimate Gold Panel

Peter Schiff on the Ultimate Gold Panel

During the Vancouver Resource Investment Conference, Peter Schiff joined Frank Holmes (US Global), Rick Rule (Sprott US), and Grant Williams (Vulpes Investment Management) on the “Ultimate Gold Panel. Daniela Cambone moderated the discussion.

Gold charted its best year since 2010 last year. The price increased by 18.4% in dollar terms. The yellow metal also reached record highs in every G10 currency except the dollar and the Swiss franc. Can this bull-run can continue into 2020?

Peter noted that he was on a gold panel the year before and he was the only person who thought gold was going to go up. Many were predicting the yellow metal would fall back to $1,000.

I thought that was very improbable. And now you’re throwing around could it go back down to $1,300. Look, it’s possible, but I think it’s highly improbable that that’s going to happen. If gold is broken out and 1,350 was a six-year high that capped every rally, I think we took it out, we’ve never looked back ever since. We now seem to be building support around 1,550, or just under 1,550, which was the high before we had a pullback to around what? 1,450. So, the market looks very strong to me. So, while it’s possible that we could get that large decline, I wouldn’t want to hope for it or bet on it. I think that there’s a lot more upside potential and I think the number that Dalio is talking about, 2,000, not only is that very probable, but depending on the outcome of this election, we could go much higher. I mean, if Bernie Sanders were to be elected president, just imagine what would happen to the price of gold. The very night the results came in.”

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Peter Schiff: Americans Are in for a Rude Awakening

Peter Schiff: Americans Are in for a Rude Awakening

On Jan. 13, Peter Schiff appeared on RT Boom Bust with Bubba Horwitz to talk about the yuan, the dollar, the stock market and the US economy. Peter said the dollar is eventually going to collapse and it’s going to be a rude awakening for Americans.

The Chinese yuan has been gaining strength against the dollar in recent weeks, in part because of optimism that there will eventually be a resolution to the trade war. But the Chinese currency is still over 17% lower than it was when the US imposed its first tariffs. Does this mean the markets are cautiously positioning for a deal, or is there still skepticism about the phase 1 deal? Peter focused on the bigger picture.

Well look, a phase one might happen because a phase one is insignificant. The real deal is supposedly phase two. That’s the one that’s not going to happen. So, if anybody thinks we’re going to have a substantive deal, they’re wrong. But the reality is, I think the Chinese yuan is undervalued relative to the dollar and I expect it to rise rather dramatically over time.”

Peter said this is not good news for the US.

It’s going to make imports more expensive for Americans, so it’s going to reduce our standard of living. And I do think ultimately, it’s going to push up interest rates as well, as the Chinese and a lot of other creditors are no longer lending money to Americans, and so we have to draw from our own savings pool, which is extremely shallow. It means the Federal Reserve is going to be printing a lot more money as it monetizes the debt that the Chinese and other nations no longer want to buy, and this is further going to lower the American standard of living.”

…click on the above link to read the rest of the article…

Peak Irony: Fed Paper Admits Fed Policy Can Lead to Economic Ruin

Peak Irony: Fed Paper Admits Fed Policy Can Lead to Economic Ruin

A paper  by Scott A. Wolla and Kaitlyn Frerking for the Federal Reserve Bank of St. Louis warns that the Fed’s own policy could lead to “economic ruin.”

The paper titled “Making Sense of National Debt” explains the pros and cons of national borrowing in typical Keynesian fashion. In a nutshell, a little debt is a good thing, but too much debt can become a problem.

But in the process of explaining national debt, Wolla and Frerking stumble into an ugly truth — Federal Reserve money printing can destroy a country’s economy.

So, when does the national debt become a problem?

According to Wolla and Frerking, debt only becomes an issue when it outpaces GDP, or national income, as they call it. If debt grows at a faster rate than income, eventually the debt might become unsustainable.

They note that according to the GAO, the US national debt is on an unsustainable path.

The federal debt is projected to grow at a faster rate than GDP for the foreseeable future. A significant portion of the growth in projected debt is to fund social programs such as Medicare and Social Security. Using debt held by the public (instead of total public debt), the debt-to-GDP ratio averaged 46 percent from 1946 to 2018 but reached 77 percent by the end of 2018. It is projected to exceed 100 percent within 20 years.”

Note that the total public debt is even higher. Most analysts put the total debt to GDP ratio at around 105%.

As Wolla and Frerking point out, rising levels of debt elevate the risk of default. Normally, investors holding government bonds bear this risk. While governments never have to entirely pay off debt, there are debt levels that investors might perceive as unsustainable.

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Peter Schiff: There Are Bubbles Everywhere and They’re All Going to Pop

Peter Schiff: There Are Bubbles Everywhere and They’re All Going to Pop

The Dow pushed above 28,000 on Friday. The Nasdaq also closed on a record high above 8,500, and the S&P 500 made a new record high of 3,120. This despite some more gloomy economic data that came out during the day. Industrial production dropped more than expected, falling by 0.8 in October. Inventory numbers were also revised down. All of this led the Atlanta Fed to revise its Q4 GDP estimate down to 0.3.

In his most recent podcast, Peter Schiff said that it’s QE and Federal Reserve policy that is driving the stock market, not a great economy. In fact, the Fed is creating all kinds of bubbles. And like all bubbles, they will eventually pop.

Despite the weakening economy, the stock market continues to roar and Donald Trump continues to claim credit for the rising stock market and holding the stock market out as evidence of the success of his presidency.”

Ironically, a rising stock market and unemployment were the same two things Barack Obama pointed to as evidence of his success. Peter said this is really all about the Fed.

When Obama was president, we had a rising stock market and a falling unemployment rate and basically for the same reasons we have a rising stock market and a falling unemployment rate now. The stock market was going up because of the Fed, because of artificially low interest rates and quantitative easing. Well, that’s exactly why it’s going up now — artificially low interest rates and quantitative easing.”

Peter said today we have one more thing driving stock markets — talk of a trade deal.

 …click on the above link to read the rest of the article…

Peter Schiff: The Next Crash Could Bring Down the Fiat Money System

Peter Schiff: The Next Crash Could Bring Down the Fiat Money System

Peter Schiff appeared on RT Boom Bust on Tuesday (Sept. 17) to talk about interest rates, gold and the dollar. Peter said the fiat currency system may not survive the next recession.

The conversation started focusing on the repo operations conducted by the Federal Reserve early in the week, Peter said the financial media and Wall Street are being much too complacent about what’s going on.

Their instinct is to sweep it under the rug as no big deal, but I think it really is a harbinger of what’s to come.”

Peter noted that the Fed has been artificially suppressing interest rates, particularly since the 2008 financial crisis.

And by keeping interest rates artificially low, they have created a bubble that’s much bigger than the one that popped in 2008. And what happened this morning is you could see the air coming out of that bubble, because the market is trying to bring interest rates higher because we have no real savings in this country. We have enormous debt. Everybody is levered up to the max — government, the private sector, business, consumers — because rates have been so low, we’ve borrowed so much money. The market wants interest rates to be higher but the Fed doesn’t want that to happen because the road back to normal interest rates is a very bumpy one because it’s going to take us right through another financial crisis. So, the Fed is trying to keep interest rates artificially low and they almost lost control of it this morning. “

In effect, the Fed created about $50 to $70 billion out of thin air to supply the liquidity that the market needed.

 …click on the above link to read the rest of the article…

Peter Schiff: The World Will Drown in an Ocean of Inflation; Gold Is Going Ballistic

Peter Schiff: The World Will Drown in an Ocean of Inflation; Gold Is Going Ballistic

The gold market took a one-two punch on Tuesday as Trump made some concessions in the trade war and inflation numbers came in a bit higher than expected. Peter Schiff talked about it in his latest podcast, saying gold traders still don’t understand the gold rally.

Stock markets surged as gold and silver dropped after US trade representatives said they would delay some of the additional tariffs recently announced by President Trump. The Dow closed 372 points higher. Meanwhile, the price of gold dropped below $1,500 briefly before rallying back above that key number.

Gold actually began selling off before the trade war news when the Consumer Price Index number came in hotter than expected. Peter said he knew that would happen.

That is the way the lemmings trade, because according to the conventional wisdom, if inflation is higher, then the Fed will be less likely to cut rates. After all, they’re cutting rates because inflation is too low and if inflation comes in hotter, well, then there’s less of a reason for the Fed to cut rates. So paradoxically, higher inflation is seen as being bad for gold. And the reason I’m saying paradoxically is because gold is an inflation hedge. Normally, the more inflation the more you want to buy gold.”

Peter said investors are banking on the Fed fighting inflation, but they’re wrong.

There is no way the Fed is going to fight inflation. I don’t care how high it is … One of these days the traders have to realize that these numbers don’t matter. I mean, maybe they matter to the public who has to live with a rising cost of living. But they don’t matter to the Fed. The Fed is going to take rates back to zero no matter what these numbers are, because the economy is going into recession even as inflation rises.”


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Peter Schiff: If You Understood What This Means, You Would Be Buying Gold as Fast as You Can

Peter Schiff: If You Understood What This Means, You Would Be Buying Gold as Fast as You Can

Gold has risen to six-year highs in recent weeks as the Federal Reserve has pivoted back toward an easy-money monetary policy. Markets widely anticipate a Federal Reserve interest rate cut this week and the economy appears to be slowing.

Peter Schiff recently appeared on RT Boom Bust to explain why he believes this is the beginning of a much bigger long-term rise in the price of gold. And it’s not just because the Fed is cutting rates.

In fact, they are going to cut rates next week and this is going to be the first step on the road back to zero. And the Fed is also going to return to quantitative easing. But we just found out that Donald Trump is cutting a deal with a Democrats to basically throw out any progress Republicans made back in 2011, thanks to efforts of the Tea Party, to at least try to rein in the increase in government spending. So, they’re throwing caution to the wind. We are going to see deficits going through the roof over the next several years, and that’s even without the recession, which I believe is coming and which is going to make them much, much worse.”

Consider that in the midst of what is supposed to be a strong economy, we’re already seeing record-setting deficits. As Peter pointed out, bigger deficits mean more money-printing and that means more inflation.

All of this is very bullish for gold … If you understood what all of this means, you would be buying gold as fast as you can.”

 …click on the above link to read the rest of the article…

Peter Schiff: The Fed Is Going to Stimulate Inflation, Not the Economy (Video)

Peter Schiff: The Fed Is Going to Stimulate Inflation, Not the Economy (Video)

In December, Peter Schiff predicted that the Federal Reserve was about to hike rates for the last time and that the next step would be rate cuts. Yesterday, Jerome Powell made comments widely interpreted to signal the rising likelihood of a rate cut. The Fed chair dropped the word “patient” from his vocabulary, saying the central bank would respond as “as appropriate” to the perceived economic impacts of tariffs and other economic data.

Peter appeared on Fox Business Countdown to the Closing Bell with Liz Claman to talk about what’s next up for the Fed and how it will impact the economy.

I don’t think that Powell would even open the door to the possibility of a rate cut if he wasn’t prepared to walk through it.”

Peter said the reason he knew the Fed would end the hiking cycle in December was because the stock market was tanking and he knew the only way the central bank could stop the carnage was to take the rate hikes off the table.

Well, now it’s falling again, and so now all they’ve got left in their quiver is to actually cut rates.”

Claman pointed out that the stock market was popping at the mere suggestion of a rate cut.

“Exactly!” Peter said. “But I think people are wrong if they think it’s going to work again.”

The Fed was able to inflate an enormous bubble with QE one, two and three, and keeping rates at zero for as long as they did. But the next time, it’s not going to work.”

Peter reiterated a point that he made during his podcast last week, noting that bond traders are anticipating a recession. They are betting that the Fed will cut rates during the downturn.

 …click on the above link to read the rest of the article…

Peter Schiff: The Uber IPO Fiasco and the Writing On the Wall

Peter Schiff: The Uber IPO Fiasco and the Writing On the Wall

Uber launched its IPO on Friday. It was less than ideal.

Meanwhile, the Federal Reserve is talking about how it wants to tweak its quantitative easing program when the next recession rolls around.

Peter Schiff talked about how these things relate — and the “writing on the wall” for the economy in his latest podcast. 

Instead of buying some fixed amount of Treasurys and mortgage-backed securities, the central bankers have floated the idea of pegging a yield during the next economic downturn. For example, it would try to hold the interest rate on a one-year bond at, say, 1%.  As Peter pointed out, this is essentially price-fixing.

They’re saying, ‘We don’t want the interest rate that is being determined in the market. We want to interfere in the market so that the interest rate is lower than the market would set.’”

The central bankers are basically admitting that this is not capitalism. They don’t want the free market discovering a rate because they don’t like the rate the market would choose. When you interfere with the market-clearing price – and an interest rate is simply the price of money – then you create surpluses or shortages. This is a basic supply and demand function.

As Peter said, this constant Federal Reserve suppression of rates is the source of our problems.

The reason the Fed constantly feels that it has to artificially suppress interest rates is because we have so much debt as a result of the artificial suppression of interest rates in the past.”

That’s the irony of the Fed suddenly running around warning about high levels of corporate debt. It’s a problem it created!

 …click on the above link to read the rest of the article…

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