Peter Schiff: Here’s Why Inflation Is Going To Get Worse
The Federal Reserve’s January CPI report disproved the notion that inflation is under control. Although the headline annual CPI fell by 0.4% to 6.4%, prices per month rose by 0.5%. Peter Schiff, NTD News’s economist, spoke on NTD News after the data was released to explain why inflation will get worse.
Peter stated that January’s data were bad news for anyone who believed the Fed had won the fight against inflation.
Powell was talking about disinflation. We have seen sequential improvements in our numbers year-over-year, according to that perspective. That was inevitable when the rate reached 9.1, or whatever our peak out at so far.
The 0.1% decrease in annual CPI was not much of an improvement.
This could be the peak for improvement. We might see an increase in year-over-year inflation numbers in February.
The 0.5% month-on-30 gain was still quite significant. The prior month’s value was also revised from -0.1 up to +0.1.
Inflation is now starting to rise again, and I believe we’ll start to see higher numbers in the future months. That’s going to put an end to the notion that the Fed is done and can begin cutting rates based upon victory over inflation.
Peter was asked by the host if we would see inflation of 2%. Peter replied emphatically, “No!”
Even if you remove food and energy, it’s still not even close to 2%.
Peter mentioned supercore inflation, a new buzzword. He noted that it does not include shelter. He stated that this is more absurd than excluding food or energy.
Shelter is not included in the year-overyear growth, but it’s still 4%. This is double the Fed’s target of 2%. So I don’t believe they will get to 2% before they stimulate again. We’re likely to be in a severe recession and may even be facing another financial crisis. The Fed will create inflation and not fight it, with this backdrop.
Peter noted that the US central bank and government have been inflating inflation for over a decade.
This liquidity has not been withdrawn by the Fed. We are still seeing the effects of that, and the inflation it created during the COVID pandemic. We still have some way to go before we catch-up. In the meantime, inflationary government policy remains. We have a very expansive fiscal policy. The government has huge budget deficits. This is highly inflationary. Even though the Fed raised rates, real rates are still negative and we don’t encourage people to save. People continue to borrow as much as possible. The savings rate is at an all-time low. Credit card debt has reached record levels. The Fed’s rate increases have not affected spending or savings decisions. I believe these are crucial to lowering the inflation rate. I don’t see how we can get to 2% if people continue to spend.
Peter was asked by the host if the CPI really reflects what Americans experience. Peter explained that inflation is simply the expansion in the money supply. Inflation is a result of rising prices. Is the CPI accurate in capturing the extent to which aggregate prices are rising
It’s not my opinion. It’s deliberate, I believe. Because of the politics behind the number, I believe the CPI was intended to give you a low reading. It was invented by the government. It’s a scorecard of government policy and the government wants to get good grades.
Peter stated that doubling the official number is likely to get you very close to being accurate. This means that the true CPI is closer at 12% than at 6%.
Peter continued to explain how the government altered the CPI formula in 1990s to understate rising costs and support Social Security.
It was thought that if we could lower the CPI, we wouldn’t need to increase Social Security payments as much. This is a way to reduce Social Security. We pretend we have lower inflation.
Peter noted that the price inflation last year was higher than any year in either the 1970s or the 1980s if you use the old CPI formula. It’s not getting better.
This improvement I believe is temporary. We will see higher numbers by the middle of next year.
Meanwhile, President Joe Biden appears to be adamant about an unlimited debt ceiling. Peter stated that the best way to combat price inflation is to not raise it at all.
Leave it alone. Pay your bills. Reduce spending. Washington doesn’t have the money to pay the bills. They want to prevent that from happening by raising the debt limit. However, raising the debt limit will allow for more debt and more spending. That’s exactly where we are headed.”
Peter was asked by the host about the “wage price spiral”. Peter replied that it was a Keynesian concept.
Wages are a price, if you think about it. Wages are the cost of labor. It is the amount I pay someone to do my job. It’s impossible to say that prices are increasing because they are rising. Why are prices rising? What is the reason for wages rising and other prices increasing? Inflation is the reason. The government is the one who creates inflation. The government.
Peter stated that the “wage-price spiral” concept was created to blame workers for inflation or claim that inflation is the price we pay to enjoy prosperity.
That’s BS! The same as the cost-price push – claiming that inflation is caused rising costs. No, it’s not. Costs are just that, prices. Costs are prices. It doesn’t matter what the difference is. It’s impossible to say that prices are rising because they are. Prices are costs. Prices don’t rise because they go up. They rise because there is more money.
What should investors do in such an environment? Peter stated that to avoid the inflation tax you must avoid what is being taxed. The US dollar is that. Owning gold and silver is one way to achieve that.
They are monetary metals. People are searching for an alternative store value to hedge against inflation when there is a lot of inflation. This is gold and silver.