Peter Schiff: The Fed Is Going to Throw in the Towel on the Inflation Fight (Interview)
Peter Schiff appeared on Greg Hunter’s USA Watchdog.com show to talk about inflation and the economy. Peter didn’t paint a rosy picture, explaining that the Federal Reserve is ultimately going to throw in the towel on the inflation fight in order to fight something much worse – economic collapse.
On Friday, Feb. 24, we got another sign that inflation isn’t dead. The personal consumption expenditures price index rose 0.6% in January. This is the Fed’s preferred inflation measure because it tends to understate inflation the most.
Peter said when you couple PCE with the hotter-than-expected January CPI and PPI, it’s pretty obvious “the inflation curve has bent back up.”
The months of declining inflation are in the review mirror. And now we’re going to see accelerating inflation as measured by these government indexes.”
Peter said this shows that the Fed’s inflation fight has been completely ineffective.
If the Fed is serious about fighting inflation, which I don’t believe it is, but if it were serious, it’s going to have to fight a lot harder than it has. Rates need to go up much more than anybody thinks. But it’s not just higher rates, because that alone won’t do the trick. We also have to see a big contraction in consumer credit. We need to see lending standards rising so consumers can’t keep spending. … People are spending money. They’re running up more credit card debt. That is inflationary. That is an expansion of the supply of credit that is available to bid up prices. We need consumers to stop spending.”
Peter said we want people working. We want them to produce. But we don’t want them spending. We want them to save.
We also need the federal government to get its spending problem under control.
We need significant cuts in government spending. The government can’t just give people money to spend, because that’s what’s bidding up these prices. And ultimately, they’re going to force the Fed back to quantitative easing.”
But Peter said all of this is really academic because ultimately the Fed is going to throw the towel in on the inflation fight.
Because it’s going to be fighting something it fears even more, which is a complete economic collapse, another financial crisis, or a sovereign debt crisis.”
Peter said they may even force the US government to consider legitimately cutting Social Security and Medicare “as opposed to just illegitimately cutting it by creating inflation.”
It’s important to remember how we got into this mess to begin with. The government and the Federal Reserve created this inflation.
We have all of this inflation because we did QE1, QE2, QE3, QE4. I think something like half of the money that’s come into circulation has come into circulation in the last few years. What do you expect? Prices have to adjust much higher. We need a new equilibrium now because we have all this money to buy stuff. But we don’t have more goods. In fact, we produced fewer goods because of all the COVID lockdowns. So, prices need to go way up.”
In effect, these higher prices and the lower standard of living that results are a tax.
This is what Americans are paying, this is the price of big government. … Higher prices is the price we pay for bigger government. Inflation is a tax. Instead of raising our taxes, they are just printing money and they’re spending that, and that devalues the money we have. Prices have to respond by going up.”
Peter goes on to explain that the only way out of this, in the long run, is to let the phony economy collapse so we can build a real economy on the rubble of this economic house of cards. That is going to be a painful transition.
People are going to suffer the consequences of this experiment gone bad.”
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