The annualized interest payment on the $30-plus trillion US national debt increased by over $16 billion in just six months. With the COVID crisis seemingly in the rear-view mirror, the economy allegedly strong, and the Fed raising interest rates to supposedly fight inflation, you’d think this might be a good time for the government to address its spending problem.
Nope.
Last month, the Federal Reserve raised interest rates by one-quarter percent in its first salvo against rampant inflation. Fed Chairman Jerome Powell has indicated that the central bank will get more aggressive in its inflation fight in the coming months. Conventional wisdom holds that monetary tightening will reverse the impacts of the extraordinarily loose monetary policy we’ve seen over the last two years and bring inflation under control.
Will it though?
The Consumer Price Index hit a 40-year-high of 7.9% in February. Of course, it’s even worse than that. The official government numbers are rigged to understate rising prices.
But inflation doesn’t just hit us with rising prices. In some cases, we pay more, but we get less. This is known as shrinkflation.
The Consumer Price Index data for February just came out. It was smoking hot yet again with prices up 0.8% month-on-month and 7.9% on an annual basis. Keep in mind, this was before the big spike in oil prices due to the Russian invasion of Ukraine.
And inflation is even worse than the official government numbers suggest.
Inflation is smoking hot. As measured by the consumer price index, the inflation rate is at 7.5%. And the cooked government CPI number understates inflation.
Peter Schiff says the inflation tsunami is just getting started. The Fed is talking about an inflation fight, but it’s more likely to drive the US economy into a recession. And Schiff says that will make inflation even worse.
The Fed is supposed to make the economy more stable. But it’s clear the real impact is the exact opposite. The Fed causes great harm. And as Ron Paul pointed out in a recent article, it hurts the average American worker the most.
Another hotter than expected CPI print in January put even more pressure on the Federal Reserve to do something about inflation. Suddenly, there is talk of a 50 basis point interest rate hike at the next FOMC meeting.
But “doing something” is is easier said than done, particularly in this zombie economy.
The Federal is supposedly on the path to tighter monetary policy, although it is currently still pouring gas on the inflation fire. The central bank says it is tapering its asset purchases even now, and will eventually begin shrinking its balance sheet. It also plans to raise interest rates.
Peter Schiff has been saying the Fed can’t do what it claims it’s going to do. Economist André Marques agrees. He says the Fed is trapped. It doesn’t really have room to raise rates or taper.
Inflation is running rampant. Even Jerome Powell has been forced to acknowledge that this bout of rising prices isn’t “transitory.” As Peter Schiff put it, there is no ceiling on inflation.
The Federal Reserve has sped up its timetable for tapering its asset purchases and raising interest rates. Many in the mainstream have called this a “war” on inflation, but the central bank is bringing a pea shooter to a bazooka fight. A real fight against inflation would require interest rate hikes that would crash a US economy built on debt.
The Federal Reserve has supposedly gone to war with inflation and Fed chair Jerome Powell has allegedly turned into a hawk.
We’ll believe it when we see it.
With the “transitory” inflation narrative dead and buried, the powers that be have shifted to a new tactic to deflect their responsibility for rising prices – blame somebody else.
Elizabeth Warren recently claimed that rising prices were due to “price gouging” by “greedy” corporations. But the evidence says otherwise. In fact, producer prices have risen faster than consumer prices. That means businesses have only passed on some of their higher costs to consumers. If anything these “greedy” corporations have allowed consumers to gouge them.
