Schiff on Impact Theory: Inflation is an Intentional Tax

Last week Peter appeared on Impact Theory with Tom Bilyeu to discuss inflation, Federal Reserve policy, wealth taxes, and a whole host of other economic subjects. This is the latest in a string of recent interviews Peter has appeared in. If you missed them, check out his appearance on Bankless and a David Lin debate with Jack Mallers.

Peter argues that it is absolutely critical that Americans see inflation as a deliberate, albeit subtle, tax:

“The best way to look at inflation is a tax. Inflation is what we pay for the government that we don’t pay for with the income tax or the Social Security tax or a sales tax. Basically, the deficits, the Federal budget deficits– we end up funding them by inflation. And those deficits are about to skyrocket. They’ve been skyrocketing. And so the inflation tax is going to be much bigger in 2025 than it was this year regardless of what the Fed is trying to tell us.”

Technical economic jargon like “quantitative easing (QE)” is used to obscure intentional inflationary policy:

“QE is just another word for inflation, just that it’s a euphemism. But that’s really what it is. But the Fed has to pretend that it’s finished the job on inflation. It can’t, you know, be honest and say, ‘Look, we still have high inflation and it’s going to go up. But, we don’t care.’ So they have to pretend that the 3% inflation that we have now is going to go down to 2%.”

From the jargon to the statistics, the entire monetary system is biased to facilitate and hide (both intentionally and unintentionally) inflation:

“If you are trying to track inflation yourself, if you’re trying to understand how prices are going up, there is a lot of manipulation that’s happening behind the scenes to control the public’s perception of the CPI number. … The government is doing sleight of hand. They’re manipulating the numbers, they’re doing sleight of hand so that they can basically– I’ll be aggressive here and use the word–  steal money from the people, not have to get people to vote so that they can keep doing just absolutely outrageous amounts of spending because they can get your dollars from you without having to ask for them.”

Even if there was honest political will to stop inflation, it would be political suicide:

“We are stuck with inflation because the alternative is a political non-starter, because if the Fed actually got rid of inflation, you would have a financial crisis that would make 2008 look like a Sunday school picnic.”

This policy can’t last forever, since it’s propped up by other countries’ willingness to participate and hold dollars:

“The problem is now, yes, they’re earning interest, but the Fed is also losing a fortune on its bond portfolio right now. So, the Fed is not making money anymore to pay the U.S. Treasury like they used to, but they do get the interest back. … But the real problem though, is going to be the dollar’s status as the reserve currency, because as the rest of the world wakes up to the reality of endless inflation and endless money printing … there is no justification for the dollar to be the reserve currency, and it won’t be.”

Understanding the inflation machine is key to understanding current sentiment around the economy. Most people sense the system is rigged, but they can’t necessarily articulate why:

“The public already knows that things are wrong. That’s why they just know something feels wrong, but they don’t know what it is. The politicians and a lot of the people in the financial media who still don’t get it, you know, they look at these phony statistics and accept them on face value. And then they look at the public and the public is so pessimistic. You know, Biden’s approval rating is so low. People are pessimistic. And they don’t understand why.”

This is a big week for monetary policy, as the Fed prepares to announce a likely rate cut. Stay tuned for Peter’s analysis later in the week.