Peter Schiff: Double-Barrel Inflation Is Locked and Loaded

The Consumer Price Index blew past expectations in October as the “transitory” inflation narrative continues to unwind. CPI was up 0.9%. On an annual basis, the inflation rate was 6.2% compared with a 5.9% estimate. It was the highest annual CPI gain since 1990. The CPI stole the headlines, but the Producer Price Index also came in hotter than expected, up 8.6% on a year-on-year basis.  After the PPI came out, Peter Schiff appeared on RT Boom Bust to talk about it.

He said double-barrel inflation is locked and loaded.

Goldman Sachs recently warned inflation will get worse before it gets better. Peter said they have it half right.

I think it’s going to get worse before it gets much worse.”

Peter said the inflation pipeline is pretty full. He noted that if you annualized PPI in 2021 to date, it’s over 10%. And so far, CPI has lagged behind PPI.

That means companies are absorbing a lot of the price increases. And I think they’ve been reluctant to pass them on because they’ve been hoping that the Fed was right and that the inflation is transitory. But I think as they realize that the Fed was wrong and that inflation is here to stay, not only are they going to be passing on the price increases next year, but they’re going to pass on this year’s increases that they have been holding off on. So, I think we’re going to get a double-barrel in 2022, which means consumer prices are going to move up a lot more next year than they did this year.”

During its November meeting, the Fed announced it will begin rolling back quantitative easing. But will that be enough to stem the tide of inflation?

Peter noted that even with the taper, the Fed will continue doing QE.

And of course, this is just temporary. They’re going to back up the truck and do even more QE.”

The federal government continues to spend money at a torrid rate. Congress recently passed a $1.2 trillion infrastructure bill and there’s an even bigger spending bill in the pipeline. Where will all the money to pay for all of this government spending come from?

They’re not getting it from higher taxes, so they’re going to get it all from the Fed. And the Fed is going to have to expand its asset purchase program to buy up all these bonds that are going to be sold to finance all this spending.”

Despite some concessions that there is inflationary pressure, the government narrative continues to be that it’s primarily due to a strong economy and associated supply chain problems. Peter said the idea that inflation is somehow the price we pay for prosperity is nonsense.

Governments have been trying to rationalize and blame the public for inflation for decades. It’s not about the economy being too strong. It’s actually about the economy being too weak. And because the economy is so weak, we’re printing all this money. And that is the source of the problem. We’re producing money, not stuff. And so, the price of the stuff is going up.”

Meanwhile, the US is importing record amounts of stuff. The trade deficit has skyrocketed to record levels. But despite the surge of imports, prices continue to rise because the economy is so weak, the US still can’t produce enough to fill the gap.

So, are there any solutions to these problems?

Peter said there are no politically acceptable solutions.

The actual solution is to “stop the presses” and go cold turkey on QE. And then the central bank needs to legitimately tighten, shrink its balance sheet, withdraw money from the economy, and allow interest rates to rise. The government also needs to slash spending. That means the stock market is going to have to come down. The real estate market is going to have to come down.

A lot of bubbles are going to have to deflate if we’re going to address the inflation problem.”

But Peter said that’s not going to happen. As a result, inflation will get much worse.

That means the average American has a huge problem that he’s going to have to live with and potentially deal with if they can.”