Peter Schiff: Fake CPI Is Only Going to Get Higher

Peter Schiff recently appeared on Kitco News with David Lin to talk about inflation and the Fed’s attempt to get it under control. Peter said there is no getting inflation under control. It’s already worse than anybody thinks. And it’s only going to get higher.

Inflation is suddenly in the spotlight. But Peter says it isn’t really new. The Federal Reserve has been creating inflation for over a decade. They just call it quantitative easing. The reason everybody is suddenly focused on inflation now is because it finally showed up in consumer prices in a big way.

In fact, consumer prices have been rising all along, just not as quickly as they have over the last year. The government managed to cover it up with a rigged CPI that understates rising prices.

The February CPI came in at 7.9%, but it’s worse than that. If measured accurately, CPI would be north of 15%.

Peter said the government has every reason to understate inflation. By understating inflation, they also overstate growth.

When you pretend that inflation is lower than it actually is, it makes it appear that the economy is growing faster than it actually is. And all politicians want to take credit for economic growth. And so by lying about inflation and under-reporting it, they can pretend the economy is much stronger than it actually is.”

More recently, the Federal Reserve has hidden behind the doctored inflation numbers as a pretense to continue its reckless monetary policy. The Fed has been able to keep pushing forward with low interest rates and QE because they can point to “inflation” below their 2% target.

But inflation was never too low. That was just a canard. That was just a false excuse for the Fed to do what it wanted to do, which was to prop up government spending, to continue to blow air into a bubble, to artificially push up stock prices and real estate prices. But it didn’t want to admit that was its goal. So, they came up with this ridiculous goal of there not being enough inflation and trying to raise the inflation rate. Well, all of the years the Fed was pretending this was their goal, I was warning what was going to happen when they overshot.”

Now the Fed is in a box. They can’t bring inflation back down to 2% without wrecking the bubble economy inflated by low interest rates and QE.

The pandemic exacerbated the problem. The government told people to stay home. They weren’t producing anything. But the government handed out checks so they could keep spending money.

When you make less stuff, but you print more money to buy stuff, prices have got nowhere to go by way up.”

Peter said he doesn’t think the markets are properly pricing in inflation. He called the markets “delusional.”

I think most analysts still expect that what we’re seeing is transitory. They just think the transition is taking longer than they first thought. They still think the inflation is driven by supply chain bottlenecks or the war with Russia and Ukraine. And so they think all this stuff is going to unclog and prices are magically going to stop rising.”

But that’s not going to happen. Inflation is being caused by the Federal Reserve and the federal government. Peter said he thinks the budget deficits and the trade deficits will continue to get bigger and bigger. That means the Fed will ultimately have to keep printing money to monetize the debt.

Yes. The Fed has raised interest rates to fight inflation. But they are still only at .25%.

Even if you buy the government’s version of inflation that is 8%, how are you going to put out 8% inflation fire with a squirt gun of one-quarter of one percent interest rate?

Peter said nothing is going to change. Inflation will keep getting worse.

The Fed is actually pursuing an inflationary monetary policy under the guise of fighting inflation. Just because you’re less loose than you were before doesn’t mean you’re tight. And you’re not even less loose because inflation is accelerating faster than the Fed is hiking rates.”

Peter and David Lin go on to talk about what the Fed can do about this inflation problem. Peter said the Fed said the inflation fight can only crash the markets and the bubble economy.