Contact us
CALL US NOW 1-888-GOLD-160

Peter Schiff: The Fed Is Pushing Us Toward a No-Growth, High-Inflation Economy

  by    0   0

As expected, the Federal Reserve nudged rates up another .25 basis points on Wednesday. Perhaps more significantly, the Fed took a more hawkish tone than expected, signaling it would likely increase rates two more times this year for a total of four hikes. The central bank had been projecting three 2018 rate increases.

A buildup in inflation pressures was a major reason for the Fed’s more hawkish tone. According to the latest data released by the Bureau of Labor and Statistics, the Consumer Price Index (CPI) jumped by 2.8% year-over-year in May. The central bankers projected inflation will likely run above their 2% target into the near future. Analysts expect the CPI to hit 2.1% this year and run at that level through 2020.

In his latest podcast, Peter Schiff said higher inflation might be a victory for the Federal Reserve, but it will be a big loss for consumers. In fact, we are heading for a no-growth, high-inflation economy.

Peter said he doesn’t think he’s ever heard a Fed chairman so bullish on the economy. That might not be good news.

Given the fact that the Fed is a pretty good contrarian indicator as far as being reliable, if Powell is extremely bullish, as bullish as a Fed chairman has ever been, it likely means that the best days of so-called growth are behind us and it is all downhill from here.”

While everybody is taking up the Fed’s hawkish stance, Peter said he thinks the Fed is actually pretty dovish when it comes to inflation if you read between the lines. In fact, Powell said it was too early to “declare victory” on inflation and he wants to make sure it doesn’t drift back down.

As if victory over inflation is defined by lifting the inflation rate up to 2%. I mean, that’s not a victory. Do you think consumers are going to celebrate that?”

In fact, it’s not hard to generate inflation. Just print money. The hard part comes when inflation runs out of control and the central bankers have to bring it down. That’s real victory – a victory Peter said Powell will never achieve.

Not that he’s not going to see inflation breaking out. He’s going to. Inflation is going to skyrocket, and the Fed is not even going to try to bring it back down, because they know it’s impossible to do, at least not without destroying the entire house of cards economy they’ve been so carefully erecting over the years. So there will be no real victory.”

The only way to control inflation is to push interest rates much higher. Paul Volker gave us the blueprint in the 1980s. He brought inflation under control – but the process also crashed the stock market. This Fed won’t likely be willing to do that. And consider this: the interest rate is only at 2% now. Peter said even this relatively low rate will have bigger ramifications for the bubble economy than anybody believes. Ultimately, he sees a recession on the horizon. At that point, the Fed will reverse course.

Powell was saying if we see evidence that the rate hikes are hurting the economy, well we can always do something about it. Yeah. By the time they acknowledge that the rate hikes have hurt the economy, or are hurting the economy, it all will be in a recession. And then, of course, it’s going to be too late to do anything about it – is if they could have done anything about it anyway. What are they going to do? They are going to reverse course. They are going to start cutting rates from wherever they got them – however high they made it, they’re going to start slashing them pretty quick. But they’re not going to have a lot of room to go between where they get to and zero, and so they’re going to have to launch QE4. That is what’s coming.”

So, how is the Fed’s message on inflation dovish?

The old policy was, “We want to have 2% inflation.” In fact, the Fed’s mandate is to have ‘stable’ prices. So, initially, the Fed said its goal was to keep inflation below 2%. If it was 1%, that was still within the mandate because one was lower than two. Then it moved the bar. The Fed said, “Well, our goal is 2%,” meaning if it’s not 2%, it has to actively work to raise it to that level.

Now they’ve moved the bar again. Now they don’t want to get to 2%. They want to get to ‘symmetrical’ around 2%, meaning that we were below 2% for a while, now we need to be above 2% for a while. So again, this is the Fed moving the bar again to accept higher rates of inflation because they know they’re powerless to do anything to bring it back down. And now the Fed is going to have ample cover to talk about or allow inflation to be above 2% because nobody knows when it’s ‘persistent,’ because there’s no set definition of how long – how many months or years.”

So, this sets the stage for dovishness. The Fed has created an excuse not to raise rates significantly higher even if inflation creeps up.

Peter said ultimately we are heading toward a slow-growth or no-growth, high-inflation economy.

We have massive amounts of debt. What hope do we have of paying it off? None! So, the only way to get out of it without admitting that we can’t pay it and defaulting, which I put a very, very low probability of US politicians ever doing anything honorable. So, it’s going to be inflation. That’s the policy.”

This might be some kind of victory if your a central banker, but it’s bad news if you are an average consumer trying to make ends meet.


Get Peter Schiff’s most important Gold headlines once per week – click here – for a free subscription to his exclusive weekly email updates.
Interested in learning how to buy gold and buy silver?
Call 1-888-GOLD-160 and speak with a Precious Metals Specialist today!

Related Posts

What Are Gold Stocks Telling Us About the Gold Market?

The price of gold is up by about 2.7% so far in 2020. But gold stocks are down on the year. Why is this happening and what is this telling us? When we talk about gold stocks, we’re referring generally to stock in companies involved in gold mining and exploration. The valuation of these stocks […]


The Dawn of the Dead on Wall Street

It’s like Dawn of the Dead on Wall Street. Zombies are everywhere. Even as stocks continue to push to new highs, the number of money-losing companies listed on US stock markets has ballooned to levels not seen since the dot-com bubble of the late 1990s. According to a recent Wall Street Journal article, nearly 40% […]


Bridgewater: Gold Could Push Above $2,000 as Fed Ignores Inflation

Peter Schiff has been saying the Federal Reserve is going to let the inflation monster loose and this is going to be good for gold. Some people in the mainstream are starting to pick up on this theme. During a recent interview with the Financial Times, Bridgewater Associates co-chief investment officer Greg Jensen said gold […]


Are Consumers Nearing the End of Their Road of Debt?

Are consumers getting close to the end of their road of debt? There are some indications that they might be and that’s not good news for an economy built on consumers spending money they don’t have.


The Outlook for Gold in 2020 Remains Bullish

Gold had a strong year in 2019 and a World Gold Council report says the outlook for 2020 remains bullish. We expect that many of the global dynamics seeded over the past few years will remain generally supportive for gold in 2020.” Gold charted its best year since 2010 last year. The price increased by […]


Comments are closed.

Call Now