Contact us
CALL US NOW 1-888-GOLD-160
(1-888-465-3160)

Peter Schiff: Clueless Investors and Economists Shocked By Ballooning CPI

  by    0   1

The consumer price index (CPI) came in much hotter than expected. The consensus was for a 0.2% month-to-month increase in price inflation.  The actual number was 0.8%. It was the biggest monthly gain in CPI since 1981. Annualized, CPI measured 4.2% – more than double the mythical Federal Reserve target of 2%.

Federal Reserve Vice Chairman Richard Clarida said, “We were surprised by higher than expected inflation data.”

In his podcast, Peter Schiff said the only reason investors and economists were surprised is because they’re clueless.

Peter said the low expectation didn’t make sense given the price increases we’re seeing in the economy and the trajectory of the CPI over the previous three months. The monthly rises in CPI through the first quarter showed an unmistakable upward trend. The CPI in January was up 0.3%, it was up 0.4% in February and it rose 0.6% in March.

Why would anybody expect the next number in that sequential series of months to collapse down to 0.2, which would have been quite a bit lower than the lowest reading of the year that happened all the way back in January?”

Keep in mind, the CPI isn’t really an honest number and understates inflation.

If you combine the CPI numbers through the first four months of the year, we’re already above a 2% increase with eight months to go. If you extrapolate out the trend, inflation will be at 6% on the year.

This is well above anything the Fed should be able to consider acceptable when they’re claiming with a straight face that their target is for inflation to average 2%.”

Most people don’t think price inflation will continue at this pace through the entire year, but Peter raises a good question: why wouldn’t you think that a trend that’s in motion won’t stay in motion?

You would expect higher than expected inflation to drive the price of gold and silver higher. After all, they are considered inflation hedges. But the exact opposite happened. Both metals sold off. Meanwhile, the dollar gained strength despite the fact that inflation is a measure of the dollar losing purchasing power.

So, why is news that the dollar is losing purchasing power even faster than we thought, why is that bullish for the dollar? Why do people want to buy dollars more as they’re losing value even faster? You would think that the news that inflation is a lot worse than people thought meaning the dollar is losing value faster than we thought it would that it would spark people who are holding on to dollars to want to get rid of them.”

But that’s not how the markets are working.

Some people watching gold and silver get clobbered on news of higher inflation immediately concluded that this proves there is manipulation in the precious metals market. Peter said it’s not manipulation. It’s stupidity.

It’s the stupidity of the traders because they continue to operate under the false premise that these hotter-than-expected inflation numbers are going to cause the Fed to raise rates sooner rather than later. … So, it is the prospect of tighter monetary policy to fight off an incipient inflation problem that is suppressing gold and supporting the dollar.”

Peter said at some point, these traders will figure out what should already be obvious.

The Fed is not going to fight inflation. Because even if it tried, it couldn’t do it, which is why it won’t, which is why I’ve been saying there will be no fight. The Fed is going to surrender. Inflation is going to win by default. And inflation is going to be much worse than markets expect.”

Peter said there is no way the Fed can get in front of 6% CPI. It would have to raise rates to 8% or 10%.

That is impossible, so it’s not going to happen. In fact, the Fed is going to be creating more inflation as inflation numbers get worse because as inflation pushes up the cost of living that’s going to restrain the economy. The economy is going to end up moving into recession because of the increase in inflation, and the Fed is going to ignore the inflation problem as it tries to tackle the problems in the economy and in rising unemployment, which is ultimately going to happen because of increases in inflation because it is going to suppress real consumer spending.”

Peter said any weakness in gold should be bought if that weakness is the result of higher than expected inflation.

Because inflation is good news for gold. The bad news for the economy is the Fed can’t do anything about it. In fact, the Fed is deliberately creating inflation because inflation is the only policy option it thinks is politically viable. So, when traders figure this out, gold is going to be bought on bad inflation numbers, not sold.”

In this podcast, Peter also talks about the whacky labor market.

Get Peter Schiff’s key gold headlines in your inbox every 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

Peter Schiff: Risk On; Economic Understanding Off

We saw a big rotation into risk assets after last week’s Federal Reserve meeting. Then we had another big shock to the markets when the non-farm payroll report came out much stronger than expected. In his podcast, Peter Schiff broke down the market reaction to last week’s events and reveals that while risk was on, […]

READ MORE →

Peter Schiff: The Fed Can’t Fight What It Doesn’t Understand

With the Federal Reserve delivering a smaller 25 basis point rate hike at its February meeting, there is a perception that the central bank is nearing victory in the inflation fight. But as Peter Schiff pointed out during his podcast, Jerome Powell made several statements that indicate he doesn’t really understand inflation. That raises a […]

READ MORE →

Peter Schiff: The Federal Reserve Is Nowhere Near Victory

The mainstream is optimistic about both the economy and the Fed’s fight against inflation. In his podcast, Peter Schiff took apart the mainstream narrative, explaining that the economy is much weaker than most people realize and the Fed is nowhere near victory in the war on inflation.

READ MORE →

Peter Schiff: Easing Price Inflation Is Transitory

Last week, the Producer Price Index data finally showed some cooling of wholesale prices. That coupled with better-than-expected CPI data further buoyed hope that the Fed is winning the war on inflation. But in his podcast, Peter Schiff emphasized that easing inflation is transitory. And a weakening dollar will be a big part of the […]

READ MORE →

Peter Schiff: Inflation Is Going to Win the War

The CPI data for December buoyed markets and raised hopes that the Federal Reserve is winning its war against inflation. But in his podcast, Peter explained that the Fed isn’t winning the war. It is losing and will ultimately surrender to inflation.

READ MORE →

Comments are closed.

Call Now