Peter Schiff: The Inflation Genie is Out of the Bottle

In this episode, Peter reacts to a hotter-than-expected CPI report, big trades in Bitcoin, and the federal bill that would ban the popular social media app TikTok. He also notes silver’s historically low price, which is nearly 50% of its 2011 high.

Prior to this week’s CPI numbers, the market was under the impression that inflation was coming down. Even if this were true, rate cuts are still a bad idea:

“The conventional wisdom is that the Fed has won the inflation war. That its rate hikes have done the trick. The inflation genie is back in the bottle. ‘Sure it’s not quite two percent. It’s a little over three percent, but we’ve gone from nine to three, so we’re most of the way there. … The Fed could substantially cut interest rates, because we don’t need five percent interest rates anymore.’ … That view could not be more widely held, yet it could not be more wrong! First of all, even if inflation was going to go down to two percent, substantial reductions in interest rates would not be warranted because you have to have a positive rate of interest.”

This week’s CPI numbers were roughly the same as last month. While the core CPI figure, which excludes food and energy, remained flat, the year-over-year headline metric ticked up from 3.1% to 3.2%. This is not what you’d expect if inflation was decreasing back to the Fed’s 2% goal:

“This is more evidence that anybody who thinks that inflation is going down to 2 percent has their head buried in the sand. … Everybody expects the Fed to be able to cut rates because everybody expects that inflation is dead and buried, but when people realize that it’s not dead —it’s alive and stronger than ever— all of these trades have to be unwound, and all the people who have been selling gold because they thought there was no inflation are going to have to turn around and buy it.”

In Bitcoin news this week, Microstrategy, a business intelligence firm led by Michael Saylor, borrowed money to fund a massive purchase of the cryptocurrency. Peter thinks this is a major financial blunder:

“[Saylor] is like the Captain Ahab of the modern day, and his Moby Dick is Bitcoin. He’s the Captain Ahab, and I think all of the sailors on the S.S. Microstrategy are going down with that ship. I think the smart money is getting out and maybe the smarter money is shorting it.”

In reaction to the House of Representatives voting to ban TikTok this week, Peter explains why this is just another instance of government paternalism:

“Banning TikTok is not an action against China. It’s an action against American citizens. What the government wants to do is ban Americans from using TikTok. Why should we be happy about that? We’re losing our freedoms. We’re losing our individual liberty to use TikTok if we want to. And who is targeted by this bill? It’s American companies and maybe eventually American individuals who have the app, who offer the app on their platform.”

TikTok is neither the main threat to American children nor the main source of propaganda in this country:

“Look, the typical American kid is getting brainwashed in public schools. The public schools are doing far more damage. They are giving out far more propaganda and misinformation than they’re getting on TikTok, and the same thing with the American media. Plenty of false information is on the mainstream far left media every day. TikTok can’t possibly be any worse than. In fact, I don’t think it is worse than that.”

Even worse, the ban could award even more influence to leftist tech corporations that also compete in the social media space:

“TikTok is a major competitor of Facebook, so if Americans can’t use TikTok anymore, who’s the winner? Kids are gonna have to spend their time on Instagram or Facebook. They might be a winner. Google could be a winner.”

You don’t have to like TikTok’s influence to recognize that a state-imposed ban like this could lead to more nefarious intervention. Peter concludes:

“It’s a ban on Americans. It prevents Americans from using a Chinese product, but it opens up the door for the government to ban Americans from using all sorts of products, and it sets a very bad precedent that ultimately will be abused and exploited.”