Peter Schiff: The Only Thing Transitory Is the Fed’s Credibility

The October CPI numbers came in much higher than expected. In his podcast, Peter dug into the data juxtaposed with the official narrative that inflation is transitory. When you boil it all down, the only thing that is transitory is the Federal Reserve’s credibility.

Peter said he’s been taking the “over” on CPI projections all year. And he’s mostly been right. The CPI has come in above expectations every month except for one.

October’s 0.9% month-on-month rise in CPI was nearly double the projection. In fact, it was above the upper end of the consensus expectation.

Core CPI is the Fed’s preferred inflation measure because it strips out “volatile” food and energy prices. The annual rise in core CPI came in at 4.6%.

That is more than double the official 2% target. Even their new target where they’re targeting ‘slightly above’ 2% — well, if slightly above 2% is 2.2, which would be 10% more than 2, 4.6 is more than double slightly above 2, even when you strip out food and energy.”

Of course, it’s silly to exclude food and energy because everybody eats and uses energy. So, if you look at the actual 6.2% year-on-year CPI, that’s more than double the Fed target.

The 0.9% month-on-month rise in CPI tied June for the biggest monthly increase of the year.

Anybody who thinks these high numbers are transitory — they would have to change their tune based on the fact that we’re already 10 months into the year and we’ve got the highest monthly increase in the CPI for the year.”

Here are the monthly increases for 2021.

• Jan. – 0.3%
• Feb. – 0.4%
• March – 0.6%
• April – 0.8%
• May – 0.6%
• June – 0.9%
• July – 0.5%
• Aug. – 0.3%
• Sept. – 0.4%
• Oct. – 0.9%

If you look at this string of numbers, is there anything that suggests inflation is transitory?

If that were the case, wouldn’t we have transitioned back down to low numbers by now? The fact that the number in October, 10 months into the year, is as bad as it was in June and is worse than anything we had earlier in the year, that, in and of itself, proves that these numbers are not transitory.”

Despite this, the Fed has not altered its tune by one note.

The Fed is still clinging to the same narrative that inflation is transitory. Their policy has not been altered at all.”

The Fed did finally announce the beginning of the quantitative easing taper at the November FOMC meeting. But as Peter pointed out, the central bankers had said all year the taper would likely begin before the end of 2021.

They’ve also been saying all year it wasn’t appropriate to raise interest rates, that interest rates would not move above zero until after the Fed had finished tapering their asset purchase program down to zero, meaning that they would have to bring quantitative easing to a halt before they even considered the first rate hike, which they’re not even considering yet. But that’s what they were saying at the beginning of the year, or at the end of last year when they still believed that inflation was transitory. Well, clearly it’s not. The data has contradicted everything the Fed had forecast when they had that monetary policy.”

Here’s the $64,000 question: why hasn’t the Fed shifted its policy in light of the fact that it was completely wrong on inflation?

If the central bankers at the Fed were honest, they would admit they made a mistake and they would get very aggressive in fighting inflation. They would say, “We missed it here, and now we’re going to address this problem. When the facts change, we change.”

That is not what the Fed is saying. The Fed is basically doubling down on its theory that this is transitory. All they are willing to concede is that this transitory period is going to last longer than they thought. But their monetary policy has not been adjusted at all in light of all this new information. And what that really suggests to me is that the Fed is not necessarily surprised by these numbers — that they maybe expected high inflation numbers all along and just lied and pretended it was transitory because that is an explanation that makes sense, because now they’re being confronted with all this data, which contradicts what they said and would argue for a change of policy. Well, if the Fed expected these numbers all along yet continued that reckless monetary policy anyway, well, then it makes sense that they’re not changing course because they knew this is where we were headed. They just didn’t want to admit it.”

Of course, nobody is calling the Fed out on this. The mainstream by and large still just accepts the Fed’s explanation that inflation is transitory

In reality, the only thing transitory here is the Fed’s credibility.

In this podcast, Peter also talked about media bias in inflation reporting, the surge in the price of gold, the plunge in consumer sentiment, Biden’s “Build Back Better” plan and more.