Federal Reserve Chairman Jerome Powell keeps telling us not to worry about rising prices, assuring us that any increase in price inflation is “transitory.” It appears most of the mainstream is buying this hook line and sinker.
The March CPI number was expected to come in hot due to a much lower baseline. Prices tanked last March as governments locked down their economies. As a result, economists expected the year-on-year CPI comparison to show a big increase. But the increase was even bigger than expected. Peter Schiff talked about it in a recent podcast.
We have been saying that given the extraordinary level of money printing the Fed has done since the beginning of the pandemic, a wave of price inflation is coming down the pike – perhaps even hyperinflation. But many will be quick to remind us that we raised the warning flag about inflation when the Fed launched three rounds of quantitative easing in the wake of the 2008 financial crisis. In fact, Paul Krugman has been doing victory laps again – reminding everybody that the inflation monster never did come out of its lair and promising it won’t this time either.
Basic economics tells us that increasing the supply of money without a corresponding increase in the number of goods and services in the economy should lead to rising prices. Is basic economics wrong? Or are there other things going on in the economy that suppressed or hid inflation in the aftermath of the great recession?
The Labor Department released February’s CPI numbers on Wednesday. The mainstream spin was “no inflation, nothing to see here.” But what will we find if we dig a little deeper into the numbers?
CPI was up 0.4% in February. That follows on the heels of a 0.3% rise in January. The rise was in line with expectations.
What is inflation?
When analysts, politicians and pundits talk about inflation, they usually mean rising consumer prices as measured by the consumer price index (CPI). Peter Schiff and Jim Rickards debated this on Kitko news. Rickards also used this definition, insisting there is no inflation right now. Peter said, “Of course there is. The Fed is inflating like crazy.”
The ensuing debate led Peter to address the issue of inflation on his podcast. Peter called the modern mainstream definition of inflation a “false” definition.
The consumer price index fell 0.8% in April, according to the latest Labor Department data. It was the biggest plunge in consumer prices since December 2008. year-over-year, the CPI is up 0.3.
By all indications, it appears inflation is the least of our problems despite massive Federal Reserve money-printing and unprecedented government spending. But in his podcast, Peter Schiff said you need to ignore the CPI because despite what it might indicate, inflation is a huge problem.
The powers that be insist that inflation is low. In fact, the central bankers at the Federal Reserve tell us that low inflation is one of the reasons they can keep interest rates artificially low. But everyday people who go to the store each week smell a rat. We know our dollar doesn’t stretch as far as it used to. If inflation is so low, why do prices seem to keep going up?
The only logical explanation is maybe inflation isn’t as low as the pundits keep telling us.
Where’s the inflation?
The Federal Reserve printed money for nearly a decade, and yet, inflation – as measured by the government – has been “muted.”
Here’s a strange headline for you: “Gold prices near daily highs despite better-than-expected inflation in October.”
This headline is bizarre on a couple of levels. First, since when are rising consumer prices and good news? And second, why wouldn’t inflation be good for gold?
You really have to buy into the mainstream narratives to write that headline.
The August jobs report came out last Friday. Mike Maharrey offered a little bit of analysis during the Friday Gold Wrap podcast, saying he was skeptical that the actual employment situation is as great as the mainstream seems to think. Peter Schiff offered a more in-depth breakdown of the employment report in his latest podcast, saying it was “anything but strong.”