Free Republic
Browse · Search
Bloggers & Personal
Topics · Post Article

Skip to comments.

The Inflation Tsunami Is Just Getting Started
USSA News ^ | 2-14-2022

Posted on 02/14/2022 12:45:48 PM PST by blam

After CPI came in hotter than expected yet again in January, Peter Schiff appeared on Fox Business along with Chief Investment Officer and Portfolio Manager of Solutions Funds Group Larry Shover.

Peter said that the inflation tsunami is just getting started and the Fed is powerless to fight it.

With the hot inflation print for January, the markets are now pricing in a 50 basis point rate hike in March. Peter said that won’t be enough.

“If we still measured inflation the way we did 40 years ago, it would be 15%, not 7.5%. And the rate hikes they’ve proposed are completely inadequate. In fact, the Fed is intending to pursue an accommodative monetary policy. Even if they raise interest rates to 1 or 2%, that is highly accommodative. That’s the same type of interest rates they had when inflation was below 2%. You’ve got inflation at 7.5%, even the way they measure it – and rising. The only way to put out this fire is to have positive real interest rates. The Fed needs to get above the inflation rate. We’re not even going to get close. So, they’re going to continue to pour gasoline on the fire. And so, the entire time the Fed is inching up rates, inflation is actually going to be moving higher. Inflation is going to be worse in 2022 than it was in 2021, and real interest rates are going to continue to fall even as the Fed raises nominal rates.”

So what happens to the economy?

It’s massive stagflation.

‘The problem is people still don’t recognize the box that the Fed put us in. Because there is no interest rate that the Fed could put to fight inflation that the economy could withstand. If the Fed has to fight inflation, we not only have a massive recession, and a crash in the stock market and in the real estate market, but we have a much worse financial crisis than the one we had in 2008.”

Peter said the Fed initially pretended inflation was “transitory” even though it obviously wasn’t because they knew that there was no way to fight it.

“And now that they’re no longer pretending inflation is transitory, they’re pretending that they’re going to fight it when they can’t.”

Shover said he doesn’t think the Fed is behind the curve. He pointed out that we had 10 years of low inflation, and “we’re just not used to this kind of inflation.”

Peter said we’re about to pay for that 10 years of low inflation.

“The Fed kept creating inflation, printing money, and staring at the broken CPI, and assuming that because the CPI wasn’t having a reading that was above 2% that they had the green light to create more inflation. Well, it works with a lag. And now we’re catching up to all the inflation that we created over the past decade. And it’s just started to take hold.”

The massive level of quantitative easing during the pandemic really dialed it up.

“That was the worst possible combination of monetary policy because as we ordered people to stop working, and people went home and were no longer producing goods and services, we gave them additional money to buy the stuff that nobody was producing. So, we have even more money chasing fewer stuff. We have an inflationary tsunami. And we have barely even caught up to that. This is just getting started.”

Peter also pointed out that there is a much higher level of debt today than there was in 1980 when Paul Volker went to war against inflation with 20% interest rates.

“What would happen to the economy given all the debt we have if interest rates even went to 10%? What about 5%? I mean, we couldn’t even handle two-and-a-half percent in 2018. And the economy is in much worse shape now with a lot more debt than it was then.”

Shover said there’s a savings glut. Peter said that’s not the problem. The problem is there’s a debt glut. And he reiterated the key point.

‘There is no way you can fight historically high inflation with 1% interest rates. One percent interest was the rate Alan Greenspan slashed rates to in 2002 to stimulate the economy after the stock market bubble popped and we had that recession. You can’t fight inflation with stimulative monetary policy. You need restrictive monetary policy. And no one is even talking about making money tight. All they’re doing is talking about making it less loose. And you can’t fight inflation with loose money.”


TOPICS: Society
KEYWORDS: cpi; economy; fed; inflation; peterschiff; prices
Navigation: use the links below to view more comments.
first previous 1-2021-27 last
To: Toddsterpatriot; aimhigh
An article from John Williams founder of Shadowstats.com:

“Foolish” Fed Rate-Hike Will “Cause Hyperinflationary Great Depression”, John Williams Says Hold Physical Gold

21 posted on 02/14/2022 4:00:43 PM PST by blam
[ Post Reply | Private Reply | To 19 | View Replies]

To: Skwor

Dems say the inflation is due to Biden’s roaring economic growth. No worries!


22 posted on 02/14/2022 6:48:43 PM PST by griswold3 (When chaos serves the State, the State will encourage chaos)
[ Post Reply | Private Reply | To 2 | View Replies]

To: Pelham

They are the idiots that increased the money supply 40% over the past two years! What did they think was going to happen?
(Volker didn’t have a $30T Fed Debt)


23 posted on 02/14/2022 6:50:55 PM PST by griswold3 (When chaos serves the State, the State will encourage chaos)
[ Post Reply | Private Reply | To 6 | View Replies]

To: Pelham

The Fed will need to notify all the insiders—and then raise interest rates over and over and over and over again....

My advice to them: Retire and change your name.

This is gonna get ugly.


24 posted on 02/14/2022 6:51:36 PM PST by cgbg (A kleptocracy--if they can keep it. Think of it as the Cantillon Effect in action.)
[ Post Reply | Private Reply | To 6 | View Replies]

To: Skwor

https://www.cato.org/blog/fed-doesnt-rule-stock-market-1


25 posted on 02/14/2022 7:49:03 PM PST by Beowulf9
[ Post Reply | Private Reply | To 2 | View Replies]

To: blam

https://www.cato.org/blog/feds-astonishing-quantitative-tightening-great-recession-0


26 posted on 02/14/2022 7:55:10 PM PST by Beowulf9
[ Post Reply | Private Reply | To 1 | View Replies]

To: Robert A Cook PE; AdmSmith; AnonymousConservative; Arthur Wildfire! March; Berosus; Bockscar; ...
Thanks RACPE.

27 posted on 02/14/2022 8:29:24 PM PST by SunkenCiv (Imagine an imaginary menagerie manager imagining managing an imaginary menagerie.)
[ Post Reply | Private Reply | To 20 | View Replies]


Navigation: use the links below to view more comments.
first previous 1-2021-27 last

Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.

Free Republic
Browse · Search
Bloggers & Personal
Topics · Post Article

FreeRepublic, LLC, PO BOX 9771, FRESNO, CA 93794
FreeRepublic.com is powered by software copyright 2000-2008 John Robinson