Peter Schiff Believes that America is on the Road Toward Inflation

America’s economy is in a weird position thanks to the government-imposed lockdowns to battle the Wuhan virus pandemic. Supply shocks that the lockdowns brought about and the Federal Reserve’s expansive monetary policy are beginning to raise speculation about the rise of inflation. When an increased money supply chases too few goods, inflation inevitably ensues. 

Economists like Peter Schiff have been warning about this scenario for the past few decades. Now, his insights are becoming more relevant after Federal Reserve Chairman Jerome Powell said during a recent 60 Minutes interview that any visible form of inflation will be “transitory” in nature. Powell declared during an interview that the US may experience  “temporarily higher prices but not persistent inflation.” 

Schiff subsequently appeared on RT Boom Bust to discuss the implication of Powell’s statement. He described Powell’s take on inflation as “laughable.”

Schiff is of the view that America is not experiencing a genuine economic recovery:

What we have is inflation. And it’s that inflation that’s masquerading as a recovery. But the economy itself is a mess. It’s weak. It hasn’t recovered. All we’re doing is spending the money that the Federal Reserve prints.

Most people have their pages confused when it comes to inflation. Contrarian economists like Schiff have correctly noted on multiple occasions that money printing is inflation. Inflation is ultimately the product of monetary expansion.   

And that’s what’s driving the appearance of economic growth. But this is a bubble. It’s a disaster waiting to happen. And prices ultimately are going to skyrocket. And I don’t care what Powell says. Maybe they have the tools to deal with it, but they’ll never us them, because in doing so they’ll destroy the house of cards that they worked so hard to erect.”

Although Schiff is an advocate of a gold standard, he recognizes the political reality that the Fed is not going away. The next best alternative is to have the Fed start reducing the money supply and raising interest rates to allow for the economy to correct itself.  

They need to start shrinking the money supply and allowing interest rates to rise. And that’s going to pop bubbles all over the place, including forcing the US government to massively cut spending.

In the first few months of 2021, the central bank has been propping up the US economy while it has been going on an epic spending binge. During the first six months of the 2021 fiscal year, the budget deficit reached a historic level of $1.7 trillion. Anything approaching normal monetary policy would stop the spending gravy train. Due to the Fed’s loose monetary policies, which enables the federal government to embark on profligate spending policies, inflation is likely going to surface.

So, not only do we have to cancel any future stimulus, but we have to take back the stimulus of the past. We have to deliver either substantial cuts to government spending or tax increases. And not just to the rich, but to average Americans. And so, I don’t see that happening. I just see more and more inflation. And so that is the way all the government is going to be paid for — through inflation, which means consumer prices are going to go through the roof.

Schiff is of the view that inflation is practically an inevitability at this point:

And remember, the Federal Reserve said the same thing about the mortgage crisis in the early days of subprime. ‘Don’t worry about it. Everything is fine. It’s contained to subprime.’ Well, they were completely wrong. We had a financial crisis. Now they’re saying the same thing about the big rise in consumer prices and producer prices. Anybody who’s not blind can see it. And the Fed is saying, ‘Don’t worry because it’s all transitory.’ Well, how do they know it’s transitory? Inflation is just as transitory now as subprime was contained then. They were wrong then and they’re even more wrong now.

Generally speaking, gold has been used as an inflation hedge by people worried about safeguarding their wealth. However, gold has not performed so hot in recent weeks, which Schiff believes is because the market is enthralled by the Fed’s policies:

They see all the inflation and they’re wondering why gold is not reacting. Well, the reason gold is not really moving up is because most of the people in the market believe the Fed. They believe that the Fed will put out any inflation fire before it gets too big. They actually think inflation will be contained. When they realize that it won’t be, that inflation is headed much, much higher, and that there’s absolutely nothing the Fed is prepared to do about it, that’s when the price of gold is really going to take off.

Regardless of gold’s performance at the present, people will inevitably gravitate towards it once inflation starts becoming a reality. At the moment, it’s probably best that liberty conservatives go back to basics and start securing their finances. Buying and holding gold, along with a balanced set of crypto assets, is a good place to start.