Peter Schiff recently appeared on the Rob Schmidt Show on Newsmax to talk about the trajectory of the US economy. Peter explains how the Federal Reserve and the US government created a massive bubble, why it is going to ultimately pop, and how to protect your savings and investments when it does.
The First question Rob asked was how is the Federal Reserve going to fix the inflation problem?
Simply put, it’s not. The Fed will make it worse.
Peter said in the first place, the Fed is lying about the extent of the problem. The CPI doesn’t measure the rise in prices accurately.
If we just use the same CPI that we used during the 70s and 80s, and applied the numbers today, we would get about 15 percent inflation for 2021. So, last year was worse than any year of the 1970s, and it was worse than 1980 when CPI was up 13.5 percent. So, this is the worst inflation we’ve ever seen.”
Peter said, unfortunately, it’s going to get even worse.
We have just seen the tip of an inflationary iceberg.”
How did we get into this mess to begin with?
The Fed created the problem.
They’ve been printing all this money. They sent the printing presses into overdrive during the pandemic. But we had an even bigger problem. The government forced people to stop working during the pandemic. So, people weren’t on the job. They weren’t producing goods. They weren’t supplying services. They should have spent less money because they weren’t earning money. The government made the mistake of sending everybody stimulus money so they could go out and spend money to buy products that didn’t even exist because they weren’t created. That’s why we have a supply shortage — because everybody is spending money that the Fed printed, not money that they earned producing goods and providing services. So, it’s a double-whammy. Prices are going ballistic. And this year is going to be worse than last.”
The Fed has said it plans to raise rates, possibly to 2 percent by 2022. Rob said that doesn’t seem substantial. Peter likened it to spitting in the ocean.
Inflation is already 7 percent, even if you accept the government’s numbers, which are a lie. How do you fight 7 percent inflation with 2 percent interest rates? Remember, the Fed had interest rates at 2.5 percent in 2018 when they had no inflation to fight. CPI was only up 1.9 percent in 2018. Yet, the Fed is not going to raise interest rates now to a level they were back then. So, the whole thing is a lie. The truth is if the Fed actually raised interest rates high enough to fight inflation, it would crush the economy. We’d have a worse financial crisis than 2008. The stock market would crash –bond market, real estate market. Government would have to slash spending because interest rates would skyrocket. And so to prevent that from happening, the Fed is going to not fight inflation and that’s why it’s going to get so much worse.”
We’re living in a gigantic bubble, and now we’re beginning to see that because prices are really starting to rise and there’s no way to stop them from going up. And this is when everything comes collapsing down. Because eventually, this stagflationary environment that we’re in, which will be much worse than the 1970s – more inflation and a weaker economy – is going to prick that bubble. So, even if the Fed won’t prick it, the markets are going to prick it for them.”
With inflation so pervasive, Peter said anybody who is retired or who wants to retire needs to get out of dollars.
Inflation is going to wipe you out. It is a gigantic tax and it’s going to impoverish an entire generation unless they act quickly to get into real assets. … You have to own real things that can’t be printed because if you just own paper, you’re going to get wiped out.”