Peter Schiff: Government Serves Grade-A B.S. On Inflation

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by Tyler Durden
Tuesday, Oct 05, 2021 - 05:35 PM


Both the Federal Reserve and the Biden administration continue to insist inflation is transitory. And they are also trying to shift the blame for rising prices so they avoid any responsibility. In this clip from his podcast, Peter Schiff explains why the government inflation narrative is Grade-A B.S.!

The Fed has finally acknowledged that inflation is running hotter than they’d expected. During the September FOMC meeting, the central bank raised its forecast, anticipating core inflation to increase 3.7% this year. That compares with a 3% projection in June. But the Fed and US government officials insist that rising prices are simply a function of supply chain issues and that it will be “transitory.”

Meanwhile, they ignore the elephant in the room – the increasing money supply. The central bank created new money at a record pace in response to the economic chaos caused by government shutdowns for COVID-19. And while money creation has slowed in recent months, it continues at a very high pace. Last month, M2 grew at the fastest rate since February.

If inflation is always and everywhere a monetary phenomenon, and you have this record increase in money supply, and then you also have this big increase in consumer prices, how can you not bring up the possibility that all of this money printing is potentially responsible for prices going up?”

But the central bankers continue to focus solely on the supply chain.

Peter suggested the money printing could account for the supply chain problems.

Whenever there is a surplus of money, there is automatically a shortage of stuff, because the government can print money very easily. It’s a whole other thing to produce stuff because the Fed doesn’t actually produce any stuff to buy with the money they print. They just print the money. And if the economy is not capable of producing the goods to go with the money, then they can always claim, ‘Well, it’s a supply shortage.’ Yeah, everybody’s got all this money to buy stuff, but we haven’t made anything. But the reality is it’s not that there’s a shortage of supply.”

In fact, there is always a shortage of supply. We don’t have unlimited stuff. So, we have to ration supply with prices. The more money we have in circulation, the higher the prices have to climb in order to ration the supply. You have more dollars chasing the same amount of stuff. This is inflation 101.

But all of these Fed guys are ignoring the fact that money supply is going through the roof, and they’re simply focusing on goods supply and saying, ‘Hey, we have a shortage.'”

It’s not just the central bankers at the Fed spinning this narrative. Director of the White House National Economic Council Brian Deese also tried to explain away rising consumer prices, particularly grocery prices. He claimed if you don’t factor in beef, pork, or poultry, grocery prices aren’t rising.

About half of the overall increase in grocery prices can be attributed to a significant increase in prices in three products: in beef, in pork, and in poultry. And in beef and in pork, we’ve seen double-digit increases in prices over the last couple of months. If you take out those three categories, we’ve actually seen price increases that are more in line with historical norms.”

Peter said this is ridiculous. He’s only talking about food. And he wants to throw out meat.

I guess if you’re a vegetarian, then it’s no big deal.”

Peter said this is typical government spin.

Ignore the stuff that’s going up and just focus on the stuff that’s not — except everything is going up. It’s just that some things are going up a lot more, and the government wants us to ignore that.”

It’s like a kid claiming he has a great GPA if you just throw out the D he got in chemistry.

You can’t throw out the bad grades. You have to take into account all the grades when you are factoring in your grade point average. And you have to look at all of the prices that are going up. You can’t throw out the ones that are going up and just focus on the ones that aren’t.”

Meanwhile, Joe Biden is trying to blame meat producers for the price increases. He’s called for investigations to determine why these companies are hiking prices.

Peter said this is yet another tried and true government strategy.

They create inflation. And then they try to shift the blame to the public.”

It’s easy to blame “evil” companies for raising prices. But in reality, they have no choice because their own costs are rising too. They are simply passing on their higher prices to consumers.

It’s not their fault. It’s the government’s fault. The government is creating the inflation.”

And this is exactly why the government redefined inflation from an expansion of the money supply to an increase in prices. When you define inflation properly, you can’t blame the private sector. Meat processors don’t increase the amount of money in circulation.

When you properly define inflation, you know exactly who’s causing it. But when you pretend inflation is rising prices, well, then it’s easy to blame the price increase on the people who are raising the prices.”

By redefining inflation, government officials can duck the blame for rising prices and blame inflation on the “free market.”