After the August CPI data came out, Paul Krugman declared that the inflation war was over. The Biden administration and the Fed won the fight. In his podcast, Peter Schiff said he actually agrees with Krugman, at least in part. The inflation war is over. But who really won?
Last week’s CPI data showed price inflation heating up again, driven by climbing oil prices. Despite CPI rising to 3.7% in August after dipping to 3.2% a month earlier, Peter said most people still think everything is fine.
I think the more important aspect of the inflation data was how few people seem to comprehend what it means. Most of the talk I hear by the talking heads on the financial media is that everything is great. The inflation threat is pretty much behind us. Yeah, there are a few more bumps in the road, but we’re on the road to 2%. No problem. We’ll be there. The Fed is going to be cutting interest rates by next year, so these high rates aren’t really a problem. It’s just a temporary nuisance until we get back to low rates.”
Peter mentioned one pundit who proclaimed inflation has topped out and it’s coming down.
How can he say that when if you actually look at what’s happening, it’s the reverse? Inflation has bottomed out and now it’s rising.”
We had a long run of low inflation as the government measures it. (Not necessarily how people live it.) We enjoyed more than a decade with CPI averaging less than 2%. That all changed in 2021. Peter called it the “breakout year” for inflation. Then in 2022, it got even worse.
If you think of inflation like a stock, this was a massive breakout. You had a 10-year consolidation, kind of below this 2% resistance, and now it’s a massive breakout above 2%.”
Peter said it looks like 2023 will be a bit of a pullback.
If you were a trader, you would want to buy inflation. Inflation looks very bullish on a chart. It broke out and now you got a little bit of a pullback, and it’s an opportunity to buy the pullback following the breakout. All the evidence is inflation is heading a lot higher.”
Oil prices closed above $90 last week. They are up 8% in September already. Meanwhile, interest rates continue to climb. Americans have a lot of debt and they use a lot of energy. In other words, two important inputs in the US economy continue to get more expensive. At least some of those costs will be passed on to consumers and that will ultimately be reflected in the CPI.
It’s obvious to anybody who opens their eyes that inflation is not topped out and coming down. It’s bottomed out and going up. And the people who are blind to this, who are asleep, they are in for a rude awakening. That is a lot of investors.”
Peter said the thinks we’ll see much worse price inflation in 2024.
All of these rosy Goldilocks scenarios that are out there, they’re all going to fall apart in 2024.”
Nevertheless, after the August CPI data came out, Paul Krugman loudly declared the inflation war was over and the Fed won.
According to Paul Krugman, the economy is great, and we’ve won the war on inflation, and there’s no recession. I mean, how wrong can one guy be?”
Peter said he does think Krugman is right about one thing though.
I agree with Krugman that the inflation war is over. I just disagree on who won. I think inflation won!”
Of course, the Federal Reserve hasn’t officially surrendered, but Peter said when it does, gold is going to go ballistic.
You don’t want to wait for that to buy it. You want to head over to SchiffGold and buy your gold now, and your silver, before this next breakout. Because when it moves, I am convinced it’s going ot be fast.”