During a recent podcast, Peter Schiff talked about how the Bank of Japan lied about inflation being too low in order to justify its reckless monetary policy and keep interest rates artificially low in order to prop up the country’s massive debt. In a subsequent podcast, Peter talked about similar lies coming out of the European Central Bank.
The United States isn’t the only country with an inflation problem. The month-over-month increase in the CPI in Germany for March came in at 2.5%. Year-over-year, the CPI increase was 7.3%. Meanwhile, in Italy, producer prices were up 41.4% year-over-year in February.
It’s clear there is a significant inflation problem in the eurozone and it will likely get worse.
The ECB has kept interest rates at zero, and sometimes below, for years. The European central bank has also run massive quantitative easing programs. Former ECB president Mario Draghi always justified this extraordinarily loose monetary policy by saying there wasn’t enough inflation in the eurozone.
Peter said he was one of the few people questioning the absurdity of calling low inflation a problem central banks need to solve.
Low inflation is not a problem. In fact, lower inflation is better than higher inflation. The lower the better. In fact, if prices fall, that’s actually better than prices rising by a little bit. It’s better if things get cheaper than more expensive.”
In reality, all of this talk about inflation being too low is really just a smokescreen to allow central banks and governments to continue their reckless monetary policy.
Keep in mind, when these bureaucrats and politicians tell you “there is not enough inflation,” they’re really saying the cost of living isn’t rising fast enough.
If they said it that way, it would illustrate the absurdity. Why does anybody want the cost of living to go up? Doesn’t everybody want their cost of living to go down? Of course, they do! People don’t want higher gas prices. They want lower gas prices. People don’t want to pay more for health insurance. They want to pay less. They want to pay less for everything.”
The original ECB mandate was to keep inflation below 2%. Draghi reinvented the mandate so that the central bank would try to keep inflation as close to 2% as possible, without going over. In effect, Draghi was saying, “We want inflation to be 1.999%.” Peter called it “asinine.” In effect, that means if inflation is 1.8%, the central bank needs to keep rates at zero and continue QE.
It makes no sense to raise an inflation rate of 1.8 to 1.9. when you’re trying to stay below 2%. In fact, it doesn’t make any sense to try to raise an inflation rate of 1.5 to 1.9 and risk overshooting. The whole idea of the mandate being close to but below 2% was complete nonsense.”
At the time, Peter said it was crazy to think a central bank could micromanage the inflation rate to that degree. And he asked the key question: what happens when they overshoot?
Well, now we know.
It’s ignoring the overshoot. It is doing nothing. Because you have a 30-year high in German inflation. You have an inflation problem all over the world. Yet here you have the ECB continuing to hold rates at zero and continuing to do quantitative easing.”
If the ECB’s real goal was to create higher inflation but keep it below 2%, they’ve succeeded. In fact, they’ve more than tripled 2%.
Why are they pursuing the same monetary policy? They’re pursuing the same monetary policy today when they have too much inflation as they were using in the past when they claimed they had too little inflation.”
Just like with the Bank of Japan, this highlights the big lie Draghi and the current ECB president Christine Lagarde have been telling — that the artificially low interest rates and QE were driven by too little inflation.
Low inflation was never a problem. It was a manufactured problem to cover up the real problem. And now they have another real problem of too high inflation that they can’t solve. But the problem that they were trying to cover up was another insolvency issue. Why was the ECB continuing to print euros to buy government bonds, in particular Greek government bonds, Italian government bonds, Spanish government bonds? And the answer is those governments were profligate. They’re running big deficits. They are not complying with the original premise of the European Union. They are not holding their deficits down in relation to their GDP. And so the reason the ECB is interfering in those bond markets is to keep interest rates in a lot of these southern European countries artificially low. So, in order to justify intervening in the bond markets, to spare Italian or Spanish politicians from the hard choices of cutting government spending or raising taxes, the ECB monetized that debt. But they couldn’t say the reason we’re printing all of this money is so we can bail out the Italians or bail out the Spanish, so they had to come up with another excuse. And their lame excuse was that inflation was too low.”
The situation isn’t much different in the US. The Fed has also used “low” inflation to justify loose monetary policy so that it can continue to monetize the massive US debt.
In this podcast, Peter also talks about how politicians and central bankers are using COVID and Putin as an excuse for inflation, the problem of big government, and the reaction of gold and oil to the peace talks in Ukraine.