Peter Schiff thinks Fed credibility is spent as its transitory inflation narrative fades into the myth.
Inflation expectations are managed as CPI forecasts are raised. So it comes as no surprise to us that the latest CPI for November came close to expectation.
The Fed moving the goal post is what could come next.
Global USD denominated debt outside the US has ballooned to $12.6 trillion, which has doubled since 2010, according to the Bank for International Settlements.
Moreover, the US National Debt has just smashed the 29 trillion USD mark.
So debts are at unprecedented levels at a time when the global economy is weak and worker productivity continues slowing in advanced economies as more investment is funneled towards robotics and AI rather than developing worker skills and training.
“The Fed moving the goal post is what could come next”
WEALTH TRAINING COMPANY
Declining worker participation rates and falling real wages are mega macro trends
In the fourth revolution, where humans are being displaced by smart robots and AI at an alarming rate, workers have little or no bargaining power to negotiate for higher wages.
Kellogg’s fires 1,400 striking workers underscore the above.
So to maintain consumption levels when inflation continues spiraling higher, due to currency debasement, households go further into debt. The state goes further into debt as tax revenues decline and welfare spending increases to prevent millions of people from falling into dire poverty.
So households and governments are likely to sink further into debt to keep the lights burning.
We believe the Fed is reluctant to step in the ring and fight the inflation fight because it realizes it could trigger a debt tsunami in the current backdrop of lackluster economic growth, declining worker productivity, and real wages.
“humans are being displaced by smart robots and AI at an alarming rate, workers have little or no bargaining power to negotiate for higher wages”
WEALTH TRAINING COMPANY
Peter Schiff thinks Fed credibility is spent as it downplays inflation in the hope that it withers away
But to date, the CPI data suggest inflation is on an upward trajectory.
The CPI surged another 0.8% month-on-month in November. The consensus expectation was for a 0.7% rise. The headline year-on-year increase was 6.8%. That was right in line with expectations. It was also the highest CPI print since 1982
“The total CPI gain for 2021 now stands at 7.1% with one month left to go” – Wealth Training Company
Peter Schiff noted in his latest podcast that the CPI number understates the inflation problem.
“The November rise came on the heels of a sizzling hot 0.9% CPI in October. This was the biggest back-to-back CPI rise of the year.
Clearly, the gains we are seeing were not transitory if we’re at the end of the year and we’re seeing even bigger back-to-back increases in monthly consumer prices than at any point during the year,” said Peter Schiff.
The total CPI gain for 2021 now stands at 7.1% with one month left to go.
- January – 0.3%
- February. – 0.4%
- March – 0.6%
- April – 0.8%
- May – 0.6%
- June – 0.9%
- July. – 0.5%
- August 0.3%
- September – 0.4%
- October – 0.9%
- November – 0.8%
Peter Schiff pointed out that core inflation, excluding food and energy as if consumers don’t have to eat or put gas in their car, rose 0.5%. The year-over-year core CPI was up 4.9%.
Peter said we need to remember that the Fed is still talking about inflation “slightly” above 2%.
“The inflation comparison between 1982 and today is apples to oranges, and it is irrelevant. The mainstream media and government officials like to compare today’s CPI numbers to the double-digit inflation of the 1970s” – Peter Schiff
Peter Schiff thinks Fed credibility is spent because inflation is already well above 2%
Peter Schiff also noted that it would be erroneous to compare the inflation of today with other periods of high inflation.
“The inflation comparison between 1982 and today is apples to oranges, and it is irrelevant.
The mainstream media and government officials like to compare today’s CPI numbers to the double-digit inflation of the 1970s.
They want to point to the higher numbers of the 1970s to remind us that it’s not that bad because after all, it’s nothing like the 1970s. Except it’s exactly like the 1970s — only worse,” said Peter Schiff.
In 1970 the CPI rose 5.8% and the following year it rose 4.3%, according to government statistics. The 1973 CPI increase was 6.2%.
Peter Schiff noted that inflation today is already worse than in the first four years of the 1970s. “So, how is this not like the 1970s when we’re starting off this decade worse than we were starting off the 1970s?” He said.
“Inflation hit double digits in 1974 with an 11.1% CPI.
But you know what? That’s actually where we are. We’re higher than that right now. And that is because the CPI that we use today — and I’ve said this many times on the podcast — is not the same CPI that we were using in the 1970s. And that makes comparisons completely irrelevant,” added Peter Schiff.
Peter Schiff noted that back in 1998, the government significantly revised the CPI metrics. Even the Bureau of Labor Statistics (BLS) admitted the changes were “sweeping.”
According to the BLS, periodic changes to the CPI calculation are necessary because “Consumers change their preferences or new products and services emerge. During these occasions, the Bureau reexamines the CPI item structure, which is the classification scheme of the CPI market basket. The item structure is a central feature of the CPI program and many CPI processes depend on it,” said Peter Schiff.
Peter Schiff thinks Fed credibility is spent, nevertheless, he believes they will continue to make false claims because it serves their agenda.” If you measured inflation now the way it was measured in the 1970s, I think 2021 would be worse than any single year of the 1970s,” said Peter Schiff.
Inflation is sugar-coated, it’s so much worse if the numbers were honest.”
Indeed, with inflation soaring and gold continuously being monkey hammered, the shiny yellow melt may be investors’ true haven, and it is still being offered at discount.
Eventually, gravity wins.