Peter Schiff thinks inflation is worse than what investors believe. January’s inflation posted was worse than expected. Peter Schiff notes the inflation increase for the month was two-tenths of a per cent for January, and we got three-tenths of a percent.
“If we annualize three-tenths of a percent from now and the end of the year, that is 3.7% inflation,” he said.
“January’s inflation posted was worse than expected”
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Peter Schiff thinks inflation is worse than investors believe, and questions why the Fed is talking about interest rate cuts
The Fed’s annual inflation target of 2% is looking like a pipedream.
“If inflation is overshooting by the official rate, why is the Fed even talking about cutting rates if they are serious about the 2% mandate target?” he added, “based on their numbers, they should be hiking and not pausing.”
“We need another rate hike,” he said.
Peter Schiff noted that household debt has hit a record high.
Credit card debt has hit a record high above 1.5 trillion dollars.
Credit card interest rates are at a record high at 21%, the highest it has ever been.
“If you have the highest debt amount at the highest interest rate, that is a burden on the borrower who has all this debt,” he said.
“We need another rate hike”
PETER SCHIFF
Higher rates should make borrowing more expensive so people stop spending.
Raising interest rates should discourage borrowing, so you reduce aggregate demand, less people spending more savings and more capital investments so we can increase supply.
“So higher interest rates reduce demand for goods but also increase the supply of goods, which brings prices down. But that is not happening,” he said.
The Fed has increased interest rates from zero to 5.25%, and consumer borrowing and spending remains elevated.
“The government is borrowing and spending to keep the lights on. They just passed a 100 billion dollar aid package. Where is that money coming from?”
– Peter Schiff
We need more rate hikes. “The problem is the Fed knows the economy can not afford it, the government can not afford it, and nobody can afford it,” he said.
“The Fed spent a decade getting the economy hooked on zero percent interest rates.
Households are not borrowing to buy a new car, TV set, or a big ticket item. They are borrowing to buy groceries or to put gas in the car. They are borrowing for a lot of things that they cannot afford.
They got to eat, so they got to borrow the money to buy the food,” he said.
“The government is borrowing and spending to keep the lights on. They just passed a 100 billion dollar aid package. Where is that money coming from? It is going to be borrowed and printed,” he added.
Government public debt is above 34 trillion dollars. Tighter fiscal policy typically reduces public spending. Instead, it is increasing.
Peter Schiff thinks inflation is worse but sees no hikes until after the election
They may not be able to cut in March or May. Perhaps it will be June or July.
He thinks the numbers confirm that the Fed has lost the inflation fight.
“Inflation has won,” he said.
Peter Schiff thinks the Fed cannot raise interest rates high enough to bring inflation down to 2%.
“There is no way the Fed will hike rates from now into the election,” he said.
He doesn’t expect the price of gold to go lower.
