Peter Schiff, a veteran Wall Street investor and well-known economist, recently wrote that he remains pessimistic about the outlook for inflation and believes that the largest commodity boom since the 1970s is about to come.
A variety of commodities surged following Powell's press conference last week, with silver, gold and copper performing particularly well. Peter saw this as a denial of the information given by Powell.
"I think we're about to have the biggest bull market in commodities since the 1970s," he said. "Of course, that goes against Powell's claim that inflation will fall back to 2 percent. The fact is, it's possible that inflation will fall back to 2 percent. Zero sex! All the data shows that inflation is rising. If you understand what inflation is, you know it can only rise."
Previously announced consumer price index (CPI) and producer price index (PPI) in the United States were both higher than expected, which also contradicted Powell's statement. Among them, the month-on-month growth rate of PPI was more than twice the most conservative estimate. Combined with a 13% increase in the U.S. federal deficit, these signs do not bode well for the economy.
Peter pointed out, "This is what causes inflation. So much money is being spent. How can it not push prices up? This is why the Fed will not only slow down quantitative tightening (QT), but also resume quantitative easing (QE), Because government spending is growing like crazy. All of this is fueling inflation... There's no downward pressure on rates at 5.25%, 5.5%. Rates are still too low."
Peter expects the Fed to cut interest rates in the future because all political forces are urging the Fed to cut interest rates as soon as possible.
He said, "The Fed will cut rates regardless. It doesn't matter what the data looks like. The Fed will cut rates because the United States is effectively bankrupt. Fed officials are not cutting rates because they have won the war against inflation, but because they must avoid financial Crisis - banking crisis. They want to get Biden re-elected to try to save the government, avoid default, cut Social Security and Medicare, all through inflation."
Peter believes that Powell's dovish remarks are a classic example of the Fed's inability to ease policy. Once the Fed starts manipulating the dollar, there is no turning back.
He pointed out, "In 2009, when the Fed first started to increase its balance sheet, then-Fed Chairman Bernanke said, 'After the emergency, we will reduce the balance sheet back to where it was. We will not keep any of the purchases we made. Bonds, because we're not a banana republic. We're not going to monetize government debt.' And now, Powell admits, 'We will indeed monetize the debt because we want to maintain an adequate balance sheet.'"
Note: Banana republic is a political term, usually used to refer to countries with unstable political systems, widespread corruption, and economies that rely on a single cash crop (such as bananas, cocoa, coffee, etc.).
Peter believes Powell is right about one thing: rising wages are a symptom of inflation, not its cause. "If wages are going up, that shows there's still an inflation problem... It's like when you use a thermometer to measure your body temperature, the thermometer is not what makes you sick, it just lets you confirm that you are sick, and you are sick because there is something wrong with you." he added.
The Fed's inability to control inflation will lead to severe challenges for the U.S. economy. Peter said, "We haven't experienced anything like this since the 1970s. The difference is that our economy is in much worse shape now than it was in the 1970s, and we don't have the ability to put out this fire. There is no next Reagan. , there will be no Volcker, and even if they were there, they wouldn't be able to do what they did then because the U.S. is in a very weak financial position now. So it's a completely different situation and the outcome will be very different."
Peter concluded that last week's Fed meeting had boosted hopes for a rate cut, and more cheap credit would only add fuel to the raging fire of inflation.
Article forwarded from: Golden Ten Data
