Peter Schiff: The Federal Reserve Made This Inflation Bed

Peter Schiff Federal Reserve

Peter Schiff: The Fed Made This Bed And Now We Have To Lie In It


Inflation is running hot. Economic data is running cold. Stocks and bonds are under pressure. The Fed is scrambling. In his podcast, Peter Schiff said the Federal Reserve made this bed. Now we have to lie in it.

Stocks and bonds are off to a rough start in 2022 with the expectation of rate hikes on the horizon. In fact, many analysts now think that the Fed could raise interest rates five times in 2022. And some also think the first hike in March could be 50 basis points.

Hedge fund manager Bill Ackman called a .5% rate hike “shock and awe.”

Peter called this “ridiculous.”

It’s not shock and awe. When you’re talking about 7% inflation, a move from zero to 50 basis points is still recklessly low interest rates. And for a Fed that’s actually serious about fighting inflation, raising interest rates to 50 basis points is not nearly enough for the task at hand.”

Even so, a .5% rate hike could have a profound impact and pop the bubble economy.

Given the incredible amount of leverage that’s in the system, a 50 basis point rate hike can still do a lot of damage. And I think Bill Ackman is underestimating the extent of the damage. But not just the damage from the initial hike, but from all the subsequent hike, which aren’t going to do any good about slowing down this inflation freight train.”

Peter Schiff noted the price of oil hit has continued its upward trajectory this week. The price of oil is at a seven-year high with plenty of room to keep running up. In 2021, a lot of producers ate their rising costs. But they may well begin passing on those costs in 2022, which would mean more big jumps in CPI.

There is going to be a lot more upward pressure on the CPI despite the Fed’s rate hikes, even if we get them, even if we get more than the market expects. It still won’t be enough to stop inflation from getting worse.”

Peter said it seems clear the bond market is slowly starting to grasp this reality. And when they really start to get it, the dollar is going to tank.

Interestingly, silver had a strong day on Tuesday, up almost 50 cents. Peter said this shows the underlying strength in the commodity complex due to all the inflation baked into the cake.

Gold faced headwinds with rising bond yields and was down about $5.

But at some point, investors are going to realize that surging nominal yields mean nothing to the gold market because real yields are not rising. The Fed is so far behind the curve. And even if real yields were rising, meaning that negative yields were becoming less negative, any negative yield is a positive for gold because you don’t want to lose money in bonds. Whether you’re losing 3% a year, or 5% a year, or 7% a year — all of that is bad. You want to avoid losses. And one way to avoid losses is by owning gold. And more people are going to recognize that gold is a much better alternative than negative yielding bonds.”

The Empire State Manufacturing Index came in at -0.7 versus an expectation of 25.7. This indicates contraction and is the kind of number you see during a recession. Peter said the Fed is starting its tightening campaign even as the economy is rolling over.

The economy is getting weaker and they haven’t even begun to raise rates yet.”

The economic numbers are getting weaker even as inflation continues to run hot.

It is stagflation. This is the perfect storm. The Fed has got itself in a box. There is no way out. And the fact that the Fed is in this no-win situation on inflation should not surprise anybody. This was the most obvious outcome that nobody wanted to acknowledge.”

Learn more about real interest rates and what they mean for the gold and silver market here.

Tyler Durden
Thu, 01/20/2022 – 06:30


Dean Nestor

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