Schiff on Redacted: Inflation Never Went Away

Peter recently joined Clayton and Natali Morris on the Redacted podcast to walk through why the inflation story never should have lost steam. He covers everything from diesel prices to the copper and gold ratio, the Fed’s toothless rate policy, the hidden costs of the AI boom, and why he thinks inflation will once again decide an election, this time against Republicans in 2026.

Peter starts close to home, describing how diesel costs are hitting him directly in Puerto Rico, and how that pain ripples out through the entire supply chain:

There are a lot of generators that run on diesel. You know, my generator here in Puerto Rico runs on diesel. So it cost me more to fill it up. Fortunately, I have a lot of diesel stored up, but the trucks that are delivering everything run on diesel. And so the companies that deliver all the goods look at all these Amazon trucks running around. You know, they need diesel. So prices are going to have to be higher.

From there, Peter zooms out to the bigger picture on commodities. He points to copper’s record run and argues that even with prices soaring in dollar terms, the real story is the collapsing value of the dollar itself, not commodities becoming more expensive:

Look, copper prices just hit a new all time record high. They’re up 60 percent since Trump took office. But, you know, in real terms, in terms of gold, copper is still cheap. So is oil. If you look at a chart of oil or copper in terms of gold, we’re getting the best bargains we’ve ever had. So what that shows you is that prices are not really going up. The value of our money is going down.

Naturally, this leads to a discussion of the Federal Reserve and whether it has any real intention of fighting inflation. Peter is blunt about the central bank’s unwillingness to take the kind of action that would actually work, precisely because it would be too painful for a debt-soaked economy:

That’s too little too late to mean anything. That’s not going to do anything to slow the increase in inflation. The Fed needs far more significant rate hikes than that to have any impact and it won’t deliver those even if it delivers 25 basis points which it probably won’t, because higher interest rates will crush the economy. We have a big bubble economy and if the Fed were to actually get serious and really fight inflation instead of just talking about fighting inflation which is all they’ve done so far, the stock market could tank, the real estate market could crash, the economy could go into a severe recession, there could be a big spike in unemployment.

Sticking with the theme of costs hidden beneath flashy headlines, Peter turns to the artificial intelligence spending boom. He argues that while AI may eventually pay off, right now it’s acting as a drag on the broader economy by pushing up borrowing costs and energy prices:

I mean maybe it will have dividends in the future but as of right now, AI is exacting a cost. The spending is crowding out a lot of other spending and the borrowing is pushing up interest rates. So people are paying higher interest rates– are paying higher energy costs as we’re building out the infrastructure required to eventually get the extra productivity coming from AI. So I think when you pull AI out of the equation and that capex boom the economy is weak.

Peter then connects all of this economic pressure to politics, predicting that inflation will once again be the deciding factor in a national election, just with a different party taking the blame this time around:

Inflation was the big issue in 2024 and it’s going to be the big issue in 2026. The difference is in 2024 the voters blamed Biden and the Democrats for the inflation. Now they’re going to blame Trump and the Republicans. So the inflation issue is going to work against the Republicans in the midterms.

Finally, Peter closes with a warning for anyone still holding government debt as a safe haven. He argues that Treasuries have quietly become one of the worst investments an American saver can make, and that the exodus from these bonds explains why yields have climbed to levels not seen in nearly two decades:

Well nobody should be buying treasuries. In fact over the last 10 years I think the returns on treasuries are like the worst they’ve been in a hundred years. I mean you’ve lost money in treasuries and you’re going to keep losing money if you’re dumb enough to buy treasuries. That’s why so many people are getting rid of their treasures. That’s why the yields today are the highest they’ve been since 2007.

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