Schiff on World Affairs: Inflation Is Here and Policy Will Backfire

In last week’s appearance on World Affairs in Context, Peter takes aim at the contrast between political rhetoric and economic reality. He argues that the supposed “golden age” touted by some is mostly spin, that inflation is returning with real force, and that expanding the money supply is sowing the seeds of a broader crisis. Throughout, he points to gold and market signals as early warnings that policymakers are steering the economy the wrong way.

He pushes back on claims that the U.S. is enjoying a true boom and frames the current optimism as largely political theater:

Well, you know, the golden age may be limited to gold itself because gold has done very well since Trump’s been president. But it’s nothing like, you know, the Gilded Age, which is what that, you know, would evoke, you know, which is the late 19th century. That’s when we had a real economic boom. What we have now is a boom that exists only in the imagination of Donald Trump. 

Peter warns that the headline job numbers and growth narratives mask weakening fundamentals, and he expects price pressures to intensify; here he uses the CPI (Consumer Price Index) as a yardstick for what ordinary people actually pay:

Even though we have a weaker labor market, a weaker GDP growth and inflation, rather, is rising. And 2026, I think the CPI will rise more in this year than in every year that Biden was president, except maybe one. But it may even beat the top year under Biden. So inflation isn’t conquered either. Inflation is here.

He also points out a sharp political contradiction: a new willingness to use force that runs counter to promises to keep the country out of overseas wars, which has real economic consequences:

One of the most important things about this war is it flies in the face of everything Trump stood for, everything he campaigned on. Trump promised to keep us out of wars, to end the wars. He was very critical of US involvement in Iraq, in Afghanistan, and he said if he was president, we wouldn’t have been in any of those wars. And in fact, in the past, he had criticized Obama because he accused him of potentially launching a war on Iran as a political distraction.  

On monetary policy, Peter leans on hard signals rather than political spin: he watches the Fed’s balance sheet, the money supply, and market prices like gold to read the public’s confidence in the dollar and U.S. sovereign debt:

Well, I think I like to look at the money supply and the Fed’s balance sheet, both of which are now growing at a pretty healthy pace or not healthy, unhealthy, because it’s an inflationary pace. I look at the price of gold, which has gone to record highs. It’s had a bit of a pullback, but the trend is very clear. The breakout is very clear. That signals a loss of confidence in the U.S. dollar and U.S. sovereign debt.

The global savings glut, Peter argues, has subsidized American living standards, and any reversal of that arrangement will have painful consequences for U.S. consumption and borrowing:

And that’s going to be a huge problem for the United States that depends on this, but it’s going to be a huge benefit, I think, for the rest of the world that has had to bear the burden of this, because the relationship ends up enabling Americans to live beyond our means. We could spend more than we produce, we can borrow more than we save, but that’s only because the rest of the world takes the other side of that bargain. They produce more than they consume and they save more than they borrow. So we get to live beyond our means, they have to live beneath their means. That’s what makes it possible.

Pulling those threads together, Peter is blunt about the arithmetic: more money printing undermines the dollar, and the ensuing market adjustments will make policymakers’ jobs harder rather than easier — higher inflation pushing up long rates at the very time officials want cheaper funding, and real economic pain arriving as stimulus fades:

I think that the policies aren’t going to work and they will backfire. And the money printing is going to directly undermine the dollar. And the weakness in the dollar is going to push up long-term interest rates just when they’re trying to lower them. And higher inflation is going to act as a sedative on the economy just as they’re trying to stimulate it. So, I think we’re headed for a real crisis here.