June 10, 2023

Inflation could rise above 10% in 2023, Fed rate hikes could make it worse – Peter Schiff


Inflation, which peaked at 9.1 percent in June, has risen further in 2023, said Peter Schiff, chief market strategist at Euro Pacific Asset Management, who correctly predicted the 2008 housing crash and high inflation in 2022.

“We can’t even get close to two percent [inflation],” he said. “Maybe we’ll go below 7 percent before we go above 10 percent, but I think we’re going to hit the 2022 highs before the end of 2023 on an annualized basis.”

The Federal Reserve has raised interest rates by 425 basis points over the year to try to curb inflation, but Schiff said they could make things worse.

“Rising interest rates actually translate into higher consumer prices,” he explained. “If I’m a business… I have to pay interest on my debt. Well, if interest rates go up, that’s the cost of doing business. I may have to raise prices to cover that.”

Schiff spoke with Kitco News anchor and producer David Lin.

Reducing inflation

Schiff, who campaigned for a Senate seat in 2010, said the way to stop inflation would be fiscal prudence.

“If we want to stop taxing people through inflation, we either have to tax them in another way or we have to cut spending,” he said. “In other words, we have to balance the budget.”

However, he added that such a policy is unlikely to be adopted because it lacks political support.

“The problem is that it’s not a good campaign to get votes,” he noted. – Politicians always choose the easier way. They want to spend money and then they want to blame inflation on someone else.”

While he emphasized that gradually raising interest rates can increase inflation, Schiff emphasized that if interest rates are high enough, inflation will decrease. The relationship is non-linear.

“The second thing that needs to happen is that interest rates need to rise to a level that exceeds inflation by a comfortable margin,” he said. “We need people to stop spending and start saving… if you keep interest rates below inflation, nobody is stupid enough to save. Everyone spends their money as soon as they get their hands on it.”

Encryption setting

In response to recent events such as the FTX debacle, lawmakers have proposed regulation of the crypto industry. Schiff said the additional regulation would not prevent fraud.

“The scam may still continue if FTX is regulated,” he said. “If you go back to the original Ponzi scheme, [Charles Ponzi’s] the system didn’t even last a year. There were no adjusters. The market quickly shut down the Ponzi before too many people lost too much money.

Watch the video above to see Schiff’s outlook on gold and Bitcoin

Follow David Lin on Twitter: @davidlin_TV

Follow Kitco news on Twitter: @KitcoNewsNOW

Disclaimer: The views expressed in this article are those of the author and do not necessarily reflect his own Kitco Metals Inc. The author has made every effort to ensure the accuracy of the information provided; However, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is for informational purposes only. It is not a solicitation to make exchanges in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article accept no responsibility for any loss and/or damage arising from the use of this publication.

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