The Federal Reserve trumpets inflation as a sign of economic growth, but economist and media personality Peter Schiff told AIM that “…it wasn’t always the case that central banks were talking about how great inflation was.”
Schiff said that about 10 years ago the Fed shifted from favoring constant price levels to championing persistent inflation. The Fed currently aims to establish a 2% rate of inflation, and Schiff explained that in Orwellian fashion, the central bank has redefined the meaning of “price stability” to include this 2% inflation.
“ … nobody has really noticed the switch, everybody just accepts it, just like this is how it’s always been — and it’s not how it’s always been. I mean it’s also just like doublespeak and propaganda that they’re able to get away with this.”
Schiff rejects the Fed’s inflationary policy, arguing that consumers benefit from prices that decline due to supply increases.
“But what is their ulterior motive? Why are they really trying to tell us that something bad is something good?” Schiff queried.
“They want it to wipe out government debt; they want it to prop up asset bubbles … they want to lower wages through inflation because of asinine minimum wage laws or things that unions do to artificially drive up the cost of employment. So there’s all sorts of secret reasons why central bankers want to create inflation, but they don’t want to level with the public as to why they’re doing it so they make up this nonsense about how it’s a good thing and we need it for the economy.”
Asked whether he attributes nefarious motives to the Fed, Schiff asserted that, “They’re either completely ignorant or they lie about things and you just have to figure out which it is or which is worse.”
Schiff believes that the nation should reintroduce gold-backed currency and the Fed should stop manipulating interest rates. “We don’t want a bunch of people … behind closed doors deciding what the price of interest rates should be. Let the market set the interest rate, not the Fed.”
He acknowledged that market-priced interest rates would force America to “default on its debt,” but he explained that the alternative option — printing money to fund the debt — would have more widespread consequences.
Printing money to pay for the debt would inflate the currency and devalue the dollar. Schiff explained that “ … everybody loses in inflation. So at least in default, the people who were dumb enough to buy the [treasury] bonds are the ones that lose out.”