Rapidly rising prices put the squeeze on everybody’s wallets. A recent study showed that inflation is hitting rural Americans particularly hard.
According to the Iowa State University report, people in rural areas now spend 91% of their income on expenses alone. Peter Schiff recently appeared on Rob Schmitt Tonight to talk about the pain of the inflation tax.
Schmitt said the last time Peter was on the show, he painted a “very ugly picture about what’s coming for the American economy.” Peter said the picture is getting uglier.
“I think we’re not in recession, which was something that I had been predicting. So, inflation got stronger as the economy got weaker. And I think this recession is just getting started, and it’s going to last a long time.”
Peter said that when you talk about families struggling with inflation, they’re really struggling with government.
“Inflation is a tax. It’s the way government finances deficit spending. Government spends money. It doesn’t collect enough taxes, so it has to run deficits. The Federal Reserve monetizes those defiticts – prints money. They call it quantitative easing, but that’s inflation. Government is getting bigger and bigger, and families across America are going to have to bear that burden through higher prices.”
The government has also artificially suppressed interest rates for years. Schmitt said we’re paying the price for those decades of “cheap money.”
Peter agreed, emphasizing that interest rates should reflect the free market, not “price-fixing by the government.” He said that by artificially suppressing interest rates, the Fed “really screwed up this economy.”
“Now we’re going to have to pay a heavy price to unwind all those mistakes. That’s why this recession is going to be so severe. That’s why this financial crisis is going to be worse than the one we had in 2008.”
The Fed has raised rates to fight inflation, but Peter said it’s not enough.
“That’s still much too low. That’s an inflationary highly stimulative rate when you have the rate so far below inflation.”
Peter said that the inflation situation is far worse than the rigged CPI indicates, and with the amount of money the Federal Reserve has created over the years, we are likely heading for “an inflationary depression.”
Peter said he doesn’t know what it will take for the government to do the right thing.
“The only way to solve the inflation problem is to dramatically cut government spending and to allow interest rates to rise to a market level. Now, when that happens, it’s going to be terrible as far as asset prices collapsing, failures, bankruptcies. But we’re going to have to endure that to get to the other side. If we want a real economy then we’re going to have to experience a real recession to get there.”