Judging Freedom - Peter Schiff - Recession, Inflation & Biden

Episode Date: August 5, 2022

The “Inflation Reduction Act” Will Do the Exact Opposite https://schiffgold.com/peters-podcast... #inflation #recession #BidenSee Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

Hi, everyone. Judge Andrew Napolitano here for Judging Freedom. Today is Friday, August 5th, 2022. It's about 310 in the afternoon on the East Coast of the United States. My guest today is our go-to person on inflation, on how the mechanics of the economy work, particularly when the government wants to put its big, fat, ugly hand in the wheels of the free market. Peter Schiff is the chief economist and global strategist of Euro Pacific. You can reach him at epacfunds.com. You can also reach him at schiffgold.com.

Peter, every time I see you, I think of all the great times we had on Fox News and Fox Business. It's a pleasure. Welcome back. Welcome again to Judging Freedom. Just before we start and get into the nonsense that the government wants to do that it claims will lessen inflation, give us the one-minute version, the sole cause of inflation. Give us the one minute version, the sole cause of inflation. Yes, well, they redefine inflation, much like now they're trying to redefine recession,

because the government didn't want the public to know the source of inflation, because all inflation emanates from the government and, of course, the central bank being part of the government. But inflation, as you know, is an expansion of the money supply. That's why they use the word inflate, because when you inflate something, it expands. You inflate a balloon with air and it expands. Prices don't expand. They go up, they go down, but they don't expand. What expands is the money supply.

What contracts is the money supply. A contraction of the money supply is deflation. But generally, when you expand the money supply and you have more money, each monetary unit has less value. And so you need more of them to buy things. And so inflation generally causes prices to go up. But because a free market is always pushing prices down, sometimes it depends on which factor is greater. You can actually have falling prices and still have inflation because absent the inflation, prices would have come down even more.

Usually what happens is you have an increase in prices and the increase is not as great because the free market offsets some of it with greater productivity, but the government is still undermining purchasing power everybody would be better off if there was no inflation and prices were allowed to be lower because that would mean people could buy more stuff the right so the government the government the government causes inflation by expanding the money supply which it does either by creating cash out of thin air, the Federal Reserve, or by spending more money than it has, which forces it to borrow. Well, right. But the borrowing doesn't create inflation unless it's financed by the central bank. You know,

private actor borrows, you just have crowding out. You get government reducing investment in the economy, which could also push up prices because now you have less supply. But the real danger is when the government borrows money and then the Fed buys the bonds. That's what was going on with QE1, QE2, QE3, QE4. So it's no accident that we're now dealing with the worst price increases in our nation's history because we just went through the greatest inflationary time period in our nation's history. So now we're going to have to suffer the consequences of that with big increases in prices. They're just getting started. Prices have a long way to go up. So the government thinks that somehow by spending more money, money that it doesn't have, it will reduce inflation.

Isn't the government doing 180 degrees from what it should be doing? It should be spending less. Well, of course, but they never want to spend less. I mean, the government wants to solve every problem by spending more money. And even if the problem is a consequence of spending too much money, you know, the reason that inflation is is really just another tax. And that's the way most people should think about it, is that every dime that the government spends needs to be covered some way.

And the honest way to cover it is through actual taxation, whether it's an income tax or, you know, a sales tax, you know, payroll tax, whatever it is. We have to send our money to the government so the government can spend it. Well, if the government spends money without taking our money, if it just prints money and spends that, it's not like we get all that government for free. No. What happens is when the government creates money and spends the new money, the old money that we own loses value. And so prices go up. And so that increase in price is what we're paying instead of a tax. Somehow Chuck Schumer and company think that by borrowing and spending, they can reduce inflation. Now, I know a clip we're about to show you will make your blood

pressure go up but I want you to watch both clips and then you tell me what you think. The overwhelming majority of those who have looked at this Mark Zandi Republican economist have said it will reduce inflation and it's obvious that it will. It's as plain as the nose on your face that this will reduce inflation Does it lower inflation and by how much final question we have seen estimates that take inflation down By I think if you look at Mark Zandi's work, it takes inflation down by about a third of a point, I think What they're talking about of course is the is the Inflation Destruction Act, or it's got some fancy, absurd name. Like a lot of federal legislation, the act does the opposite of what the name claims it's going to do, like the Patriot Act, which is one of the most unpatriotic invasions

of privacy in history. This thing is going to cause more inflation. What kind of a nonsensical argument is Schumer making? Yeah, look, it's the Inflation Reduction Act that guarantees more inflation. But what the government is doing is they're taking advantage of the fact that the public is upset about inflation. So by titling the bill the Inflation Reduction Act, nobody wants to vote against it because nobody wants to vote against reducing inflation. You know, it's like they come up with a law, the Tax Simplification Act. Well, who would be against tax simplification? Except those acts always complicate the tax code even further.

They never actually simplify it. But this is a spending bill. And even if they want to dress it up as an investing bill, the government doesn't make investments because it's not motivated by a profit and loss. The government just spends money. They can call it an investment if they want, but it is spending. And they're just putting demand into the economy. Where is the money going to come from to finance this spending? I mean, the only tax hikes they have in there, they have some, I guess, on corporations. But when you increase

tax on corporations, all you do is reduce their capacity to invest and increase supply. You know, if they're going to increase taxes to fight inflation, they got to reduce demand. They got to tax the middle class or the poor. They can't tax corporations because that's going to reduce supply. But the best way to go at it is to cut government spending. But I mean, they would never even consider doing something like that. Now, I don't even understand Chuck Schumer's argument. I don't even understand how they can possibly argue that by spending three or four hundred billion that they don't have, they're going to reduce inflation. I don't even know how, other than sophistry, other than just making this up, I don't know

how they could make that argument. Well, remember, these guys are a bunch of socialists. They don't actually believe in the free enterprise system. And so it's their belief that if the government is in charge of spending this money, that it's going to make the economy more efficient and more productive. See, they think that they're going to target this. These geniuses in Washington know precisely where this money needs to go, and they're going to produce an outcome that is much better than what the free market would have produced. See, the people in the free market, all this market forces and competition and supply demand that crap doesn't work you need central planning that's what creates prosperity and that's what these guys believe so they think that may by making government bigger well you're going to have a more prosperous economy the problem is there isn't a single example of that

working anywhere in the history of the world. Is there a conservative Republican economist named Mark Zandi who supports this nonsense? Well, I don't think he's a conservative Republican. I would even challenge whether or not Zandi is officially a Republican. I mean, I've rarely agreed with anything Zandi's ever said. So the fact that they're pointing to Zandi as saying this is a good deal, and I'm sure Zandi was one of the people who was claiming inflation was transitory. So obviously he doesn't know anything about inflation. I think anybody who said inflation was transitory, you know, whatever they say about inflation

at this point, you know, should be completely irrelevant. In fact, Zandi was probably saying before he was saying inflation was transitory, he probably says there wasn't any inflation at all. So all the people who support this bill, you know, should be completely disqualified to comment on it. Janet Yellen, who's the secretary of the Treasury, said inflation was transitory. I think she since has changed their mind. But she pounded the table and insisted on it for a while.

And if I'm not mistaken, Jay Powell, chairman of the Federal Reserve Board, said the same thing. Of course, they all say the same thing, that that's the script that they all read from. You know, it doesn't matter. I mean, you don't know whether they're incompetent or they're just lying. But just like now, they're all saying there's no recession. Meanwhile, you know, now you've got this jobs report that came out today, you know, 500 and some odd thousand jobs, unemployment, three and a half percent and they're saying you see this proves there's no recession as far as i'm concerned these jobs help validate the recession because all these jobs are part-time jobs it was another month

that we lost full-time jobs and but and the number of people in the workforce went down fewer people are working but there are more jobs. What is that telling you? It means the people who already had jobs got another job. And the fact that all these jobs are part-time jobs proves that they went to people who are already employed. Now, why do people who already have jobs, why are they suddenly needing another job? Because they're not earning enough money because of inflation.

Exactly. Exactly. Exactly. So, so many people are forced to get jobs they don't want. And now Biden looks at all these jobs that people would rather not have as the sign of a booming economy. You know, a lot of these jobs are probably people who are no longer retired. You know, what if inflation is so bad and the cost of living goes up so much that kids have to start dropping out of school and go to work because that's the only way their parents can pay the bills. Is Biden going to brag about all the child, all the children that are now in the labor

force because that's the only way their parents can feed them? That is what is going on. Real wages are collapsing. They keep talking about this strong labor market. How do you have a strong labor market if workers have to settle for big pay cuts? If we had a strong labor market, workers would be able to go to their bosses and say, I want a big raise. You know, prices are up 10%, I want a 15% raise or I'm taking another job. The fact that workers have to settle for a 4% pay raise with

prices up 10% And of course, prices are really up 20% because the government is lying about how much they're going up. So the real decline in wages is much bigger than what the statistics, the official ones, would indicate. And that's why so many people are getting jobs. Why is household debt exploding? Why is credit card debt year over year up the most in 20 years? Because people can't buy groceries with their paychecks. They have to put it on their credit card. Peter Schiff, admire your courage and the ease with which you explain all these things, and our audience does as well. It's always a pleasure. Thanks for joining us. My pleasure, Judge. Keep up the good work.

Thank you, my friend. Judge Napolitano for judging freedom.