Schiff warns artificial interest rates and government spending fuel permanent inflation

Most consumers define inflation as rising prices. Economists like Peter Schiff argue this definition is a deliberate misdirection. Historically, inflation refers strictly to the expansion of the money supply and credit. Rising prices are merely the consequence of that expansion.

By redefining the term, the U.S. government shifts blame to businesses, supply chains, or geopolitics. When the money supply expands, currency value depreciates. This forces sellers to adjust their prices upward to maintain value. This basic misunderstanding prevents the public from identifying the true source of their declining purchasing power.

The Natural Force of Capitalism

Under a healthy capitalist system, the natural trajectory of prices is downward. Innovation and increased productivity naturally reduce production costs. Technology, like artificial intelligence, serves as a powerful deflationary force by making operations more efficient.

When productivity gains are realized, businesses can charge less while maintaining healthy margins. This dynamic creates abundance out of scarcity. However, persistent monetary expansion prevents these natural price cuts from reaching consumers. Instead of enjoying a lower cost of living, citizens pay flat or rising prices, effectively robbing them of the benefits of technological progress.

The Cost of Cheap Money

Artificial interest rates create severe economic distortions. While the Federal Reserve keeps rates low to ease the debt burden of the federal government, the broader economy suffers. Low rates discourage savings, promote excessive borrowing, and fuel speculative bubbles in assets like Bitcoin and real estate.

To rebuild a resilient foundation, the economy requires higher interest rates. This adjustment would reward savers, encourage capital accumulation, and force necessary cuts in public spending. Currently, inflation serves as an invisible tax. It bridges the gap between massive government expenditure and artificially suppressed borrowing costs.