Schiff warns artificial interest rates mask true cost of government spending

Why Deflation is Your Friend

Conventional economic dogma warns that falling prices destroy economies by delaying consumer purchases. That theory falls apart under real-world pressure. In reality, consumer goods are bought out of necessity and utility. If you need a car or an air conditioner today, you will not wait a year to save a marginal percentage. Capitalist innovation naturally drives prices down through productivity. Technologies like artificial intelligence should make goods cheaper. Instead, monetary expansion acts as a hidden tax, stealing those natural price cuts away from consumers and leaving them with artificially high costs.

The High Price of Low Rates

The Federal Reserve keeps interest rates artificially low because the U.S. Government is burdened with unprecedented levels of debt. It is a policy of self-preservation, not economic health. True economic recovery requires higher interest rates. Higher rates reward savers, discourage excessive consumption, and build the capital needed for long-term investments. However, raising interest rates would require painful spending cuts to entitlement programs and national defense. Instead of making those tough decisions, policymakers inflate the money supply to keep interest rates down, kicking the structural crisis down the road.

Shifting Capital to Speculative Bubbles

Artificial rates create speculative bubbles instead of sustainable growth. The housing market remains highly unaffordable because zero-percent interest rates inflated a massive bubble. Similarly, capital has been misdirected into speculative, non-productive assets like Bitcoin and various cryptocurrency ventures. True economic resilience requires letting these bubbles deflate. Only by allowing prices to fall naturally and encouraging savings can we rebuild a healthy financial foundation.