As Bloomberg reported, "officials in December debated the risks to the US economic outlook, with some concerned about low inflation and others pointing to robust growth that was about to get a further boost from tax cuts." In fact, inflation was at the center of debate. But generally, the concern was that inflation expectations remain too low. In his latest podcast, Peter Schiff said this attitude shows just how clueless investors, and the general public are.
"If they don't think there's going to be inflation, they're wrong. Those expectations are totally wrong. People are ignoring what is going on in the currency market, what's going on in the commodities markets, what's going on in the bond markets. All of this stuff is flashing inflation - at least the way you measure it - consumer prices."
Peter specifically mentioned oil. The price has pushed above the $60 per barrel mark, the highest levels in two years. Of course, when the price of oil rises, it reverberates through the economy. Peter called it a gigantic tax hike for consumers. But the Fed is still worried prices aren't going up fast enough and that they won't hit the mystical 2% goal.
"They're going to hit that out of the park. They're going to be looking at 2% in the rearview mirror - in the distant rearview mirror. That is going to be the big story. They're going to way overshoot and they're not going to be able to do anything about it."
The FOMC also talked a lot about tax cuts. Most analysts still believe the tax cuts passed last month will spur economic growth. We have argued persistently that tax cuts without a corresponding decrease in the size and scope of government will not produce the promised growth. But the mainstream is banking on growth. Peter said these people are ignoring the structural problems in the economy.
- Source, Seeking Alpha
