International Man: First, the Federal Reserve told us there was no inflation.
Then, they told us not to worry when inflation became undeniable because it was only “transitory.”
Then, when it became apparent that it was not merely transitory, they told us not to worry because inflation is actually a good thing.
Then, when it became obvious that inflation was not good, they told us not to worry because they had it under control.
Do you think the Federal Reserve has lost its credibility?
Nick Giambruno: The Fed should have lost credibility long ago for anyone with gray matter between their ears.
The Fed is discrediting itself because of the ridiculous lies they’ve been spewing for the past couple of years, like “inflation is good.”
What kind of person thinks higher grocery, gas, clothing, rent, and medical care costs are good?
The only ones who do are fools or those who benefit from lowering the standard of living of everyone else. It’s like saying America needs more tapeworm infections. It’s repugnant.
Please don’t believe the Fed’s absurd deceptions.
They’re spitting on your boots and telling you it’s raining. It’s gaslighting.
The reality is that inflation is out of control, nothing can stop it, and it’s poisonous for individuals and the economy.
Here’s the correct way to think about the problem.
Did you know the US government has printed more money recently than it has for its entire existence?
Since the outbreak of the Covid hysteria in March 2020, the US government has inflated the money supply by around 41%.
That amount of extreme money printing has never occurred before. So here’s what it means…
If your after-tax wealth has not increased by 41% since then, you are not keeping up with the Fed’s monetary debasement and are losing ground. You’re on the road to serfdom.
It’s just an anecdote, but I don’t know anyone whose after-tax wealth has grown by 41% since March 2020. I imagine that most people don’t know anyone, either.
Here’s the bottom line.
Most people are getting poorer, and the Fed is to blame.
International Man: Do you think the Fed can get inflation under control?
Nick Giambruno: This is a popular topic in the financial media, but the framing of the question is incorrect and deflects from the actual source of the problem.
The truth is the Fed is the engine of inflation and is incentivized to create much more of it.
Putting the Fed in charge of getting inflation under control is like putting Marlboro in charge of getting lung cancer under control.
Further, it should be self-evident to everyone by now that central planning doesn’t work.
In Marx’s Communist Manifesto, the 5th plank calls for the “centralization of credit in the hands of the state, by means of a national bank with state capital and an exclusive monopoly.”
That is a perfect description of the Federal Reserve and other central banks.
In reality, the Fed is nothing more than a politburo of bureaucrats attempting to centrally plan the economy by tinkering with the money and interest rates—the most important prices in all of capitalism.
Even if we presume the Fed has benign intentions—which it doesn’t—central planning money and interest rates is an impossible task.
That’s why the Fed is in a mission-impossible situation—much like it was an impossible task for the Soviets to centrally plan their economy.
The best thing investors can do is recognize that the Fed can’t save the day any more than the State Planning Committee of the USSR could—and get positioned accordingly.
International Man: Since the Fed can create an unlimited amount of fake money out of thin air, does the US federal government’s debt even matter anymore?
Nick Giambruno: Yes, I think the debt is becoming an urgent problem for the Fed. That’s because of the out-of-control inflation, which the Fed is attempting to combat by raising interest rates.
However, the amount of federal debt today is so extreme that even a return of interest rates to their historical average would mean paying an interest expense that would consume more than half of tax revenues. Interest expense would eclipse Social Security and defense spending and become the largest item in the federal budget.
According to even the government’s own crooked inflation statistics, which understate the problem, price increases are soaring to 40-year highs.
That means a return to the historical average interest rate will not be enough to reign in inflation—not even close. A drastic rise in interest rates is needed—perhaps to 10% or higher.
If that happened, it would mean that the US government is paying more for the interest expense than it takes in from taxes.
In short, the Federal Reserve is trapped.
Raising interest rates high enough to dent inflation would bankrupt the US government.
The Fed could combat rising prices by hiking interest rates in the past. Today, thanks to the extreme debt levels, it does not have that option, which means inflation will continue to spiral out of control.
That’s why the situation is unprecedented and dangerous.
Reprinted with permission from International Man.
