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We have people in the Federal Reserve Bank, people in the government, and a lot of Americans who will tell you, "No, inflation is because corporations are greedy. It has nothing to do with government spending. It has nothing to do with the Federal Reserve Bank printing money." I mean, corporations are always greedy.
And so, we should always have inflation then. I mean, everybody is greedy. I mean, not just corporations. Everybody who has a business is greedy in the sense that they want to make as much profit as they can. All workers are greedy. I mean, they're trying to get the highest wages they can. You know, when when you're looking for a job, you try to find the employer who's going to pay you the most.
And if you think you're you know, you're you're you're worth more, you'll go and demand a raise, right? So, everybody wants to earn more. So, that can't be the reason that we have inflation, or we we'd always have a lot of inflation. See, the the problem is is greedy as a businessman is, or corporation is, there's competition.
Yeah, I'd love to raise my prices, but the problem is the customer will take their business someplace else if I do. Uh and so, really what happens is the greedy businessman, the greedy corporation tries to lower prices. What the the the profit-seeking company understands is the lower the price, the more I sell.
So, if I can figure out how to lower my price, I'm going to do more business, and I'll make even more money because I'll have more sales. Greed is actually a reason for prices to go down, and not for prices to go up. So, the only reason that you have inflation is that the government is inflating the money supply, and so our money is worth less because there's more of it.
And so now, prices have to rise to reflect a new equilibrium with more money. And and so, that's the only source of inflation. I don't care how the government wants to define it. I mean, they're just ignoring the definition because the real definition places the blame for inflation where it belongs, on government.
Because if you understand that inflation is the expansion of the money supply, well, who does that? All right? It's the government. Greedy corporations don't print money. They have to earn the money. Same thing as Putin. Putin can't cause our inflation. He can't print our money. I mean, he can cause inflation in Russia.
He can print rubles, but he can't print dollars, so he can't be the source of US inflation. So, all this is the politicians and the central bankers trying to shift the blame of inflation onto the public, or you know, just onto the corporations that everybody hates anyway. These damn greedy corporations.
You know, Biden is all upset about what he calls shrinkflation, or not He didn't make up that name. It's been around. But companies have been playing this you know, trick for a long time to deal with inflation. And and so, what companies try to do rather than just raise prices is they just shrink the the the packages, or they put less of a product in a package.
You know, they make the candy bars smaller. They put less cereal in a box, fewer rolls of toilet paper, you know, in the roll, right? And they and people don't notice the price increases. This is not because they're greedy. I mean, they're just trying to figure out the best way to pass on inflation to their customers in a way that may not piss them off as much, but it's not their fault.
You know, they don't want to put less cereal in the box, but they got no choice. It's either that or raise the prices, all right? So, uh the consumer in many cases responds better to uh a smaller quantity of cereal. But you know, at some point you can't just keep shrinking these things down forever.
But there's the irony though where the Federal Reserve Bank is trying to fight inflation. They're raising interest rates, doing quantitative tightening. They're trying to fight inflation, but then the government says inflation is a problem. We want to bring inflation down, but we still have this national deficit that's over a trillion dollars where the government keeps spending money.
So, they're creating inflation while the Federal Reserve Bank is fighting inflation. So, I mean, it's just it's very ironic in that sense to me. Yes, you know, the fiscal and monetary policy is working at cross-purposes, but the Fed is not really fighting inflation. I mean, it's a half-assed job at best.
It's pretending that it's fighting inflation, but you know, if it really was going to fight inflation, it never would have lowered interest rates to zero in the first place. We never would have had quantitative easing, certainly not, you know, four rounds of it. We wouldn't have done all the COVID stimulus.
The Fed wouldn't have dragged its feet raising interest rates when it was obvious that there was an inflation problem already manifesting itself in prices. Uh so, the Fed has not really been fighting. I it's pretending to fight. And if it really was fighting inflation, it wouldn't have stopped hiking rates.
They're still too low. They would have had several more rate hikes. They would not be indicating that rate cuts are around the corner when rates are still too low. And of course, the credit is really expanding. I mean, there's still too much credit in the system, and that's, you know, on the Fed's watch.
It's still too easy uh to loan money. Uh we need to, you know, clamp down on that. And you know, the big thing is government spending, which hasn't uh stopped at all. Governments send people money, and they go out and buy stuff with it, and that's bidding up prices. So, we have to reduce government spending, and Powell hasn't raised interest rates nearly enough to do that.
You know, if rate is if rates were much higher, the government would be cutting spending, but they're not because rates are still too low. But if we go down this scenario, the Federal Reserve Bank doubles where they are with interest rates. Interest rates, the Fed rate is 10%. Mortgage rates are 14%.
No one's going to be able to buy a home, and how is the government going to pay back their 30 some trillion dollars of debt, which now skyrockets in price? Yeah, it will be difficult to buy a home because most people don't want to sell their homes. That's the problem, and it's expensive to build. But to the extent that you want to sell your house, and some people have to sell, the prices are going to have to crash because that's the way someone's going to afford a 14% mortgage is if they don't have to borrow that much money because they didn't have to pay that much for the house.
So, your house has to go down if you want to sell it. But yeah, I mean, if the Fed raises interest rates to a level that might be appropriate to actually fight the inflation it caused, that rate would be so high that it would cause a financial crisis that it would not only cause a crisis for the banks, but for the US government itself.
For I'm right now, the current debt service cost on the $35 trillion national debt, all right? is about 1.1 trillion a year. You know, if the rates got up to where you're talking, you know, 14% I don't know, maybe 4 trillion, 5 trillion a year. I mean, the government would probably have to spend more to observe us the debt than it collects in taxes in a given year, which is obviously not even close to within the realm of possibility.
I mean, even if rates just stay where they are in the low fives, you know, a year, year and a half from now, the government will be spending 2 trillion a year on interest on the national debt. That's more than expense on Medicare or Social Security. I mean, right now it's spending more on interest than on national defense.
And you know, we spend way too much on national defense. We're paying even more in interest. So, yes, if the Fed were to really fight inflation, we'd have a massive financial crisis in the federal government. They would be insolvent, which is why the Fed is not going to fight inflation. It's going to continue to create inflation.
But it can't be honest about that. It can't tell the public what it's going to do. It has to keep pretending it's going to do the opposite of what it's actually going to do. But as an investor, you got to be smart enough to read between those lines, and you don't have to be that smart because the lines are pretty far apart, and the writing is in bold.
Uh and that's inflation. And so, people need to be getting out of dollars, getting out of treasuries, or uh muni bonds, or corporate bonds, or things like that, and buying gold. That's why gold's just under 2,400. Uh you know, near It hit a new record high overnight, you know, when people were worried about the bombs going off.
Uh we had a new all-time record high in gold. It's pulled back a bit from that record high. Um but people should be buying gold and silver. They should be getting out of the dollar before the bottom drops out of the dollar, and buying foreign assets. Foreign, you know, stocks, foreign real estate. If you enjoyed this clip, and you want to watch the entire conversation, all you got to do is click that button right over there.
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