the hello and welcome to cross talk where all things are considered. i'm peter labelle . we all see it and we all feel it. the significant increase of inflation has many economists concerned, and consumers, needless to say, terrified why the sudden increase in prices, if it's temporary, and what can be done to tame this cruelest form of taxation on working people, the cross fucking increasing inflation. i'm joined by my guess peter shift in weston. he is the host of the peter ship show podcast in great barrington. we have pete earl, he's an economist at the american institute for economic research. and here in moscow we have sophia done. yes, she is a russia and c i s. economists at renaissance capital r i cross roles and the fact that means you can jump in anytime you want. and i

always appreciate it. we have 3. peter is on the program here. so i'm going to be very specific location where you go to peter in, in west and peter, i've been what, you know, obviously i'm a news junkie. i'm always trying to figure out what's going on. i cover a wide brett, the media and there seems to be a lot of questions about the severity of the inflation that we're experiencing, how long it's going to last and actually where it's coming from. i know this is your yours, one of your great specializations and i compliment you. i see you all the time on a variety of programs. what is your take here? because if i can just add the little salt and pepper to it, it's been politicized as well. as usual, go ahead peter. well, you laid it out correctly in the intro. inflation is attacks, and the source is government because that's who taxes us are. the only way to reduce inflation would be to dramatically cut government spending, because government spending is being paid for through inflation. we're running

record budget deficits. and so instead of taking our money and spending it, the government is taking our purchasing power by printing new money and spending that. so the increase in prices that we're all experiencing is the tax that we are paying to finance government. in addition to federal reserve is trying to prop up the stock market, crop up the real estate market and prop up the u. s. government can only do that by keeping interest rates artificially low, but in order to keep seeing money to buy blondes. so as long as the fed is artificially suppressed, the interest rates, it is going to have to create inflation to do it. and because we have so much debt that is now forced to keep interest rates at 0 and not so unfortunately, average americans, the middle class of the working poor,

are going to suffer the most severe bout of inflation in us history far greater than anything experienced during the decade of the 97028, you know, let me go to pete here. and in great barrington, i mean one of the explanations i've been told and it's basically coming from the fed. this is all temporary, it's bent up demand. it's going to, it'll smooth out as we, but that's not happening here. okay. and, and i mentioned the working class, middle class people in my introduction intentionally because i room, i was small, i was young, but i do remember the 19 seventy's and that was a very, very dreary time. we thing a repeat of that, go ahead p. i remember state relation to as a kid in the seventy's, so i re read everything that peter just said, peter chef, but i do want to add the following. we did have a massive increase in the money supply in 2020, just over 25 percent in space for

a few months, which is a different cause for concern. but a lot of people are looking at the year over year cpi numbers. and it's not an a look at the headline number, you have to look at what will be index is too big contributors to the recent jump. right? so 1st you have gasoline, oil in the energy basket, which were up over 50 percent year a year. but you have to remember that, right, about a year ago, this time with a situation where russia saudi arabia, and least a lot of boy went to the markets when demand was probably because it locked down. so you've had this surgeon oil prices, but it's come from where one point we had was touch with international that are intermediate rather at negative $32.00, negative $34.00 a barrel. the 2nd thing is we've got a huge spike in used cars, an auto insurance, 30 percent 70 percent increases or expectedly, which has to do with shortages and people get back on the road. so there are side you inflation is worrisome. but in terms of the c p, i number about inflation, that's not very alarming. what we see in financial markets. that's more alarming.

okay, well let's, let's go to our guest in moscow here. so yeah, i'm very concerned. i mean, if you look at it globally, where is most of this inflation coming from? because we have a lot of western governments of pump, huge amounts of money, which i find really in some cases it was absolutely necessary. i don't have a problem with that. but i mean, there's so much money that has been allocated to be pumped into the economy. is it really necessary right now? because from what i understand, a lot of these glowing increase, you know, g d p numbers and all, but, you know, they're saying all they're all great. but is, is that counting inflation is inflation pumping up those numbers? they're really real numbers here. can you, can you make an assessment on a global scale when it comes to inflation when it, because we just mentioned oil used cars, saudi arabia, russia, globally, it will. where is the biggest tripping pointed. if i could put it that way,

go ahead. so i would say that we're not talking about like any scenarios, like the question, 1st of all, just because the like of inflation is exactly the product. well, the recovery on demand, and it's like, you know, probably what most unusual is that it's a very, very symmetric across the globe. and the reaction to the crisis was very symmetric across the globe. so it was quite different from previous to crisis. just because like a not only advanced economy offered at the desk of seamless, not only from the physical side of but also from a monetary side. but the 1st time in to the key emerging markets also over quite an eoc launch recall. so that's, that's, that's actually makes it a global phenomenon. barge. i probably, i would disappoint you, but as a formal, probably being a former center. but i'm on that side who believe that inflation is temporary or now. ok,

well it's interesting because you can tell there's the that's the perspective i keep getting legal back to peter here is, is the fed being responsible here because, i mean it's, it's not over the last 14 months so that we've seen increased huge injections here we've, we've seen a lot of really easy money for a long time now, and then we've got supercharged go ahead. peter was. busy the federal reserve is never responsible. so why should they change now? but remember, what are the other things that the fed is never is honest. i the fed is all about spin. it's all about trying to in. so if you recall, early in the mortgage crisis, when the sub prime market blue op and the threat to the entire mortgage market was obvious, as was the threat to the economy. what did the federal reserve do? they came out and reassured everybody that there was nothing to worry about that the subprime problems were contain. why did they do that?

because they, we're hoping that by denying that the problem existed, maybe they can somehow, well it out of existence and somehow get people to change their behavior in the face of what should have been an obvious crisis. and they were hoping to averted, and i think you're doing the same thing now. the fed has absolutely no ability to fight inflation. so why even acknowledge that it's a threat when you can't do anything about it. so the only thing the fed could do is been i, why do the markets tell everybody that it's all temporary? and that explains their failure to act. but real failure to act is big. it's impossible because the only way to fight inflation is it turn off the monetary spigots to raise interest rates of cards. economy that they've erected. we have a worse financial crisis in 2008. the government would be forced to slash spending

dramatically. they may even have the default on the national debt, who knows what happened at fed actually fought inflation. so b, because they can, they are just denying the problem, but there is absolutely no evidence to suggest what we're really experiencing is the beginning of a long overdue, huge increase. and the cost of living, not only the result of the inflation that the fed has created since the pandemic, but of all the inflation that we created before the big that we've yet to deal with, you know, made a p 11 of the arguments out there is that if, if this inflationary trend is sustained, then it will dramatically cut back on consumption. but this things will be just too expensive here. i mean, how does that play into what is, what is call, what is called the recovery from the pandemic? because, you know, we could go through a w, a, b k, all the,

all the alphabet letters here. but how is not going to affect the recovery and who is going to be hurt most. we've already mentioned working people go ahead, peep, so the problems of inflation fall most heavily upon people who have either low income, the working poor and also people on a fixed income because the reduction of the value of dollars while receiving the same amount of dollars, basically winds up being a sort of a tax. you know, i point out before the d. c. p, i numbers are a little bit misleading, but we have seen classic inflationary effects. both financial markets and commodities which is perfectly aligned with both economic during history, lumber prices, rosemary, 800 percent. over a month period starting to see some skyrocketed. there's weird price bites in places like hockey mon cards and non fund tokens. so while the c p i number was kind of nothing, nothing burgers so far will know when a few months where she mixed signals, but commodities, whether it's lumber or whether it's food commodities,

all that sort of thing affect everyone. so it won't be long before the price increases, do start dro, type everybody, but just personally, we're going to effect on the poor people on a fixed income. okay. so if you're in moscow here, i mean this 30 seconds before we go to the break here. i mean, is there any kind of coordinated global approach to dealing with this problem because it's growing in magnitude and it's coming fast. go ahead. well, i would say that the, the, the now the mom proposed to respond via this go to need it again just because emerging market is already started the normalization cycle of the monetary policy. so when you moving closer to neutral rate, some somehow, 030, the ethic over the increase of the rate. and i think that important feed, what we see now is that very unusual dynamic between emerging market develop market like, for example, the us inflation is now higher than each most emerging market that i look at.

ok. all right, i'm not know we're going to go to a short break it out about short break. we'll continue our discussion on searching inflation stay with r t o, the driven time shape. those. the in me thing we dare to ask

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being lost. i think it's part of mental health revolution. we increasingly freeze political claims inside the language of mental health became more common. so if you disagree or something i said on this program, you know, just say i just agree with you. i think you're wrong. following problems in your adventure logic, you see your micro grass mate, you say you triggered me. you said you hard me again from psychological way because news or psychological terms. and i guess an enormous problem for politics because it's almost impossible to have a discourse on that terrain. the ah,

welcome back to cross talk. we're all things considered. i'm peter lavelle to remind you we're discussing searching inflation in me i, let's go back to peter in western peter, you know, we've, we've talked about how economists look at this. we have 3 economists on the panel here. and it, all of you make a lot of perfect sense to me, but it's really a political problem at the end of the day because a lot of promises, i have been made promises that are going to be made here. it's, it's about how we get out of this crisis here and the powers that be decided you spend your way out. ok, and all 3 of you, of enumerated so far in this program, the immense dangers of it. and they're not, they don't have the downside, like the rest of us. ok, working people, they're the ones who get a sub for the most and they will be a backlash. we at least 3 of us here. remember the 19 seventy's and stagflation. go

ahead, peter. well, of course it is political, i mean, the bided administration. every member of congress wants to give the voters something for nothing. right. the government wants to make sure that all the people who don't have jobs, many of them, of course, are just choosing not to have jobs. but the government wants to make sure that they have plenty of money to span, even though they didn't earn that money, even though they didn't help produce any goods or provide any services. the government wants to give the money to buy goods and services. well, where's the money coming from? they're not raising taxes, they're just spending money. and so the money is being created, it's being conjured into existence by the federal reserve, but that is inflation. you see every single dollar that the federal government spends, the american public has to cover the costs. and so they're not going to take our money through tax. and they're going to take our per sting power through

inflation. and so they print all this money, the government spends the money, but the federal are printed the money and it goes into the economy. and now as non productive unemployed, people go to buy stuff. they didn't help produce. all that happens is the price goes up and it's amazing that people don't understand or they expect that we can have all the lose lose all those government for free. there is no thing is a free lunch we're spending is going to keep getting worse. and of course, as government spends more it week as the economy, which means even more spending, inflation is going to go through the roof and we keep talking about the 1970 s. what we're going to experience is going to be far worse. and in fact, it probably already is worse than the 1970 s. if we were using the cpi that existed back and then to measure prices right now, we would see that the cpi is already rising at a faster rate than it ever did that i havanese and we're just calling out from here

. okay, well let me go to pete in great barrington. i mean then how does all of this end here? because it seems like it's, we're chasing our tail here because you know, you can pump in all of this money here. but if people can afford goods, then you're going to start seeing sectors of the economy collapsing here. i mean, how we, how do you get out of this trap? the trap up, just keep pumping money because the more you pump the lessons worth go ahead peak and great bear out someone. yeah, someone is going to have to be the adult in the room and eventually had to take the action that will end in late 70 was was paul volcker, we don't know the name of the person, at least i don't think we do. we do at this time, but you know, the government tends to tend to prolong these things and generate more and more unintended consequences as inflation started to rise in the seventy's nixon put on price controls. and then host of other things happened about 50 years ago. actually

almost to the day to few months away, we have the final, several of the dollar from gold. i was, i think, august 15th, 1971. and so eventually somebody is going to have to be a really unpopular person and either try to choke off the flow new money into the money supply. or maybe, you know, you would hope that they would look at the, the, the, the incentives that the fed faces, which are highly symmetrical. you know, everybody loves lower interest rates and more money. but people don't usually like rising interest rates and, and a decrease in the, in the money supply. so, so i want to mention is going to have to rise up and do the unpopular things. and although they won't be liked for it, they will be doing the right thing and they will be doing something really sort of of her own portions at that point. okay, so here in moscow here, i mean, how is this going to put effect the emerging markets? i mean, 1st of all, a lot of these economies are still feeling the, the, the very strong impact of the coven crisis. i mean,

western agencies tend to focus on western countries here, but when you look at country, you know, go to asia, we have india has a major crisis still dealing with it. south america also here. i mean, how is this good? we have a 3rd of inflation here, and we still have the supply chains that are been cut or very, very weak here. how does it, how does the global economy recover from this? because governments are always looking at single countries here. but if we look at it and broadly here, i mean, it seems to me they're going to be on very much on the short end of the stick here . i mean, you start recovering and then all sudden you get this huge wave of in place and coming out you well yeah, theories is exactly the point. so colby is still here and the war results still here. so i'm not only on like a developed market, but also in emerging markets. so the problem is still here and uncertainty is still here. but again, i would note to point here is that i was already talked about is that inflation is

high and emerging market. but sometimes it's even lower than it in develop market or in, you know, so that's actually makes like that position in, in, in financial markets. it's actually means that the merchant market currency, it could potentially gain from, from, from the new reality. let's see. so they potentially could feel stronger than us door going forward. and the 2nd point is that probably, you know, we could, we could be in a case over the 17th. but we could also be in, in the top of 2008, just because i, i remember that that was a hot topic, the global plate. and as it is now in a couple 1000 a and it ends up with huge correction and financial markets. and the crew default, so i think that though i'm not that concerned about like singable things, i'm pretty much concerned about credit bubbles and potential creditors and the

potential correction that could follow. so we want, we could wait for it. let's say another blacks want to come to just to rigor, the correction that would be a very broad base. that's exactly where i wanted to go. peter well, in western here. i mean what we see here with all of this cash injections here is this huge. i mean, we talked about like the, how we thing bubble, but i think almost every sector is turned into a bubble right now. it's really quite terrify watching it here. the amount of money that is being pumped in is over the last 14 months. it's hard to comprehend and it's out there. and it's just not how we think it's just about what sector it seems to me. this is like a perfect storm to collide. go ahead, peter. oh, sure, because of the federal reserve and the reckless monetary policy is just about every single financial asset is dramatically mis price, and that has no tremendous distortions in the economy and massive negative implications. just look at the bond market. look at the yield on

a 10 year us treasury, which is below one and a half percent is like 1.4 percent. inflation is 5 times that and look at the yield . there is no way that that yield reflects reality. it of x. 2 it reflects fantasy and everything is price to fantasy. you know, you have the extreme examples in means stops ox encrypt occurrences, but the fed has done tremendous damage and there is no savior on the horizon that's going to do the right thing like paul vulgar. because the consequences are doing of doing the right thing are so horrific at this point that they're never going to be tried. but of course, the consequences of continued do the neuron thing are even more horrific. but that's what's gonna happen because politicians don't give a damn about that. all they want to do is kick the can down the road as long as they can. they don't care, they make the problem worse just so long as it blows up later,

rather than sooner. and that is what is going to happen. but i think on the emerging markets, they are going to finally be the big beneficiaries. because we're going to print the dollar into oblivion, the dollar is going to crack. and then what is going to happen is a lot of the goods that are being sent to the united states are no longer going to come to the united states because nobody here will be able to afford to buy them. and so all those goods that are produced abroad will stay abroad, and so prices will come down for people in emerging markets as their currencies go, way up and things become cheaper for them as americans get priced out of all these mark is because our current who's gonna lose so much value that we can no longer afford to buy the things that we're buying. now pete in, great barrington addressed that issue as well because you know, not only was there a rotation of the dollar before all of this it seems to be on steroids right now. again, so short sighted so short sighted. go ahead, pete. the great barrington. yeah. so i just,

i need to mention this in economics. we sometimes talk about a signal extraction problem, right? so it can be difficult to determine what things are injecting money and goods. for example, we have the demand for goods and services. you have the demand for the dollar itself. we have inflationary banks, which makes numbers tricky to reach. my point is that it is undoubtedly true. we've had the largest increase in the money supply, and it's about time in history. but also we had the entire nation blocked down as something reopen basically the same time we had a fixed amount of goods and services suddenly house upon by many tide, more consumers unusual. all right, so my point is i advocate being prepared, not panicking, having hedges, but the people been saying hybrid relations right around the corner since 1982, they haven't done a study. good. so be prepared. don't panic, especially when the data is still mixed in somebody inconclusive. ok, well, it's sophia here in moscow. i mean, this has been a very depressing program here. i mean, how does this all end here?

i mean, we gave, you could give like an russian accent here. i mean, i've been told that economists think that the russian economy is overheating. how do you see it one minute last, last comment? go ahead. well, i would say that we now with senior actually, what do you see there? she's a very fox recovery, but i would expect us to be like very short term ethics. but still with spec to see i grew up with 4.0, which is the largest, didn't indicate. so were nice catch up, grow full of what, but more modern growth next year. well, did you have a normalization of the monetary policy and the fiscal conference nation inside? so that actually means that the vision pretty much balance now. so, and that actually means that another strong point is that credit bubble is not any fuel for either russia or neighbors. ok, well we, we ended on a good note there, but one thing i've learned in this program here, the dollar has a very treacherous future. i'm a,

i'm very worried about it. i want to take my guess in great barrington, west and, and in moscow and thanks to be worth for watching us here are to see you next time . and remember cross talk roles. ah ah ah ah, me the

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