Thanks to Democrat over-spending during the pandemic when the supply chain was busted and goods were in short supply, prices skyrocketed to reflect the lack of availability, and they've not come down very much at all.
Worse, other monetary assets are now being negatively affected as well.
"We saw a big selloff in the gold market last week and the price dropped below $2,000 an ounce. The catalyst for that selloff was tough talk from several Federal Reserve officials and an increasing expectation that the central bank will raise rates again in June," SchiffGold.com noted this week.
"As Peter Schiff explained in his podcast, everybody thinks the Fed is going to win the inflation fight because it is going to be even tougher. In reality, they are talking tougher because they are losing the fight," the site noted further.
In a statement on Thursday, Lorie Logan, the President of the Dallas Fed, expressed her concerns about “much too high” inflation, stating that it is not slowing down quickly enough to enable the Federal Reserve to consider pausing its campaign of interest rate hikes in June.
"The data in coming weeks could yet show that it is appropriate to skip a meeting. As of today, though, we aren’t there yet," Logan said.
Despite the stock market's indifference to the Federal Reserve's more stringent stance, there were notable reactions in other financial markets. The dollar gained strength, gold prices declined, and there was a sell-off in the short-term bond market. If the Federal Open Market Committee (FOMC) proceeds with a rate hike next month, it would result in the Fed funds rate reaching a range of 5.25% to 5.5%. Schiff highlighted that this would surpass the peak rate observed during the previous cycle in June 2006.
"We will be above the interest rate level that precipitated the 2008 financial crisis and Great Recession. Except the difference is today that we have so much more debt than we did back then. Everybody has a lot more debt — the government, corporations, individuals. So, that level of interest will do far more damage today than it did in 2007. And we know how much damage it did then because we had the financial crisis of 2008. So, the financial crisis that has already begun in 2023 is going to be much worse than the one that we had in 2008," Schiff said during his podcast.
For the first time ever, household debt in the U.S. has surpassed $17 trillion. Typically, credit card balances fall during the first quarter of the year, but this year they were flat.
"Americans are using their credit cards as a lifeline. That’s how they’re dealing with higher prices. They’re charging stuff," Schiff said.
During March, revolving credit, which encompasses credit card debt, experienced a significant annual increase of 17.3%. Simultaneously, interest rates on credit card debt soared above 20%. Schiff suggested that these trends demonstrate the Federal Reserve's lack of progress in addressing inflation.
"The consumer keeps spending. Where are they getting the money? They’re borrowing it. Credit continues to expand. That’s part of the inflationary dynamic. Inflation is an expansion of the money supply, which includes credit. So, consumers are not cutting back on their spending because of higher prices. They’re not even cutting back on their spending because of higher interest rates. They just keep on spending," Schiff said.
"So, prices are going to keep on rising, and this next quarter-point rate hike isn’t going to be any more effective than the previous rate hikes, which means they’re going to have to do it again," he added.
Get ready for a massive debt bomb to explode soon, in other words.