Is The Fed Lying About Inflation? | James Lavish

**James Lavish** (0:02)
I wouldn't want to be in the sent seat trying to manage all these deficits and just watch Congress continue to pile on more and more spending, have absolutely no solution for Social Security, which I've paid into all my life, and suddenly they're talking about, we're just going to start cutting it. What do you mean cutting it? It's not even keeping up with inflation. Are you kidding me? They have a pretty big problem in front of them here, and it's obvious what the solution is. It's just how are they going to do it? What acronym are they going to put on it? And can they get away with it in a way that doesn't cause a massive spike in the separation of wealth in the short term? Another thing that's happening, Danny, is people are, they have fully 100% embraced the debt-based economy, and they live on debt. The first quarter Fed, New York Fed numbers came out, and credit card delinquencies, 90-day delinquencies are, they're matching the 2008 levels now.

**Danny Knowles** (1:00)
Let's talk about the Fed, James.
I have this. It's been super interesting to see what's happened since Warsh has come in, because it's not been what I expected. I don't think it's been what most people expected. But one of the most interesting parts of it that I've been watching, and I have an inkling as to what's going to happen next is, are they going to start lying to us about inflation? And when I say lying to us, we already know that CPI is like a bit of a cook number, but they've got this inflation task force now. And are they about to start sort of overtly lying about what's happening?

**James Lavish** (1:31)
I mean, I talked about this a long time ago where I think we're so used to the 2% inflation number, we've just become conditioned to it. It's a frog boiling, kind of just turn up the heat a little bit. Yeah, inflation is kind of normal. You need inflation because you will need people to spend money for goods in order to keep the economy going, and all that, you get people to buy into it. I had an argument with somebody about this years ago about how inflation is just insidious, you don't need it. It's just part of a debt-based system, it's a reality.
And people become conditioned to it. So once you get them to that level, and we've talked about this before, how the Fed was asked, Powell was in a congressional hearing, and I can't remember who asked him, but they were like, why 2%? Like, where does that come from? And he gave this long, drawn out answer that had to do with the neutral rate and everything, and it was like, he just completely obfuscated the answer, which was, because that's what we can get away with, you know, it's that people don't notice it. Three, four, five, six percent, you start noticing that come out of your paycheck because you go down the street to get groceries, and you're like, oh man, that's a lot more than last month, and my wages haven't gone up yet.
And so I'm like, now I'm suddenly behind. And so, two percent is, and there's a saying that came from your end, your area of the earth, where Australia decided in the, I believe it was in the early 80s that, you know, they kind of, they stated that number.

**Danny Knowles** (3:12)
I think it was New Zealand. Some people believe, so I'd never heard this before. Alan Farrington wrote an article recently, and mentioned, that's the first time I'd ever seen it, but apparently, it was like a central banker in New Zealand who got asked in an interview on TV and just said two percent, and that's where the kind of, the whole mythology around two percent started.

**James Lavish** (3:29)
Yeah, and I don't know if it became, it was because that was kind of matching the, the expansion of the gold supply from mining. But in any case, I wrote about this a long time ago. I said, look, people are conditioned to two percent. They're going to kind of say, yeah, somewhere around two or three percent, and then eventually it'd be somewhere around three, three, four percent. And they'll just kind of let it slide. And people are like, oh, well, inflation's a little bit hotter now, whatever. But then they just get on with their lives. And part of the issue here, Danny, is that when you have an oppressive fiscal system like this, people are struggling just to survive. Like they don't have time to dig into why this stuff is happening, understand it. They're just trying to be like, what do I need to do to make more money, to feed my kids, put clothes on their back, pay for the car, pay for the rent, and just keep going. They're inundated with, or they're just overwhelmed with that need. And then the two working spouses and double salaries and now you're paying for childcare.