Peter Schiff opens by attributing the strength of US stocks to the weakness of the USD and proceeds to drill home the point that inflation is driving prices higher by saying:

• “The weakness in the USD is creating the illusion of strength.”
• “It’s the downward pressure on the dollar are sending prices higher. Not just stock prices, look at oil prices. Look at the price of gold surging.”
• “Investors are getting poorer. Nominally they have more money in the stock market, but it costs more to live.”
• “The combination of deficit spending and QE is what’s destroying the value of the dollar and it’s sending prices higher, stocks are no exception.”
• “We’re not getting richer because the nominal value of our stocks go up. Most Americans are getting poorer because when they go to spend dividends or the proceeds from the sale of their stocks, they’re going to find that the cost of living has gone up a lot faster than their stock portfolios.”

Schiff is as clear as he can be about inflation. Now, you would think a financial reporter of ten years could understand the consequences that inflation has on interest rates. The concept is fairly simple, which is that the interest rate should compensate for the loss of value due to inflation as well as for the risk and opportunity cost of the investment. In short, higher inflation means higher rates.

On the second round, Schiff poses the question, “How are we going to survive a high interest rate environment when the whole economy is levered to the max?”

To which the reporter adamantly responds, “Why are they going to surge? The Fed just said they would keep them low until 2014. Why would they surge?”

Schiff, “They can’t, that’s wishful thinking. They can only keep them low as long as the world believes the myth that there’s no inflation.”

Financial reporter, with force, “They control it. They can do whatever they want. They’ve got the press, and I mean the printing press, not the media.”

But seriously, the CNBC reporter actually meant that the Fed has the media. This reporter says into the camera with a straight face that the Fed can “control it. They can do whatever they want.” If that isn’t pro Fed propaganda, then I don’t know what is.

The Fed can’t do whatever it wants. The Fed doesn’t have a magic wand. The fact is the Fed operates in the real world and there are real consequences to the Fed’s actions of printing money and ultra low rates, such as inflation. And inflation inevitably leads to higher rates.

It certainly would be nice to have someone that understands basic finances, like inflation and interest rates, to give interviews on the largest financial channel. I guess the only qualification to work at CNBC is to stand behind the Fed.