Inflation Is NOT What They Tell You | Mario Innecco

Added: 2026-05-05

[00:00:00]Central banks they they don't fight inflation they fight uh the public perception that there is inflation because central bankers are the ones who create the inflation. Uh and even in a great depression uh having gold and silver outside the system is really a very good place to be because uh you will have a lot of bankruptcies if they were trying to rein it in and they're not going to rein it in. though >> inflation that's a topic that we need to discuss a bit more in detail today everybody knows inflation it means price spikes or prices going higher but what is causing inflation these days is it just the oil price or is there more to it really want to understand that topic and also try to understand and find a possible solution what can the Fed do what can the ECB do and really looking forward to this like really in-depth discussion on the inflation topic. Today I've invited back Mario Enko. He he runs a phenomenal YouTube channel, Manco 64.

[00:01:03]Go check that out. And he's also going to be a keynote at the Deutsche Goessa here in a few short weeks in Frankfurt.

[00:01:09]I'm really excited to hosting him or to to be hosting him for the very first time in Frankfurt. And if you haven't signed up, go to domaster.com and sign up for free or Germanold show.com in case uh you struggle with the German spelling. Um it is an in-person conference. We will record all the interviews and of course keynotes. uh at the event and post it online on our channel. But uh make make an effort to come out. It's really really worth it.

[00:01:32]So before I switch over to my guest, just one last quick reminder, hit that like and subscribe button as well. It helps us tremendously grow our channel.

[00:01:38]Thank you so much for doing that. Now Mario, it's a great pleasure to welcome you back on the program. It's good to see you again.

[00:01:43]>> Uh Kai, it's great to be uh on with you again as well.

[00:01:47]>> Yeah, really looking forward to the conversation, Mario. Um as I mentioned to you beforehand, we're really going to focus on the inflation topic. Um we always touch on inflation but we never really go in depth and I think today is the right time and it's the right audio the right topic to discuss. Um maybe we'll start with a definition like how how do you define inflation when you when you look at it? Uh well yeah it's uh the abnormal uh increase in the supply of currency and credit resulting in the uh rise in the general price level and uh yeah and that's not how most people or the majority of people define it nowadays. Um, that's a problem I have with inflation. And I'm glad you you want to touch upon inflation because there's a lot of fallacy out there.

[00:02:40]People say that the CPI is inflation or the PPI, but no, the CPI is a measure of consumer prices and uh there was a a banker uh from uh he was originally from Austria, but he moved to Switzerland. He was very influential in the uh early well 1900s to mid 1900s. uh Felix Som uh he he was uh nicknamed the the raven murk and he said in his book which I've read his uh biography that uh inflation is impossible without government and that uh saying that uh governments uh fight inflation is totally uh totally wrong because uh yeah oil oil prices don't cause inflation they're the consequence of inflation so I I think it's really important to get that right and unfortunately 99% of the mainstream economists or maybe even 100% uh they get it wrong. Uh and um central banks we can come to that later but that's how I define it. Yeah, it's it's it's the increase uh abnormal increase in the supply of currency and credit uh above the amount of savings savings in the economy and that leads to gen generally higher prices. Uh some prices can still go down if there is inflation.

[00:04:09]>> Let's talk about that creation of credit first. Um how does that work? Like it's really about the intricacies here. Like how is that created? How's that how's money being created here?

[00:04:20]>> Yeah, I I mean in our current fiat currency system, most of the uh deposits that you have in the bank or the currency that's created is created by the uh private uh banking sector. Uh they will uh let's say uh they'll write a loan. They they'll give uh Mr. X a loan of €10,000 to help them buy a car.

[00:04:44]and that that money will show up in his account. That that's how most of the money is created. Central banks uh actually don't create much of the currency that flows in the economy. They do create of course reserves which are used by the banks to create the currency and the loans. So yeah, it's all created a out of uh book entry. Uh in the old days of sound money you could it was the same kind of uh principle but you had to have uh money uh to to lend i.e. gold or silver to lend to your uh customer and uh preferably in a sound system it would be uh onetoone but uh bankers are always uh yeah they're always trying to be clever and they use fractional reserve they even use fractional reserve lending which means uh they're they're going to lend out uh more more than they have in gold right uh if they had like a $100 in they will lend out 500 because most people don't come to the bank to get their money all at once. Uh but nowadays we don't even have uh what we have backing uh the monetary system is government debt and government debt has basically it's backed by the the tax that government can take from the public from the taxpayer. It's backed by inflation as well, I would say. And what does that mean? Well, when governments borrow to pay owed loans, that's inflation. They're not like taxing. And that's the system we're in right now.

[00:06:31]And uh yeah, um so it's it's central banks and governments that create the inflation. And we can look back as well if you want like Roman times how they created the inflation.

[00:06:47]>> Yeah, abs. Absolutely. Why not? Like this is the platform to do it today.

[00:06:50]Like I really want to understand that inflation debate because as you said like 99% of uh journalists out there don't understand what inflation actually means. Um so I'm curious. Yeah, help us with that historic definition as well there and how they handle >> because the Romans didn't have like a the credit market, government bonds. it the money was basically the denarius the silver coin. Um and then uh they found out the the Romans uh the people who ran things that uh if they took a little bit of the silver out and put like base metals in the coins uh they could create more coins and they could use the the silver they took out to make more coins.

[00:07:31]So that increased the money supply which is inflate inflated the money supply.

[00:07:37]But then most people realized that that Denarius didn't have as much silver. So it wouldn't buy as much as before because people are not like they're not stu most people are not stupid. They notice it. And uh at you know at a certain point u by the end of the 3rd or 4th century AD uh the daenarius almost had no silver and basically you could hardly buy anything and it wasn't a surprise that uh western Roman Empire collapsed by 476 AD and that was all because of uh they inflated the currency and uh you can't pay uh your soul soldiers uh and you can't keep uh fighting uh your enemies and uh but nowadays uh you know they've even taken the the silver and the the gold coins out of the system. It's all paper all credit and it's been a very clever uh cleverly done. It's been gradual if you look back in the last 120 years. Um and and I think they're trying to move forward through the uh central bank digital currency. We will we'll be even further away from real money uh once we move uh in that direction. I think >> that's going to be a slippery slope.

[00:09:05]Absolutely. There uh Mario, the the central bank digital currency. Um that's probably a topic for a whole different episode because that is that is a big topic uh because we're moving into the implementation phase here very soon. I think the ECB or the EU, sorry, is going to have uh a vote on the Europe on the central bank currency here in Europe at least, I think in June. So that's coming up rather quickly and then trial run for 2027 and then implementation apparently in 2029. And we can talk about what the impacts are maybe in an a separate episode, but I really want like understand um in inflation like you we talked about inflation for you is the creation of extra money and availability of credit of course. So does that monetary inflation um does it necessarily mean that there's consumer price inflation? Like is the one correlated um or does one lead to the other automatically?

[00:09:54]>> I I mean they up until 2022 uh they've been able to keep that inflation into financial assets and that's why stocks, bonds, real estate went up in price. But e ever since co uh when I I think they pumped a lot of the um the extra currency and credit into people's pockets like consumer pockets uh the uh genies out of the box and and a lot of the the currency and credit is flowing into consumer goods. So yeah, that's what's happening. And I also think with uh the world uh breaking apart in terms of globalization uh where like uh uh China and other countries didn't care, didn't mind like producing everything and accepting dollars and euros. Um that changes things.

[00:10:50]Commodities are becoming a lot more important and uh we've neglected it because a lot of the this currency and credit is going into uh finance uh real estate technology and we've neglected uh real real goods and yeah so we haven't like ex exploited or explored commodities. So the supply has gone down and the prices are going to go up and and most people they they associate inflation with consumer prices because they've been uh fooled into thinking that it's just consumer prices and uh yeah uh I remember uh Kai back in the uh early 90s when I was just beginning my career in finance that I worked in the bond market and uh the Bundes Bank uh was still, you know, in charge of Germany's uh monetary policy.

[00:11:49]Unfortunately, now the ECB is uh but they used to track M3 that that's what they tracked M3 uh not CPI and in Germany they used to call the CPI the cost of living. They didn't even call it consumer price index. And I remember back in 94 uh there was a German M3 number that came out and it was a huge number. It was up 30% yearonear and I think the Bundes Bank had a target of 3 to 5% annual growth. So the bond the boon market collapsed that day. It was a the busiest day I've ever had in the markets was in that day. Uh so yeah that that's how you should look at inflation and and if you look at M2 now uh not just in the US but the major uh countries of the world the east euro zone Japan China M2 is going through the roof which to me tells me that uh yeah this is in this is the inflation right here and and the price rises are the consequence. So, I I don't think I don't see things getting better. And why is that? Um because in a fiat currency system, uh you can't extinguish debt. Um you have to keep uh borrowing to pay the old debt, right? You can't go and say, "Oh, here's a a gold coin." The debt is extinguished. So, if you stop inflating, the whole system implodes. And that's why I'm so bullish. uh gold, silver and hard assets because uh as you know Kai the uh the debt mountain of the world is getting you know towards like the uh Everest higher than the Everest is going towards the moon. So it's not going to get better.

[00:13:48]>> It's definitely filling up the Morana trench. So yeah, we're getting to absolutely >> you notice on that chart because uh people always talk about Japan that they have deflation, but the Japanese haven't had deflation because their money supply has been going up. But we've actually had deflation there from uh early 2022 to uh let's say mid 2023. That was actually deflation. And and it's ironic because prices the CPI was going up during deflation. So >> I was exactly going to ask about that like because like how do we experience this like based on your definition everything prices should have come down.

[00:14:29]Um can we just argue that maybe infl the infl the rate of inflation has slowed down but it doesn't disappear. I'm just curious like what did happen during that time? I think the uh the reason why prices didn't uh come down become negative with that deflation that we had is because if you look a bit further back to 2020 uh most you know look at the in how how sharp the inflation was from 2020 to 2022.

[00:14:58]So, uh, yes, it deflated there, but there was so much currency and credit in the system already that it made very little difference. Maybe it slowed down the the rate of increase of CPI, but it didn't stop it. And now we're going right back up.

[00:15:17]>> Absolutely. And you know inflation will be picking up as well. But we're all focused on the oil price and uh that's that's the thing like we're looking at oil and everybody says well prices are going higher but then we look at M2 uh and the money supply is increasing as well. The question maybe is and really trying to make it simple for for the layman as well like why is or why do you exclude or not exclude I'm trying to phrase it properly like why is looking at the oil price perhaps the wrong indicator for for CPI like what what kind of role does that play? Well, I I don't uh argue that uh higher oil prices will affect prices all around the economy because we need energy to do everything and uh oil is used in a lot of uh byproducts and derivatives and if the price goes up other prices will go up. Um but what I'm trying to say here it's u not oil that causes inflation. I it it's the uh the government and the central bank, the banking sector. Uh if uh the uh powers that be really wanted to stop prices going up because of oil going up, what they would have to do is raise interest rates very sharply right now to slow things down. But they're not going to do that. And the reason why I I'm I try to differentiate that is because uh inflation is really a term that's a monetary term if if we go back to Rome, right? Um it's all to do with the currency supply. It's the inflation of the current the money supply of the currency. So uh yeah, oil will affect prices. But uh prices uh yeah but once the supply of oil comes back uh things will stabilize. But if the central bank keeps printing uh and creating currency and credit out of thin air, the currency is always going to lose value.

[00:17:18]>> And uh that's why I think it's so important. And I I remember Kai because I grew up in the 70s and um all you heard was that uh inflation was created because of the uh oil embargo by OPEC uh because oil prices went up and I I believed in that because everyone was told that. But then when I learned about uh monetary history, uh Nixon closing the gold window, I realized that most of that was that explanation for inflation in the 70s was not really right. The inflation of uh you know the rising prices in the 70s or inflation was a result of what happened in the 60s and 70s in terms of the US um uh spending.

[00:18:08]uh they spent uh billions at the time it wasn't trillions but it was billions uh at in the Vietnam war they spent billions uh in the great society experiment uh welfare and that's that's really what uh was the underlying cause of what we saw in the 70s the uh the oil crisis. Yeah, it helped prices go up, but that wasn't the uh ultimate uh cause. Um yeah, for I'm I'm trying to make it really palpable for our audience in general, right? So maybe like using the oil price as as an example because we've all seen it spike to $120 a barrel. Um, of course prices are getting more expensive at the pump. But what you're saying, and I'm trying to rephrase it, like inflation is really caused like what the oil price is causing, meaning the government or the the Fed, central banks have to issue more credit so the the companies, the banks can refinance and use that money to to to to buy or pay the higher oil price. Is that correct? Like we have to take that extra step in between >> to to understand inflation properly. I I guess the oil price is the uh supply side of let's say when you create a lot of currency and credit and you don't increase uh the amount of goods and services at the same rate you you have more uh currency and credit chasing too few goods. uh so that causes higher prices but what I'm trying to say here is the term uh the word inflation should be used with not price but with currency and credit and I'm not arguing that the supply of oil going down because of the war hasn't c hasn't helped prices go up but there's two sides to the coin there's the currency and credit not enough oil >> uh But it's not the oil that causes inflation ultimately. The inflation is uh currency and credit. And the reason I'm so like you could call it pedantic about it is because central bankers uh they use that as an excuse to blame uh yeah blame like oil for inflation or or blame other I mean here in the UK they say oh we have uh uh tourist inflation or I I saw the other day a headline from Bloomberg climate infl inflation. So, uh, and that's just a copout. That's central bankers trying to blame everything but themselves for the inflation. And, um, yeah, that but I'm not saying that the supply of oil going down doesn't cause higher prices. But it's like, uh, when it rains, you know, uh, the the road is wet. That's not rain. That's the result of rain, you know. and higher oil prices is not inflation of the currency.

[00:21:20]It's the res it's the result of too too much currency chasing too too few uh barrels of oil.

[00:21:30]>> No, I appreciate that and thanks for helping me and our audience of course understand it's really important. It's something that I think uh I think it was Lenin who said that inflation is the way that uh they destroyed the bourgeoa you know the the bankers and uh he said one person in a million understands it and I think it's still the case nowadays hopefully more people are waking up and the reason I'm so adamant about that is because I grew up in Brazil and we had a lot of uh Uh I mean Germany as well. I think the Germans learned maybe they're forgetting a little bit but uh a lot of German uh older Germans now their grandparents went through the Weimar uh hyperinflation and uh you know they they printed a lot of currency out of thin air and uh look what happened to it >> just to repay our debts. See that's what we did. Absolutely. Um Mario, we one last topic. We need to tackle the topic of central banks and how to potentially fight inflation if that's even possible, right? And uh you you touched on the central banks a couple of times and um you let's use the Fed, their mandate is inflation and employment, right? The the dual mandate. Um help us define like the role of the central bank when it comes to inflation and uh help us understand like how can they tame inflation or at least keep it in check. It comes back to the the famous 2% target of course. I'm curious what your thoughts are. Uh well, you're going to find this weird as well because from what I've told you, central banks, they they don't fight inflation.

[00:23:13]They fight uh the public perception that there is inflation because central bankers are the ones who create the inflation.

[00:23:23]So, um their job is to hide it from the public. And um yeah because under the current system Kai uh any any credit or reserve money they create is inflation because there's no gold backing. It it's not created out of savings. It's not like you and I put, you know, a thousand euros with our bank and then the bank goes and puts it in the central bank and then they can issue uh some credit from that. No, they just do it out of thin air. So uh that's why uh that's why gold has been going up so much in the last 25 years because uh they the fact that they they they target CPI as inflation uh it means they can tinker with the number they can change the methodology and even at 2% I I haven't yeah over 40 years uh uh your savings will be uh like kind of uh eviscerated. Uh the best really inflation is zero. Um but you you can't have that uh in a debt-based system because they always have to keep it keep it going. And if you look at the Bank of England for example, they have a an inflation calculator going back to the 1200s.

[00:24:56]But if you me if you ask for the period from 1820 to 1913 uh inflation uh was zero in the UK because we were under a gold standard after the Napoleonic wars and up until World War I and uh yet the economy grew very nicely. You had the industrial revolution. So yeah, central banks uh they tell you they fight inflation and they have a target. Uh but uh no, they're trying to uh to fool you and and they want to keep you in in their game and their game is that you you leave your uh savings in the system and you also borrow. They want they they need you to keep borrowing or else everything halts.

[00:25:47]No, that makes sense. And that's maybe why the the Fed was so hesitant to to hike rates if you were to speculate, Mario. Is that one of the reasons um they don't really want to slow things down and and as you said like the oil price doesn't really play a role in inflctly plays a role in inflation here. Is that maybe one of the reasons?

[00:26:06]>> Yeah. And uh the debt load as well is one of the reasons they can't really uh try to fight the uh inflation. The last central banker who did fight inflation successfully was Paul Vulker when he let rates go up to like 20% uh in the early 80s. Uh the reason he was able to do that is the debt to GDP in the US, public debt to GDP was only about 32%.

[00:26:35]Now it's like 130%. They they can't afford to uh to raise rates. And I think this week, Kai, as we speak, uh, the Fed, ECB, Bank of Canada, uh, Bank of England, and maybe even the Bank of Japan, they all have their meetings, and I was reading earlier this morning that, uh, they're going to hold off raising rates. Uh, they always are on the side of caution when it comes to controlling uh, you know, bringing, you know, raising raising rates. I mean the Bank of England um they have a like a 2% target and whenever it's a 1% above that target they have to write a letter to the chancellor of the X checker explaining why but have you noticed like when uh you have a crisis and the CPI drops to like near zero or negative they will cut rates they'll do QE it's like every but when it's above you uh their target they they they don't do anything. They It's >> It's transitory, Mario. It's transitory.

[00:27:45]>> Yeah. Yeah.

[00:27:46]>> I'm just looking at the Fed watch. Let me share that real quick actually because I don't think I've ever seen that. I'm not sure if you have or the audience, but FedWatch is like predicting what's what's supposed to happen at the Fed meeting.

[00:27:56]>> Oh, yeah. Yeah.

[00:27:57]>> And I don't think I've ever seen a 100% bar personally.

[00:28:00]>> So, the market is 100% sure that we're not going to see a cut or a hike, right?

[00:28:06]Uh, like I don't think I've ever seen 100%. That's why I'm bringing it up here. But, uh, so we we got two days until the next meeting, 29th of April, Wednesday.

[00:28:15]>> And, uh, I don't think I've ever seen 100%. Which is really fascinating. Um, so we we'll see where it goes. I'm really curious. Of course, the commentary, the press conference is always fun to listen to after it. It's >> always entertaining. Um, Mario, maybe last question here on the on the inflation topics, like how do we protect ourselves from it? Um, I'm sure it's a bit of a rhetorical answer uh based on uh our channel's DNA here, Mario, but I'm curious like how do we protect ourselves?

[00:28:42]>> Well, it's not easy uh because we we are paid with the uh fiat currency. We have to pay our taxes with it uh as well. Uh so you can't escape that. But I if you're fortunate enough to be able to save some of your earnings, uh I mean um I I would say that uh yeah, save some of your earnings, get out of debt. I mean, even though some people might argue that having some debt actually u is not a bad thing be as long as you can service it because the debt will become worth less and less with inflation. So, uh, if you're young, uh, I guess having some debt doesn't hurt, but make sure you have savings and and then, uh, the savings you you put aside, you you start building a base, uh, a base of, uh, like a central bank, even though I don't like them, you need to have some some reserves uh, like gold and and silver and uh, and then you can also look at investing uh, and companies and uh uh businesses. But yeah, I think uh the the real saving uh for monetary saving for a rainy day is gold and silver and in the physical form of course not ETFs >> and and maybe very last question Mario then even at the current prices gold and silver are the way to go right now. I I think so because I I can't see uh it's mathematically impossible for the central bankers and governments to to reign in uh fiscal policy and to reign in monetary policy because our economies are so leveraged. There's so much that they could do it but then every we'd have a great depression. uh and even in a great depression uh having gold and silver outside the system is really a very good place to be because uh you will have a lot of bankruptcies if they were trying to rein it in and they're not going to rein it in. So, um, yeah, don't think too much about the price because short term it moves around a lot. But, yeah, I still it's just like u yeah, it's not really buying gold and silver is just like having money, you know, u converting your fiat trash in into real money.

[00:31:20]That's all it is.

[00:31:21]>> Absolutely, Mario. What a wonderful conversation. very insightful, very educational, perhaps a bit drier than usual, but it's it's it's really important to understand the topic of inflation and uh I don't think we've done a a good job at it to define it properly and that's why I really wanted to hone in on it this time and I think it was really really worthwhile. So Mario, thank you so much for for coming on and discussing that with us. Where can we send our audience to follow more of your work?

[00:31:44]>> Yeah, man 64 on YouTube basically and I'm also an X. I'm fairly active there at Monco 64.

[00:31:54]>> Awesome. No, fantastic, Mario. Really looking forward to hosting you in Frankfurt here in about three weeks time. Uh time's just going to fly by.

[00:32:00]Really excited to have you in in in Frankfurt for the very first time as well. So looking forward to meeting in person and uh thanks so much Mario.

[00:32:08]Everybody else, thank you so much for tuning in. What a wonderful discussion here today with Mario and Neko about inflation. It's really important that we understand it because it helps us understand what is moving prices, what is moving markets and how do central banks behave and why do they behave in a way they are doing right now. So really really important to to really grasp that topic. If you enjoyed this conversation, hit that like and subscribe button. It helps us out tremendously grow our channel because our goal is to educate.

[00:32:32]We discuss the macro to understand the micro. Thank you so much for tuning in and uh don't let the uh don't let emotions run your investments for you.

[00:32:40]Take care.