Inflation’s Comeback: Why the Fed May Be Losing the Fight Again

(Money Metals News Service) In this episode of the Money Metals Midweek Memo, host Mike Maharrey argues that reports of inflation’s demise have been greatly exaggerated. Drawing on both recent economic data and historical parallels, he contends that the United States may be entering a second wave of a broader long-term inflationary cycle reminiscent of the inflationary era of the 1960s and 1970s.

Using the famous example of the New England Patriots’ comeback from a 28-3 deficit against the Atlanta Falcons in Super Bowl LI on February 5, 2017, Maharrey suggests that inflation, much like that game, wasn’t truly over when many believed it was. While the Federal Reserve’s aggressive tightening campaign brought inflation down from its June 2022 peak of 9.1%, the underlying forces driving rising prices were never fully eliminated.

Signs of a Second Inflation Wave

According to Maharrey, the recent rise in consumer prices suggests inflation is beginning to reassert itself. The Consumer Price Index (CPI) climbed to 3.8% in April, its highest level since May 2023.

Many analysts have blamed the increase on the U.S.-Iran war and the resulting oil shock. While higher energy prices have certainly contributed, Maharrey argues that the deeper cause is continued monetary expansion. He points to the growth of the money supply from $21.61 trillion in February 2025 to $22.67 trillion in February 2026, an increase of approximately 4.9%.

From his perspective, inflation should be defined as an increase in the money supply rather than simply rising consumer prices. CPI, he argues, measures one symptom of inflation rather than inflation itself. Rising prices resulting from oil shocks can create temporary disruptions, but only monetary inflation can drive sustained increases across the entire economy.

Whether driven by war-related spending, monetary expansion, or a combination of both, Maharrey believes the conditions are in place for another major inflationary surge.

Lessons from the 1960s and 1970s

A major theme of the episode is the striking resemblance between today’s economic environment and the inflationary cycles of the late twentieth century.

Maharrey notes that inflation during the 1960s and 1970s did not rise in a straight line. Instead, it arrived in three distinct waves. The first wave emerged in the mid-1960s before subsiding after the Federal Reserve raised interest rates, with the federal funds rate peaking at 8% in 1969.

Once inflation appeared under control, the Fed cut rates in 1970, setting the stage for a second inflation wave that peaked in 1974. Interest rates subsequently rose again, reaching 10.5% that year.

The pattern repeated itself. Inflation eased, rates were cut, and a third inflation wave eventually followed. The cycle finally ended only when Federal Reserve Chairman Paul Volcker pushed interest rates to nearly 20% in 1980.

Maharrey argues that today’s inflation trajectory closely resembles the early stages of that historical pattern. The inflation spike of 2022 and 2023, followed by easing inflation and subsequent rate cuts, appears remarkably similar to the first wave of the 1970s cycle.

Government Spending and the Real Driver of Inflation

According to Maharrey, government spending lies at the heart of inflationary pressures.

He points out that the inflation of the 1960s and 1970s was fueled by a combination of Lyndon B. Johnson’s Great Society programs and spending associated with the Vietnam War. Massive borrowing required monetary support, helping create inflationary conditions.

A similar pattern emerged during the COVID era. In response to the pandemic, the Federal Reserve slashed interest rates to zero and conducted nearly $5 trillion in quantitative easing. The central bank effectively monetized much of the debt accumulated during that period by purchasing government bonds with newly created money.

Maharrey argues that every significant spike in government spending is typically followed by a rise in inflation. He cites Austrian economist Mark Thornton, who contends that the Federal Reserve’s primary purpose is to facilitate government borrowing and deficit spending rather than manage inflation and employment.

With persistent federal budget deficits and increased military expenditures associated with the current Iran conflict, Maharrey believes the same forces that drove inflation decades ago remain firmly in place today.

Why Higher Rates May Not Be Enough

Although markets continue to speculate about future Federal Reserve rate hikes, Maharrey questions whether the central bank can realistically maintain a restrictive policy stance.

He argues that the U.S. economy has become so dependent on debt that significantly higher interest rates could trigger widespread financial instability. Government debt, consumer debt, and corporate leverage have all reached historically elevated levels.

As a result, the Federal Reserve faces what Maharrey describes as a “Catch-22.” If it raises rates aggressively, it risks destabilizing the economy. If it eases policy, inflation could accelerate further.

This dilemma leads him to conclude that inflation remains the most likely long-term outcome.

The American Consumer Is Running Out of Room

The second half of the episode focuses on the financial condition of American households.

Maharrey challenges mainstream narratives celebrating the resilience of the American consumer. While retail sales remain strong, he argues that much of the spending is being driven by necessity and financed with debt rather than genuine financial strength.

During the pandemic, Americans accumulated substantial savings. The personal savings rate surged to 31.8% in April 2020, the highest level since the 1960s. Aggregate excess savings eventually peaked at $2.1 trillion in 2021.

That cushion has largely disappeared.

The San Francisco Federal Reserve estimated that excess savings had fallen to just $190 billion by June 2023, representing a decline of roughly $1.9 trillion. By March 2024, those excess savings were effectively exhausted.

Meanwhile, the personal savings rate fell to just 2.6% in April, the lowest level since before the 2008 financial crisis and approaching the all-time low of 1.4% recorded in July 2005.

Credit Card Debt Reaches New Records

As savings have disappeared, consumers have increasingly relied on debt.

Total consumer debt has climbed to a record $5.14 trillion. Revolving debt, primarily credit card balances, has reached an unprecedented $1.4 trillion.

Maharrey highlights March retail sales, which rose 1.5% amid rising gasoline prices. At the same time, revolving debt surged 9.1%, suggesting that a significant portion of consumer spending may be financed through borrowing rather than income growth.

The situation becomes even more concerning when delinquency data is examined.

According to New York Federal Reserve figures, 13.1% of credit card balances were at least 90 days delinquent in April, the highest level since the later stages of the Great Recession. Serious delinquencies have risen 5.5% since the third quarter of 2022, deteriorating faster than during the 2007-2010 financial crisis period.

Maharrey suggests that consumers may be approaching their borrowing limits, reducing their ability to continue supporting economic growth through credit-fueled spending.

Rising Financial Stress Across America

Additional evidence of financial strain can be found in LegalShield’s Consumer Stress Legal Index (CSLI).

Although the index declined slightly in the first quarter of 2026 due largely to tax-refund-related relief, it remained 11.6% higher than a year earlier.

The firm’s bankruptcy subindex rose 2% during the quarter and 8% year-over-year. LegalShield notes that its bankruptcy data has historically preceded actual business bankruptcy filings by approximately two quarters and has demonstrated a 0.95 correlation since 2006.

Even more concerning, the foreclosure subindex increased 20.3% year-over-year, reaching its highest level since the onset of the pandemic in March 2020.

Homeowners are also facing growing pressure from rising insurance costs. National homeowners’ insurance premiums increased 70% between 2019 and 2025 and now account for approximately 14% of the average monthly mortgage payment.

Taken together, Maharrey argues that these figures paint a picture of consumers who are financially stretched, heavily indebted, and increasingly vulnerable to economic shocks.

Gold and Silver as Inflation Protection

Against this backdrop, Maharrey remains bullish on precious metals.

Despite recent volatility caused by war-related headlines and speculation about future Federal Reserve actions, he believes gold’s long-term fundamentals remain strong. He argues that real interest rates continue to fall and questions whether the Fed can maintain tighter policy without triggering a broader financial crisis.

In his view, inflation is not a temporary problem but a structural feature of the modern monetary system. Because government borrowing and spending continue to expand, he expects inflationary pressures to persist.

For that reason, Maharrey encourages investors to maintain exposure to gold and silver as long-term stores of value. He characterizes current price weakness as a buying opportunity and argues that investors should acquire their inflation hedges before a larger crisis unfolds rather than afterward.

As the episode concludes, Maharrey reiterates his belief that the current environment closely resembles the early stages of the inflationary period that culminated in the 1970s. If history continues to rhyme, he warns, inflation’s comeback may be only beginning.