Peter Schiff warns that interest on the national debt is about to surpass Social Security spending and that the Federal Reserve has no realistic way to fight the inflation that will follow.
In his latest podcast episode titled Debt Interest Is About to Pass Social Security… Here’s What Breaks, Schiff notes that the interest bill is already on track to exceed Social Security next year even if rates hold steady. “Interest on the national debt would probably soar to three trillion or $4 trillion a year,” he says. “Well, that is impossible. We can’t pay that kind of interest bill. The entire tax revenue for the United States government is not much more than 5 trillion. You can’t spend 60 or 80% of that on interest on the national debt.”
Schiff argues the Fed is trapped. Hiking rates far enough to genuinely tame inflation would trigger widespread bank failures, crashes, and defaults. “We’re damned if we do. We’re damned if we don’t,” he states. “The Fed has created a box for itself where it can’t fight inflation because trying to fight inflation will bring about a crisis that the Fed fears even more.” He describes Kevin Warsh’s recent decision to hold rates steady between 3.75 and 4 percent, while calling the economy strong and admitting inflation remains too high and policy is still accommodative, as pure theater. “They’re going to have to show their hand and everyone’s going to see they’re bluffing because they’re going to have to abort this hike cycle. They’re gonna go back to QE because everything is gonna start to collapse and it could happen very very soon.”
Schiff also addresses the recent sharp drop in gold and silver, with gold trading below $4,000 and silver below $50. He calls the move a cyclical correction within a still intact secular bull market and an unexpected buying opportunity created by mistaken market expectations around Fed policy and geopolitical events. He urges listeners not to wait, stating he expects gold back above $4,000 by his next update. A Democratic controlled Congress, he adds, will likely mean larger deficits rather than fiscal restraint, further pressuring bonds and accelerating the need for the Fed to monetize debt.
These warnings track closely with the case Schiff made on the SilverTrade Insider earlier this year.
In that conversation he stressed that if the Fed does not monetize the debt the country faces a financial crisis worse than 2008, and that Warsh will ultimately follow the same path as his predecessors by choosing inflation over collapse.
Listeners can view the full discussion here:
The same dynamics of unsustainable interest costs, accommodative policy amid rising prices, and the coming return to quantitative easing continue to underpin Schiff’s long standing view that gold and silver remain the clearest protection as the debt crisis intensifies.
