저자: PeterSchiff · 외국인
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결론: 미국 국가부채 위기가 임박했으며 장기금리 상승·주택시장 붕괴·정부 디폴트 가능성이 커지고 있어 채권 보유는 피하고 금을 대안으로 봐야 한다는 주장. 금리와 채권시장: 미국 모기지 금리는 9월 이후 7.49%까지 올랐고 이자 지출은 연 1.2~1.3조달러 수준이다. 1981년 고점 이후 약 40년 강세장이 끝났으며 현재는 약 20년 지속될 장기 약세장의 6년차라고 본다. 모기지 금리는 9%까지 갈 수 있고 금리 상승 속도가 하락보다 빠를 것이라 예상한다. 주택시장: 주택 가격이 전국 기준 30~50% 하락할 수 있으며 이는 2007~2008년 하락보다 클 수 있다고 주장한다. 낮은 고정금리 모기지 덕에 버티던 사람들도 자산이 마이너스가 되면 상환을 포기할 것이라 본다. 모기지 재융자 기반의 소비도 막혀 경제 위기로 이어질 것이라 한다. 재정 구조: 부채 4분면(저부채·저금리→고부채·고금리)으로 설명하며 현재는 고부채·고금리 국면에 들어섰다고 본다. 미국 정부의 해결책은 인플레이션을 통한 숨은 디폴트 또는 명시적 디폴트·채무조정이며, 디폴트 가능성이 0은 아니라고 본다. 금융기관 및 연기금: 은행, 보험, 헤지펀드가 국채를 많이 보유하고 있어 손실이 누적될 것이며, 패니메이·프레디맥도 주택가격 하락 시 다시 구제가 필요하다고 주장한다. 사회보장기금은 채권을 매각하며 2032년 무렵 고갈 가능성이 있고, 급여 30% 삭감 또는 제도 폐지론을 제기한다. 투자 조언: 미국 채권펀드 보유는 실수이며 머니마켓 보유가 낫다고 본다. 금이 채권·국채 대비 유일한 헤지 수단이며 채권 금리 상승은 금·은에 호재라고 주장한다. 달러의 금 재평가 해법은 효과가 없다고 본다. 출연자 전망: 공화당은 중간선거에서 하원·상원을 잃을 것이며 민주당도 같은 부채 확대 기조라 문제 해결이 어렵다고 본다. 비트코인 전략준비금론은 정부 매입을 노린 허구라고 비판한다. 주요 리스크: 금리 상승 지속, 주택 가격 급락, 정부 디폴트, 인플레이션 급등, AI 투자 자본 쏠림으로 인한 실물 경제 자금 부족.
다듬은 글
China's central bank just made its largest monthly gold purchase in 2 years, and central banks continue to buy , but gold is almost $1,500 below its January record. So what do they see that the sellers don't? Meanwhile, the cost of borrowing continues to rise. Mortgage rates are at their highest in almost 3 years.
Washington's spending on 30-year borrowing is the highest since 2002. Peter Schiff says something has to break, and what will break first, and where is he putting his own money? This is further. " In Focus with Jeremy Saffon" from Kinesis. Trade perpetual gold and silver futures 24/7 at kinesis.com.
So, welcome back. I'm Jeremy Saffon. Peter Schiff has been warning about this moment for about 20 years, and last week on his show he said that all the crises he warned about are coinciding. Stay with us because later we will ask him where his own money is in this market now. So, Peter, welcome back to Kinesis.
Nice to see you. Oh, thanks for inviting me again. Let's start with the bond market. I mean, it's obvious in the headlines because that's where Washington borrows money, and Washington clearly expects to be able to borrow whatever it needs at a price that suits it. Now the people who borrow this money are asking for much more.
Is the bond market calling Washington's bluff? Well, it's not really a bluff. This is finally the payback for past mistakes. It's long past time for America and other countries, by the way, to take responsibility for their wastefulness, and what's more alarming than current bond yields, you're looking at the highest rates since 2002.
But where they are headed. Because they will be much higher. This is not the end of this movement. We're probably closer to the beginning. So servicing our debts will be very expensive. And we have a lot of debt. You know , this means that a crisis awaits us, and it is already close. Yes. As for the financial crisis and the sovereign debt crisis as well, not just, you know, like in 2008 when homeowners couldn't pay.
This will be a situation where the government will not be able to pay . Namely, the government bailed everyone out during the 2008 financial crisis . He will not be able to save anyone in this crisis because he himself will need saving. But of course, there is no one big enough to save the US government.
Yes. Yes. And of course, for people at home, borrowing rates are becoming more expensive for everyone. Your mortgage , your car loans, credit cards, government bills. I mean, the 30-year mortgage hit 7.49% in early October. Before the September jobs report, you said on your show: If the numbers are weak and bonds are still selling off, this slow decline will eventually turn into a crash.
That is, the jobs data turned out to be weak, and bonds continued to sell. What do you see now? Yes, this is a serious " bear" bond market. You know, people forget, but we had a 40-year bull market, and we really rode that wave since 1981: mortgage rates were 18% at their peak in '81 and fell to a low of 2.625% in 2021.
And that, you know , correlated with Treasury bonds. 10-year Treasury bonds were at 16% in 1981, and in 2021 they are at 60 basis points. So, then the markets peaked and interest rates bottomed. We have been in what I consider to be a major bear market for 6 years now, a secular bear market that will last at least half the time of a bull market.
So, maybe 20 years, and we've already lived 6. But what we will see over this period is a steady increase in rates. And they, you know, will probably grow faster than they fell. So, we could see 9% mortgage rates, perhaps by the first quarter of next year. And, you know, the impact on housing affordability will be dramatic, as people can no longer afford to buy homes at current mortgage rates.
Therefore, the only thing that will allow people to buy homes is a dramatic drop in prices, perhaps 30–50% nationally, which would be the same, if not greater, than the drop in 2007–2008 that triggered the financial crisis. So , it's a bigger bubble. The only thing keeping people in their homes right now is the 3-4% fixed rate mortgages they have locked in.
But once the equity in the home is gone, if you're barely making your mortgage payments, even a low one, why continue? You are just throwing money away when you have negative equity. So we're going to see a big problem, but people are also underestimating how important rising house prices and falling rates were to the economy because it was a driver of consumer spending.
Because if you owned a home, you could constantly refinance it, withdrawing cash for expenses and reducing your monthly payments at the same time. No one else can do this. Refinancing is dead. The withdrawal of capital from real estate has ended. So, there is no more lifeline. So if you're struggling with rising food, energy, insurance, or healthcare prices, you don't have the option to use your home.
You have exhausted all resources. So we are heading towards a major crisis. Now you mentioned other countries. Japan has a 30-year record. I mean, Britain has the highest rate since 1998. Who is next? Because France is also experiencing its own bond sell-off. America still pays more for 10- year borrowing.
What does this comparison tell you? Yes, well, look, as I said, the consequences of debt catch up with everyone who allowed them. So, you know, it's not just the United States. There are many European countries that have large debts. Maybe not as big as ours, but they still have problems because of them.
And you mentioned Japan. Yes, Japan has been building up debt for decades. And all this was made possible thanks to low interest rates. In my opinion, there are four main quadrants you can find yourself in. We've already been to three, and now we're in the fourth . So the first quadrant was when we had low debt and low interest rates.
It was wonderful. We didn't borrow much. We had a lot of savings, and as a result, we had low interest rates. Then we started borrowing more, much more money in the 60s, 70s and 80s . We still had relatively low debt overall because we started from a very low level. But interest rates rose significantly because the bond market was afraid of a rapid increase.
So, we went from low debt and low rates to moderately low debt but high rates. We could afford high rates because we didn't have that much debt yet. Then , after the 2008 financial crisis, debt exploded. But interest rates have fallen. So we move on to the third quadrant: high debt and low rates. And that was acceptable because we could service the high debt thanks to very low rates.
Well, now we're in the fourth quadrant : high debt and high interest rates. And in fact, it will be the largest debt we have ever had . And we can make it worse with the highest interest rates we've ever had. And interest rates, you know, can go up significantly, as I said , government bonds were at 18% or 16% in 1981.
We had much less debt then than we do now. Yes. So this will be the biggest financial crisis the United States has ever faced. And other countries will also find themselves in very difficult circumstances. You know, this morning I was reading a report where the head of the IMF said this month that rich countries are, quote, "the worst offenders" when it comes to debt.
I mean, just this morning the New York Fed reported that people expect to spend more than they earn this year, and credit is obviously getting harder to get. So, Peter, what happens when they hit the wall? Yes. Well, like I said, you can't get a home equity loan anymore because you can't refinance. Unless you want to take out a second loan, but it won't help you reduce payments on the first one.
But interest rates on a second mortgage are much higher because it is much riskier for the lender, as they will be the last to receive the payment. If you have to borrow on credit cards, you face rates of over 20%. So credit is being squeezed because it is becoming significantly more expensive. And the Americans are already in trouble.
This is why Donald Trump's popularity is so low, because average citizens are in a terrible financial situation, much worse than they were a couple of years ago. Therefore, Republicans will lose the House of Representatives and the Senate because people will vote with their wallets . Unfortunately, they vote for people who will make things even worse, but you know, it's desperation.
You just want to try something different because you know what we have now isn't working. The problem is that returning to the Democrats is not something different. It's the same. Both parties are increasing debt, spending money, causing inflation , so neither party will solve these problems. Both parties are responsible for these problems.
Right. Now, you mentioned 1981, I think, when the stakes were at their peak. Public debt was about 31% of the economy, according to FRED data. Today it is more than three times. I mean, how does a country get out of what you call the fourth quadrant : high debt, high interest rates? Because , you know, after World War II, Washington paid off its debt by keeping interest rates below inflation.
Is this a solution now? Well, there are actually two ways we're going to solve this. Yes. One of them is because of massive inflation. I mean, you know, it reduces the overall debt burden. In fact, that's exactly what Donald Trump said he wanted to do. Just the other day he said, “Hey, debt is great.
"Inflation is great because we can pay off our debt quickly." I, you know, he doesn't really repay it. You just, you know, kind of give up on him. This is a hidden default. You just, you know, do it because of inflation. So, we either have massive inflation or simply massive default. And there will definitely be many defaults in the private sector.
Many mortgages will become problematic. Many corporate debts will become problematic. Many commercial real estate debts will result in default. Business loans, companies. So you'll see a lot of debt just disappear because it goes into default. This is one way to solve the problem. But the question is , what about the US national debt?
Will the US government default? Perhaps. I don't think the risk of default is zero. I don't know exactly how high it is, but I think there is a real possibility that the government will default. Now, when I say the US Treasury will default, that doesn't mean you won't get anything. If you own a Treasury bond, it doesn't mean the government is n't paying anything.
Most likely, it will be a restructuring where they say, " Okay, you'll get 50 cents on the dollar." You have a bond of $100,000, we will only pay you $50,000.” This removes a significant portion of the debt. Yes, the government is simply reneging on its commitments. Frankly, we are declaring default.
There's nothing you can do about it. You can't sue the government. They, you know, they don't have to pay you if they don't want to. So maybe there will be something like that. Or they can simply change the repayment terms. They can say, "Hey, we have all these Treasury bills coming due. " We are going to extend the repayment period to 30 years, or maybe 50 years.
Who even knows? And they keep interest rates very low. Or they just lower them. They say: "We will not declare a default on the bonds." I know you bought a bond with a 5% coupon . "We're going to lower the coupon to 1% because that's all we can afford." So this could very well happen. And this could happen in other countries as well.
But I know one thing for sure: the debt will not be repaid, because it is impossible. Yes, at least not with real money. The tax base to repay this debt simply does not exist . Some 30-year Treasury bonds issued in 2020 were already trading at around 43 cents on the dollar due to rising rates. Is default happening now, slowly ?
Well, it's not a default because the government is still going to pay you...yes. 100, the face value, provided you wait another 29 years, or however long it is left until maturity. But these are just market losses. Because if I was stupid enough to buy a Treasury bond with a yield of less than 1%, now if I want to sell it, I won't get my money back.
Because who will buy my low- yielding bond when there is a higher- yielding bond available in the market? So I have to make a discount so that the buyer ends up getting the market rate. That's why they have depreciated by half. The performance of US Treasury bonds over the past 10 years is the worst in 100 years.
Even worse than in the 70s. And this is even without taking inflation into account. These are only nominal losses. That's right. You bought bonds and lost half of your capital if you want to get out now. But they will continue to fall. We are not even close to the bottom of the bond market yet. So the losses will only accumulate.
And banks, banks hold a lot of these papers. OK. Ahem. That's exactly what I wanted to ask. I mean, who, who, who? They will all become insolvent. Who holds these assets? All of them...they are already insolvent. And Fannie and Freddie own a lot of mortgage loans. Look, Fannie and Freddie are going bankrupt again.
The irony of all this is that Donald Trump has been talking about taking them out of custody. We are going to hold an IPO. They are worth all this money. This is great. Well, it never happened, because for the reasons I mentioned, it could never have happened, even when it was talked about. I said they wouldn't be able to do it.
It was a ridiculous and pointless idea, designed only to enrich the stockholders so they could dump them at their peak. But now what will happen is that they will be destroyed and they will have to be saved again at the government's expense. Although technically it's no longer a rescue, because the government owns them.
But the government will have to pump more taxpayer money into the GSEs to patch the hole in their balance sheets. Because it only takes less than 3% of their, you know, $78 trillion in insured mortgages to wipe out 100% of their capital. Yes. Yes. Yes. And you know, that's what's going to happen when real estate prices really fall.
You mentioned it briefly, Peter, but I mean, who holds these bonds? You mentioned banks because that's what sank Silicon Valley in 2023. Could this happen on such a scale? Banks own them, insurance companies own them, hedge funds own them. You know, they were... you know who owns them less? These are central banks.
Foreign central banks are getting rid of their Treasury bonds, especially long-term ones. And, of course, the Federal Reserve owns a large number of them. The Fed has a lot of long-term Treasury liabilities on its balance sheet. Let me ask you. What does this mean for someone who saves? I mean, let's say if someone has a bond fund in their 401K, what should they be asking about right now?
Well, I think it was a mistake to buy a US bond fund. And I think it would be a mistake to continue to hold onto it . Although you might look at this and say, "Wow, I'm getting a 5% return right now or 5.4 or whatever." Uh, yeah, but you know, that's not good because the stakes will be much higher. Mhm.
So you might as well just put your money in the money market where you can get 4.25 because that rate will continue to rise. And if you need money, you can withdraw it, you know, 100 cents on the dollar. You don't need to worry about big losses when selling bonds if you can't hold them to maturity. But even if you hold these bonds to maturity, you will still lose money because the inflation rate will exceed your coupon income.
You know, if you just kept your money in money markets, you would end up getting much more than 5%. But I want to escape from this completely. People should buy gold. You know, gold has fallen in price. At one point today, it fell by almost $100. Silver fell more than $20 as metals are still reacting, or traders are reacting to rising bond yields as if it is a negative for gold and silver.
This is the best news that could have happened for gold and silver, because this rise in yields shows that bond prices are collapsing. Bond investors are losing money. And if they want to stop losing money, they have to sell their bonds. What are they going to buy with the money they receive? Of course, gold or silver.
If you are looking for a safe haven, this is it. And why are bonds falling? Because investors are losing confidence in the governments that issue this debt. They worry that inflation will be too high and they will lose the value of their capital, and interest rates will not be high enough to compensate for the loss of purchasing power.
Actually, that's why they buy gold . Yes. Gold is the only hedge against Treasuries, bonds, government securities, and all other sovereign debt instruments. If you want to have a safe asset but don't want to own government debt or other bonds, what would you choose? You own gold. And, of course, another thing that's happening is that because rates are going up so much, and we already have so much debt, the budget deficit is getting bigger and bigger, because the additional interest that we have to pay, we also have to borrow.
So, right now we are spending 1.2-1.3 trillion a year on interest on the national debt. Mhm. So this is almost half of the real deficit. That is, the government claims that the budget deficit is 2 trillion . In fact, it exceeds 2.5 trillion, if we do an honest accounting. But about half of that is interest on the debt itself, which is now a significant part of the budget deficit.
However, in a few years we could be spending 3 or 4 trillion a year on interest on the national debt. So, all of this will increase the annual budget deficit. So now that you're talking about $5-6 trillion in annual deficits. This means, you know, the national debt will grow from 50 to 60 trillion in 2 years.
So you're talking about an exponential explosion of debt. Obviously , this cannot continue without a serious collapse. Actually, I was going to ask you. You, because you are a lending expert. Let's say a 70-year-old retiree receives benefits that increase with inflation every year. Does this protect her from a hidden default, and when interest-only accounts and Social Security compete for the same money, who gets paid first?
First, the indexation of social security will never reflect the real cost of living, because it is based on the CPI, which underestimates consumer price growth. But this also reinforces the spiral, because as inflation increases payments, the government has to borrow that money as well. So, this creates even more inflation.
So because we keep increasing payments to recipients to compensate for past inflation, we end up creating even more future inflation. Uh, what was the follow-up to your question? Well, Social Security trustees predict that the pension fund's reserves will be depleted by the end of 2032 if Congress doesn't change anything.
Income tax will cover only about 78% of the planned payments. Do you think Congress will allow this to happen? Well, first of all, these reserves are a fiction. Yes? In fact, there was never any trust fund, because all the money collected through Social Security taxes was spent many years ago. But when the government spent all the Social Security money, it issued itself a promissory note.
So, social security trust funds own government bonds. Well, what are they doing with these bonds now? They sell them at the market to get cash for aid payments. So part of the problem now is that not only is the U.S. government directly selling Treasury bonds, but the Social Security fund itself is selling them.
Ten years ago, the Social Security Fund was buying bonds. So, he helped reduce the problem. But now he is increasing it. But in a few years, this is what will happen: the bonds already in the funds will be completely sold. And then the funds will have no bonds left to sell. So, now the government will be forced to officially admit that the social security system is bankrupt.
I mean, it's already bankrupt because there's not enough tax revenue to make payments. Therefore, it sells bonds. But someone still has to buy all these bonds, right? You know, these are still Treasury bills, and that only compounds the problem. So Congress will have to start issuing and selling even more bonds.
The official deficit will increase rapidly, as the government will have to borrow more money to prevent Social Security checks from becoming invalid. Or they will have to radically reduce payments. I think the current estimate of the necessary reduction in benefits is too optimistic. They will probably have to be reduced even further.
I think it's 30% for everyone. For all payments. Unless they significantly raise taxes. They could raise payroll taxes, and then they wouldn't have to cut benefits so much. You know, I think we should get rid of this system altogether. It's just a financial pyramid. It's a shame that Roosevelt invented this nonsense.
But we need to eliminate it. However, unfortunately, because of the social security system, many people now depend on it. So I think we need a transitional, income-tested, social-type program, only for the truly poor elderly who really need the money. I mean, if you're only using your Social Security check to pay your country club dues, you shouldn't be getting it anymore.
Sorry, but you just can't have it. Your Social Security taxes were spent years ago. The money for social security payments comes from young people. In fact, the average recipient of social benefits is much richer than the person who pays this tax. Or for that girl. We must abolish these payroll taxes.
This is a burden for young people. But we also have to get rid of this program. So if you are wealthy, like me, for example, I don't receive any Social Security benefits. I am quite satisfied with this. Just cancel my Social Security. I paid Social Security taxes for many, many years. I wrote off this money the very moment I paid it.
I never expected to see them again. As for me, it was just another income tax. And you know, yeah, I don't get a penny. And there are many people who have much less money than I do and who don't need their Social Security payments. You know, they have, they have equity. They have shares that they can sell.
They have real estate. They have other assets they can sell to, you know, fund their retirement. Maybe they have a private pension or something like that. But the people I worry about are the ones who have nothing but that Social Security check. But you know, with this development of events, everyone will be ruined.
Peter, let's get specific on this, because I mean, we were talking about that 70- year-old woman, Social Security, maybe she has a couple of certificates of deposit in the bank, well, a couple of deposits. The Fed rate reaches a maximum of 4%. Americans expect nearly 4% inflation next year, according to data from the New York Federal Reserve this morning.
So, after taxes, I mean, does her money in the deposit depreciate? What will happen to this woman? And does she need gold? Yeah, well, you know, you pay taxes on your interest, you'll be in the red when you adjust for 4% inflation, but consumers expect 4% inflation. They will receive something much higher than that.
So consumers are more accurate than the Fed in their inflation forecasts, but they're still, you know, pretty much wrong. No, I think people need to buy things like, I think, the average person. You should start shopping for next year's groceries now. I mean, not things that will spoil, but durable goods that have a long shelf life.
Just buy it now and fill your closets, basements, and pantries, because it's all going to get a lot more expensive. If what you buy today will cost 10-20% more in a year, that's a 10 % or 20% tax-free gain if you buy it now. So why settle for 4% and pay taxes on it when you can just buy these things?
But you know, once you fill all the shelves in your house and there's no more room left, then you can buy some gold and silver, because in the future you can use it to buy everything you need, because prices will drop if you have real money. Only if you have dollars will you have to worry about the skyrocketing cost of living.
Listen, we've been talking all year about the gap between Main Street and Wall Street . It seems like every time we talk about it, the situation gets worse. And Washington clearly wants this to continue. I have two examples in mind . The Treasury is buying back some of its old long-term bonds. You called it "backdoor quantitative easing, " meaning creating money to buy bonds.
And regarding fuel, Washington allowed the use of agricultural diesel fuel on highways, eliminating the federal tax, in order to lower prices at the gas station. How much of this boom will survive without additional help from Washington? Well, the Fed...I mean, the Treasury doesn't do quantitative easing.
They conduct a " twist" operation, buying up long-term bonds and issuing short-term ones. This is a mistake. If I'm right about interest rates rising in the future, then the government is doing the worst thing possible because now they will have to pay off short-term bonds and refinance them at even higher rates than the long-term ones they bought.
So this is just a temporary measure to try to lower long-term rates , perhaps before the midterm elections. But this is counterproductive, because in the long run, it is a mistake. This will cost the government dearly. But what will happen and where the quantitative easing will actually come from is from the Fed, because it is the only one that creates money.
At some point, the Fed will start to ramp up its purchases of long-term Treasury bonds to prevent what I was talking about, because when rates really go up, bond yields are going to be 5%, 6%, 7 %, 8%, right? Somewhere at this level, the government simply will not be able to service its debt. They simply won't be able to find buyers for it.
So, the Fed, unfortunately, becomes the only buyer of last resort and prints a bunch of money to buy up bonds that no one needs because of their low yields, allowing them to rise enough for buyers to appear. But it is too expensive for the government. And once you realize that the government can't pay you , you won't buy bonds anyway.
The Ministry of Finance is reportedly considering canceling 20-year bonds. Is this the same error? Well, we...we have mostly 30-year and 10-year bonds. This is what they usually sell. Listen, is this boom on artificial life support? I mean, which of these steps provide useful time, and which ones make the problem worse in the future?
Well, everything the government does only makes the problem worse. They don't want to solve the problem because it creates even greater political difficulties for them. Postponing problem solving leaves it to someone else. Real problem solving means delivering the bad news. There is an old saying: don't shoot the messenger.
Nobody wants to announce austerity to voters. That's why no one does it . And this happens everywhere. In all these democracies where people vote, government officials want to be re-elected. This is their number one priority— to continue their political careers. They sacrifice their careers if they do the right thing, so they never do it.
They do what is beneficial to themselves . They want to stay in their positions. So they simply postpone the problem, fanning it, hoping that another politician will fall for it when the music dies down. Yes, listen, they say that the AI boom is increasingly based on borrowed funds. Banks are preparing a record $60 billion loan so that one AI company can lease chips.
I have to ask: I was watching CNBC this morning, and a former Bridgewater strategist said that the stimulus is not coming from Washington, but from companies pouring money into AI. So whose boom is this? Washington or Silicon Valley? Yes, I saw the same interview. And one of the things this lady got wrong: first, she said that during COVID, the economy needed stimulus.
It was needed like a dog needs a fifth leg. That was the worst of it all. That's why we had this inflation—because of all these so-called incentives. This is not stimulus, this is inflation. That's what quantitative easing really was. Government stimulus is the creation of inflation to postpone problems.
So we did n't need it at all. But this is not an incentive when you attract capital investment in the private sector. Is n't that right? This is a completely different thing, because government stimulus fuels consumption . And again, I don't even call it a stimulus, but government money is going to stimulate consumption.
This is an investment. Now these investments can pay off. We can expect significant productivity gains in the future as a result of these investments. Of course, the companies making these investments believe they will get their money back. They hope to get enough funds to pay the interest on the loans and then earn even more.
So it's not bad that companies are making these investments, unless they're wrong. Unless these investments ultimately prove unprofitable. And the results are still unknown. Let's see. But she was right about one thing : it raises interest rates. M-hm. As there is more competition for loans. Assuming these hyperscalers are confident that capital investments in data centers, robots, or computer chips will yield huge profits, they don't care whether they pay 10% , 15%, or 20% for their money.
It doesn't matter to them . They will just pay. And many of these big hyperscalers, like Meta, Alphabet, or Amazon. Previously, these companies had cash. And they bought Treasury bonds for it. They borrowed money from the government. Now they are borrowing themselves, competing with the government. So governments are now big borrowers.
And now they have been joined by technological giants. Trust funds have also become big borrowers, haven't they? They sell Treasury bonds, which is equivalent to borrowing. And there are foreign central banks that also sell Treasury bonds. Yes. So they're basically, you know, who buys them? Uh, so yes, the stakes will rise.
Uh, they'll get much taller. Okay, I want to talk about the dollar, and if you just joined us, I'm talking to Peter Schiff about why central banks keep buying gold while the price is falling, and what happens when Washington wants to keep this boom going while the cost of borrowing keeps going up. Uh, listen, Peter, I mean, the dollar is close to its strongest level in a year, and you've been bearish on it for years.
Is the dollar really strong, or is everything else just weaker? Well, all currencies are weak. So, you know, you're talking about relative relationships when you compare the dollar to the euro, the pound, or the yen. You know, all fiat currencies are sinking. They simply sink at different rates. So , if the pound sinks faster than the dollar, it seems like the dollar is rising.
Yes. But that's not true. I mean, if I'm in a car going backwards at 10 mph and the car next to me is going backwards at 15 mph, I'm not going forward. It may look like this to another car , but I'm still moving backwards. So, all these currencies are losing value. Uh, now I expect the dollar to start losing value faster than many other currencies, because of the huge debt we have and because I expect the dollar to lose its reserve status.
And it was on this status that we relied. That was the backbone that allowed us to carry all that debt because we had a lot more buyers because of the dollar status. But since central banks and others no longer want to hoard dollars and invest them in U.S. Treasury bonds, this is a fundamental game changer.
Yes. It was interesting to watch because when investors got scared this week, they bought dollars. It is obvious that the world, in such a panic, is still running to the dollar. And I look at traders on Kelshi, prediction markets. They estimate the probability of another Fed rate hike by the end of the year at 78%, higher rates usually attract money into the dollar.
What part of his strength lies in this? Yeah, well look, you know, the algorithms are programmed so that higher rates mean a stronger dollar, right? That is, rates are rising—buy dollars, sell gold. I mean , it's a garbage- in, garbage- out principle, because I think the people who are creating these programs don't really understand the long-term implications of what's happening.
You know, because this rate hike will ultimately be positive for gold, just like it was in the 1970s. Rates rose throughout the decade, and gold and silver prices rose with them . It didn't matter that the rates were rising . And the rate hike that markets are expecting , even if it happens, will be too little, too late.
Inflation will rise faster than interest rates. So, real rates will fall all the time while nominal rates rise. Real rates are what matters. Nominal rate... you know what happens if interest rates reach 20% and inflation is 30%? Is a 20% deal worth it to you? Is there a real incentive to earn 20% when you're losing 30%?
No. I would rather own gold and earn nothing. And would have avoided a 30% loss. I saw this graph today and we will show it in the montage. Foreign investors have invested nearly a trillion dollars in American stocks in a year. And this is according to data from the Ministry of Commerce. A big part of this is in the pursuit of AI.
And to buy these stocks, I guess it's all...it's all technology stocks, I'm sure. shares. And obviously, to buy these stocks, they first had to buy dollars. Apollo Chief Economist Thorsten Slok says that most of these investors are not hedging their currency risks against the dollar. So what will happen to the dollar if this trend in AI falters even slightly?
Well, first of all, I don't think people who buy AI stocks are concerned about currency risk because it's so small...even if the dollar falls 10 or 20%, you expect your tech stocks to double or triple. So no one worries about it. Currency risk is important in the bond market. It's a serious problem there, because, let's say, a foreigner bought treasury bonds at 5.5%.
A small change in the dollar exchange rate can wipe out annual interest income. Yes. This is where it matters most. So, once foreigners start worrying about the dollar exchange rate, it will further undermine demand for Treasury bonds. Nobody will want to buy bonds. If you think the dollar will lose 10% and you are European, you would not buy a bond with a yield of 5%.
You will still lose half of your money. Let's go back to where we started: central banks continue to buy gold, and prices continue to fall. I mean, the dollar is held up by the "fast money" of investors who seem to be able to go away with one click. And gold is bought by the " slowest money" in the world.
China, for example, added about 103 tons this year, according to its own data. According to the World Gold Council, in August, the world's central banks purchased another 39 tons. Poland bought the most—98 tons . So who is on the other side of this deal? Uh, on the other side of the golden deal? Yes.
Well, you know, some of the gold they buy is obviously mined. So these are mining companies, right? They buy it as soon as it comes out of the ground. But I, you know, maybe there are still investors who are selling. Perhaps funds are being withdrawn from ETFs around the world. But a significant portion is likely new supply to the market, which is being absorbed by central banks .
I know that there has been a strong sell-off for several years. You know, there has been a net outflow of capital from GLD for years. And so, obviously, a lot of that gold was just being sent to foreign central banks, which is unfortunate because Americans were losing their gold and foreign banks were getting it.
But I'm sure consumers in emerging markets like China and India are still buying. Is n't that right? They don't sell their gold. They're not that stupid. But, you know, at some point, the sellers' supply will run out. No one will want to sell their gold. You may want to sell your currency, fiat currency.
And eventually people will want to sell their cryptocurrency too. All Bitcoin "hodlers" will want to get rid of it. They will also want to buy gold. And all the others, you know, digital tokens. At some point, people will want to get out of there. So, gold will remain the last safe haven. Gold and silver, I think.
Well , let's talk about the long term . You just mentioned it. There are still some sales. I'm looking at the Kitco chart. Today, the purchase price on the spot market is 4107. I mean, some of the selling is done by central banks , as you said. The World Gold Council said Russia's central bank has sold 56 tons of its reserves this year.
Turkey sold about 82. I assume you are of the opinion that countries are simply forced to sell their gold to pay the bills. Oh yes. Well, the only reason Russia is selling its gold is because it is at war. She needs money. But that is the purpose of gold. This is a reserve that you can really turn to.
You know, when you need money to pay soldiers or whatever, you have gold. Gold is extremely liquid . You can sell it. So that's exactly what's happening. This simply shows that gold is performing the function for which it was created. It exists to provide central banks not only with a means to support their currencies, but also a source of liquidity should it be needed.
If countries have problems, they have real money they can use. Mhm. You mentioned Russia. As I said, this central bank sold 56 tons. But separately, I'm looking at a report this morning: the Russian Finance Ministry says it is buying five times more foreign currency and gold this month than last, as oil revenues have turned out to be higher than expected.
They don't say how much of it is gold, but as oil money accumulates, does it now go into gold? I think it used to be all dollars, but I think more and more of it will go into gold, for sure. Mhm. And it's not just because we're bankrupt, and it's obvious: if you lend us money, you won't get it back in a currency with the same purchasing power that you borrowed.
We have raised the stakes significantly by weaponizing the dollar, using it to impose sanctions on people and countries if they do something we don't like. This creates vulnerability for any sovereign that holds dollars and Treasury bonds. So the way to avoid that vulnerability is to not hold Treasury bonds, which is why I was very critical of Biden's decision to impose sanctions on Russia immediately after its invasion of Ukraine.
I said: " Come to your senses." You know, you just did something that will be much worse for America than what is happening in Russia and Ukraine. You just told everyone that their US dollars and US Treasury bonds are not safe.” And they, they, they own them, believing it, and you just knocked the ground out from under their feet.
So, you just opened a Pandora's box that shouldn't have been touched. Mm. Listen, last week you told your listeners that support was around $4,000, this morning we are close to that level. I was looking at a survey of delegates at the annual London Gold Market Conference this week, they are predicting a price of around $5,000 per year.
Too low? Yeah, well that's almost $1,000 higher than it is now. If this happens in a year, that's a 25% increase. So, this is a pretty significant leap. But last time, when we were moving towards 5,000, we reached it very quickly. So, next time we can get there even faster. This will happen when traders realize that what is happening in the bond market right now is the best thing that could have happened to gold.
Mm. And you know, someday they'll understand. Our viewers own gold. But they might have to wait until something breaks. Maybe we'll have to wait for the new Silicon Valley Bank or Signature Bank or something like that, because we know something will happen. This is usually how the Fed operates. They tighten up the policy until something breaks, and then they stop.
That's right. And just to clarify, since our viewers obviously have gold. How much gold should an average family hold? I understand that situations are different. But if someone buys, does it matter now whether it's coins, or bars, or a fund that tracks the price of gold, or shares of mining companies?
Listen, if you want to buy gold, just don't get fooled into buying these fake numismatic coins, proof sets, or collectibles. You don't need this garbage . You should buy quality, recognizable bullion or investment coins from trusted dealers, where markups are very low. You know, we deliver the gold ourselves.
So, people pay me 1%, 2%, you know, on top of my purchase price of gold or silver. Yes? I don't know, we, we, this is exactly what you need. And this, this, this is a very liquid asset. You can easily sell it after purchase, or you may never have to sell it. You can use it for barter. So I would buy, you know, physical metal.
But, also, if you have a brokerage account and you just buy ETFs , you can buy them and you still own gold. I also like gold mining companies. In fact, I hold more of my own money, significantly more, in mining stocks than in physical bullion. Because I am so bullish on gold that I want to own it while it is still in the ground because I think it is a really good deal.
And I want to own these operating businesses that I think will become much more valuable, and they are already much more valuable now. They are making a lot of money and I think they will make even more as gold prices rise. And, you know, eventually we might see some governments trying to buy up these gold mining companies.
I think big companies will start buying smaller ones. Or maybe some sovereign wealth fund will just buy one of them to get all the gold. We won't have to worry, "Hey, where do I get the gold?" Well, I'll just mine it from my mine. So I think the demand for these assets will be huge. So I own them, and people can check them out — we manage a gold fund, the Euro Pacific Gold Fund.
People can purchase it commission-free at any discount brokerage firm. Or they can go to my website europac.com, get information and even buy the fund there. And we have individual accounts under management specifically for gold-related stocks . We have other broader strategies: foreign dividend-paying companies strategies and foreign income strategies.
Some of these strategies also include mining companies, which, by the way, pay dividends . And I think these dividends will grow significantly due to the increased profitability of these companies. Yes. What mining companies are you interested in right now? Are these large manufacturers, developers, explorers, or maybe dividends are more important to you right now?
Yes, well, we own ... In my fund, we actually prefer royalty companies. We also highlight junior companies. So, we still have positions in top- tier companies. Of course. But we believe that many of these junior companies have the greatest growth potential. And we hedge this risk by buying less volatile royalty companies, where revenue streams are more predictable and less dependent on production costs or other factors.
So, this is our strategy. And I think it has underperformed over the last few years because it's the large-cap stocks that have grown the most. Royalty companies also grew, but not as much, and juniors generally lagged behind. And I don't think this will continue . I believe this is where I expect the performance advantage of my fund and strategies to lie in the future, as these smaller companies begin to outperform the market.
And I think this will happen during the next phase of growth, which has not actually started yet. We are just consolidating after breakouts now, because remember, we had a huge breakout in gold. Gold has had resistance at around 2000 since 2011, and finally broke through it, rising to 5500. Now it has rolled back and is stabilizing around 4000, forming a base.
Silver barely made it to 50. It reached 50 in 1980, and then couldn't even make it in 2011. But in 2024, silver was still below $30. And then it quadrupled. It went up to 125. It rolled back, but look where we stabilized— around $60, which is well above the old double top. So this is a significant breakout, and people are underestimating the importance of what happened in the silver market.
Yes. I don't think $125 an ounce was the maximum. This was just the initial breakout point we reached before the correction. I think we'll go much higher next time. Interesting. Now, you mentioned a little bit about M&A. Let me ask you this, Peter. Does it matter where the mine is located? I mean, if governments start looking for wealth, you talked about governments buying them.
Can they take them away? Yes, they can do that too. I mean, obviously it's happened, and yes, the jurisdiction where your mines are located matters. Does the government have a history of confiscation? And this can take many forms, because if you run a mine, you most likely have permission from the government.
They can take it away. Most likely , there is a royalty agreement under which you pay certain amounts to the government. They can change the conditions. So yes, there are a lot of political risks. And that's why you should insure yourself against it. We mainly insure ourselves, trying to avoid jurisdictions where, in our opinion, the risk is highest.
But since you never know for sure, the US government can also seize property. Who even knows? So all you can do is diversify geographically. Just make sure all your mines are not in the same jurisdiction. Most large mining companies have mines all over the world. So if there is a problem with one of their mines, it won't wipe out their entire portfolio.
True. Here's what a viewer wrote to me this morning: Does it matter to the owner of physical gold where it is stored? I will provide a little context as the Central Bank of the Netherlands moved 86 tons of gold to London to facilitate trade. ICE just launched gold futures in London. How do you balance access to and control over your gold?
Well, first of all, I think foreign central banks or governments will want to keep more of their gold within their borders. I think they would be worried if they left it here, at the Federal Reserve Bank of New York or somewhere else. So, I think we will see more repatriation of gold by sovereign nations.
And for individuals, the best place for most of your gold is in your own vault. That's right . That's part of the charm of gold. It's not that hard to store since you have a lot of wealth concentrated in a very small space. So you can easily store it and not worry about counterparty risk or third- party risk.
Although you do have to worry about someone physically stealing it from you, so keep it where that's impossible. But you can also use reliable third-party storage. Um, you know, we, we know, we provide that too. In fact, what I'm doing right now, my newest business project with gold, is T-gold, which I'm implementing at Shift Gold.
But what I do with T-gold is we either store the gold and silver or we don't store them. We organize their storage. It is issued in your name. You own it , but we don't deliver it. But now you have immediate access to this gold. We are going to launch debit cards and secured credit cards that will give you the ability to instantly tap into the value of your gold if you need to.
You know, if you're in a restaurant at 2 a.m. and you're hungry and you don't have cash, you have a debit card, you can buy something, and gold or silver will be instantly sold at whatever the current price is to cover the transaction. But ultimately, I want T-gold to become a platform for commercial transactions where buyers and sellers can pay with gold.
So, if I'm a small business owner and I sell goods, I can invoice my customers in gold. They can pay me in gold. Gold can move between accounts, or they can even withdraw their gold not only in physical form, but also in digital form. You can withdraw the token backed by your gold. That is, tokenized gold, where the token is, in essence, a receipt, proof of ownership of the gold.
And now you can transact with this token just like you can with gold, but it's easier to do it with a token. If I owe someone in Australia money and want to pay, I don't need to send gold. I just send them my token because I can do it instantly and for free. Hey, I saw this report this morning in the Financial Times.
China begins levying a 20% income tax on offshore trusts. Um, when governments start looking for wealth, where does that money go? Is this part of the reason why Chinese investors continue to buy gold, because it is harder to tax and harder to find? Yeah, you know, that's what happens when governments need cash.
They resort to more desperate methods in an attempt to get it. The same thing will happen in the United States. I mean, they're obviously going to raise taxes. I expect a significant tax increase for the wealthy next year. Ugh. Because the Democrats will control Congress. They will pass a big tax increase, and Donald Trump will likely sign it.
And, you know, they will also include a significant increase in government spending. So the deficit will explode, even though it is already growing, because higher taxes on the rich will not bring in nearly as much revenue as they expect. True. Because the rich will do anything to avoid paying taxes.
And much of what they do to avoid taxes actually reduces economic growth, which reduces other revenue that the government could be getting but ends up losing. So, in the end, even with tax rates raised, they will collect less taxes. Meanwhile, they will spend more money because they are increasing government spending.
So it's, you know, just an explosion of debt. True. Peter, is this the most dangerous stock market of your entire career? Bank of America analysts say a tech bubble is brewing, but they still advise clients to invest . What's wrong with this picture? Well, you know, you have to dance while the music is playing, right?
That's what they say on Wall Street. But listen, there's a chance this isn't a bubble. Yes. There is a possibility that AI and the investments currently being made in data centers , computer hardware, and the development of these models could dramatically increase productivity so much that we will have a "get out of jail free" system.
Because if GDP doubles or triples in a short time, debt as a share of it will decrease sharply. And this will provide governments with a source of revenue that they can tap into. They can start taxing these AI companies. They will make so much money, right? They can start taxing them. Especially considering that they will fire all their employees because they will no longer need them.
So the government will have to rely more on corporate taxes than on individual taxes because people will no longer be working. They will just rest. So there is a chance that all of this could happen. I don't know how to rate this. Is that a 10% chance? Is that a 20% chance? I don't know. But you hear a lot of people, you know, in these cutting-edge labs, saying, "This is a guaranteed result, right?" You know, they think that either we're all going to die because AI is going to be so smart that it's going to just wipe us all out, or it's going to solve all our problems, right?
These are, in fact, diametrically opposed options that we have. Either we will all die, or we will all live forever in this wonderful utopia. But even if it turns out that we will get all this productivity from AI, the question is when will we get it? How long will we have to wait? And wo n't we have a crisis while we wait?
See, that's the problem. Because we have a time bomb here . And I do n't know when it will explode. Yes. Well, what a transition it is. I mean, while AI stocks are rising, companies selling everyday goods are suffering losses. McDonald's fell by about a third from its peak, Home Depot by 28%, Nike by more than double.
What does this tell us about the average consumer? And what is the biggest threat to someone's pension right now? The biggest threat is inflation. Yes. It simply destroys the value of their savings. But yes, right now these huge investments in AI are a burden that the economy has to bear. Maybe it's a burden worth bearing because the profits will be huge, but in the short term we have to deal with it .
Because we don't have unlimited capital. And if it goes to funding AI, then what is left without funding? Where would this money go if data centers weren't built ? Because it is these sectors of the economy that will suffer. They are experiencing a lack of capital. They can't get it. And part of this is about governments.
Much of this money would go into government bonds. But now they are going into corporate bonds. And before you go, if you had 10 minutes alone with the Minister of Finance, without cameras, what would you say to him? Well, you know, I mean, first of all, I would say to him: why is he putting up with this crap from Trump?
I mean , he's much smarter. He knows that everything he says is nonsense. You see, I don't know if Trump understands what he's saying, because Trump might be sick in the head. But I don't think Scott Bessett is like that . So I say: hey, enough already. Like, what's going on? What does he have against you?
Does he have any compromising information about you? Does he have any compromising photos? Why are you doing this ? But, you know, if he wanted my advice, as much as he needed it, I would tell him: here's what you need to do as the Minister of Finance. Yes? You need to sit down with your boss and explain to him why all his policies have failed, why he's doing everything wrong, and that we need massive cuts in government spending, and immediately.
Dramatic reductions in all directions. As your Minister of Finance, I must report that the treasury is empty. You know, we're just drowning in debt. So we need to cut spending, and in fact I would like to move ahead with debt restructuring. Mhm. You know, because we have to get this under control . Interest rates should be significantly higher.
We can't possibly have high rates with such a huge debt. There is a strategy now: let's artificially lower interest rates and inflate inflation to deal with the debt. I'd rather not do that. Let the market determine interest rates. Don't create massive inflation, just restructure the debt. Instead of telling people: we will pay you 100 cents on the dollar, but you will feel like you only got 20 because you will lose 80% due to inflation.
How about saying: we won't drive up inflation, but we'll pay you 50 cents on the dollar. But it will be a real 50 cents. That's better than getting a dollar that's worth 20 cents. But that's exactly what we're heading towards. But I think if the Finance Minister had done the right thing, we would have preemptively restructured the debt to a level that we can actually afford without creating inflation.
Washington still values its gold at $42 an ounce. That is, can Washington revalue it to help with the debt? No, reassessment won't help. This won't change anything. Gold is worth what it is worth. It doesn't matter how they want to account for it. You know, if they were selling gold, they would get the market price.
They're not stupid enough to sell it for $42, but that doesn't give the government any additional purchasing power that it doesn't have right now, because it's a myth that we can suddenly say gold is worth $20,000 or $30,000 an ounce and use that to pay off the debt. We could do that, but then, of course, massive inflation would occur.
And that won't save us. If we try to do that, we will get uncontrollable inflation. We could do this without revaluing gold. But the government can set the value of the dollar in gold. So if the government owes you a million dollars, and says, “Oh, we’re changing the official value of gold. " Gold is worth a million dollars an ounce." They could just give you an ounce of gold and the debt is paid off.
Isn't that right? Truth. Well, true. I don't know. The government may say gold is worth a million dollars an ounce, but when you go to sell your ounce, you are unlikely to get a million on the market. Why do so many people believe that a gold reset will save the dollar? Just hoping? I do n't know. People believe in a lot of crazy things.
There are people in the crypto market who want the government to revalue gold and then use that perceived profit to buy Bitcoin for a strategic reserve. But all this, you know, is nonsense. This is simply an attempt to force the government to buy Bitcoin to drive up the price. Yes. Listen, Peter, we'll invite you after the election.
It was Peter Schiff. You can listen to him on The Peter Schiff Show. By the way, it was great. You can also follow him at X on Peter Schiff's page. Thank you for taking the time. I guess we'll see you in New Orleans. See you in New Orleans, just before the election. Amen. Yes, this will be a very interesting week.
OK. Take care of yourself . So, today's show is presented by Kinesis Trade — the first CFTC-regulated perpetual gold and silver contracts in the US. You can trade 24/7 with no expiration date. See the description for our exclusive offer and restrictions. So, two dates to look out for , and Peter just talked about that before we started our broadcast at the conference in New Orleans with Brian London.
We'll talk about the midterm elections, and the morning after November 3rd, the Treasury will announce its borrowing plans, and then we'll know if the 20-year bond will survive. If this is your first time here, please subscribe. Every week, we talk to people who manage money professionally and ask what it means for you.
Write in the comments whether you think Washington will be able to sustain this boom without printing money? Yes or no. With you is Jeremy Safron on behalf of our entire Kitco News team. Thank you for watching. See you next time. The program "In Focus with Jeremy Safron" is presented by Kalshi. Trade perpetual gold and silver futures 24/7 at kalshi.com.
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