Schiff w/ Kalbarczyk: Trump Won’t Fix the Economy

On Friday, Peter joined Artur Kalbarczyk for a wide-ranging conversation about the Federal Reserve’s next moves, the “time bomb” of U.S. government debt, and why he believes inflation will keep surging in 2025. Despite market expectations that the Fed will leave rates unchanged at its upcoming meeting, Peter sees plenty of monetary danger on the horizon—especially with budget deficits ballooning and no real plans for meaningful spending cuts.

Turning first to the Federal Reserve, Peter emphasizes that, although rising inflation would ordinarily prompt more rate hikes, the central bank appears hesitant to take action:

The fact that the Fed is not going to raise rates, even as inflation is rising, is a significant development because that means real rates are going to be plunging. And that’s going to be negative for the dollar. It’s going to be bullish for commodities. It’s going to be bullish for gold. And so those are the trends, I think, that are going to be important.

While the Fed projects 2% as its inflation target, Peter argues that it may soon shift the goalposts. Rather than tightening policy and risking a recession, officials may decide to tolerate 3% inflation or higher. This reluctance to bite the bullet stems from decades of poor fiscal and monetary policy:

It’s really unfixable in that it’s not just about cutting spending. We’ve got to repair the structural damage to the economy. That’s the result of decades of bad monetary and fiscal policy, where we have an economy that runs on consumer credit and people living beyond their means… And so we have massive trade deficits and budget deficits. So we have an entire economy that’s predicated on those deficits continuing.

On the subject of government spending, Peter’s outlook is grim, as annual budget deficits could reach three or four trillion dollars soon. He points to mounting interest costs on federal debt—potentially hitting two trillion dollars a year by 2026—as the most urgent red flag:

The national debt is probably going to hit 40 trillion within a year. We’re going to be adding three to four trillion a year in debt. So this is a time bomb here. In fact, it’s already, I think, going off when the interest on the debt is 1.2 trillion or so. Sometime next year, it’s going to hit 2 trillion. And by 2026, we’ll be spending 2 trillion a year just paying the interest on the debt. And it’s going to keep rising from there.

Moreover, Peter doubts that President Trump’s proposed policies—ranging from renewed tax cuts to the threat of tariffs—will address the real problem. Even if new tariffs generated revenue in theory, he says, the bigger challenge is that the United States simply no longer has the domestic capacity to replace imported goods:

The tariffs are taxes and the government needs more taxes, right? Because we have a huge deficit. So the tariffs will help reduce the deficit somewhat. But, you know, they’ll be more than offset by other tax cuts. So the deficit is going to go up. The problem is we’re not likely to get the tariffs for that reason. But, you know, Trump misrepresented the tariffs to the voters– as if we’re going to get government, and we’re going to have Canada pay for it. … It’s not going to happen. That’s not how it works.

Peter remains resolute in his bullishness on gold, which he believes is poised to set record highs in U.S. dollar terms (as it already has in many other currencies). Meanwhile, he laments the ongoing hype around Bitcoin and “meme coins,” arguing that they siphon potential investors away from more traditional and reliable hedges:

Crypto has taken the retail investor out of the precious metals market. Gold is being driven by central banks and more sophisticated buyers, but silver is considered ‘poor man’s gold.’ Well, the poor men are gambling on crypto. Silver is just not on anybody’s radar, but there are more and more uses for silver discovered all the time.

For more of Peter’s analysis on Trump and recent market activity, listen to Friday’s episode of the Peter Schiff Show.