Schiff on VRIC: Rising Yields Spell Crisis Ahead

In his latest interview with Darrell from VRIC Media, Peter walks listeners through why he remains unshaken by market turbulence, breaking down the mechanics of America’s debt spiral and the rising bond yields that threaten to blow up the US budget. He also criticizes at Donald Trump, questioning both his motives in the White House and his broken promise of peace, before closing with a warning about hidden leverage in the gold market and where he thinks investors should be putting their money.

Peter starts by explaining why he isn’t rattled by market swings the way some investors are. Because he runs his business without leverage, he can afford to take the long view, and he sees volatility as an opportunity rather than a threat:

I’m not leveraged or anything, so I don’t have to worry that maybe I get a margin call or something. And I’m very confident in how this is going to play out. So if I see the markets moving in that direction, I’m not concerned about it because I know that ultimately prices are headed a lot higher.  

From there, Peter turns to the bigger picture: the feedback loop between rising bond yields and America’s growing debt. He lays out how this dynamic is self-reinforcing, and warns that it’s a problem that can only end one way:

Well, of course, the yields are rising because of all the debt, but it’s the rising yields that turn it into a crisis because as the yields go up, number one, the debt goes up because we have to finance the debt and the higher interest rates go, the larger the deficits grow because of the added cost of paying that interest. So as our creditors get worried about our debt and demand higher interest rates, the debt automatically goes up as a result of that. And that gets more people to be worried about our debt, meaning even higher interest rates and even bigger debt. So eventually it can only end in a crisis.

Shifting from fiscal policy to politics, Peter offers a blunt assessment of Trump’s motivations. He suggests that the president’s public statements and social media posts may serve a purpose beyond communication, benefiting those with advance knowledge of what’s coming:

I personally think that Donald Trump says things and posts things specifically to manipulate financial markets so that his friends and insiders who get advanced knowledge of exactly what he’s going to say or post can profit. That’s what I think is going on. I mean, I think Trump is in the White House to enrich himself. Yeah. I think, yes, he pretends that he’s there to help the country. He’s a patriot. He’s making a sacrifice. But that’s part of the show. That’s the marketing campaign.

Peter doesn’t stop there. He also revisits one of Trump’s signature campaign promises, pointing out how it collapsed once conflict broke out with Iran. He recalls how Trump built a reputation as an anti-war candidate, only to abandon that image when it mattered most:

Now, of course, he made it even worse by starting a war. Because one of the things that he was able to say to attract people was I’m not a warmonger. Everybody else, the Democrats, the Republicans, they all want war. They’re all part of the military industrial complex. They keep meddling in the Middle East, whether it’s the Democrats or the Republicans going into Afghanistan. They’re going into Iraq. I would never do that. I would never have done that. I’m a man of peace. I don’t want to start wars. And a lot of people were like, yeah, I like that about Trump. And during his first term, he didn’t start any wars. He actually kept that promise during his first term. And so I think people expected the same Donald Trump, no wars. And then he starts this ridiculous war with Iran. 

Turning back to markets, Peter addresses the recent volatility in gold prices, suggesting that leveraged players scrambling for cash, not any change in fundamentals, may be behind the dip. He warns that the fallout from overleveraged positions in the gold trade may not be finished:

And I think one of the reasons we had the big drop in gold last week is that may have been some of the leverage players raising cash, and they raised it by selling gold. They could sell it. But I think that, you know, there’s more shoes that are going to drop here on this trade. You know, we had that one hedge fund blew up situation around us. They took a big hit, and then they de-levered. But you know, that was one fund. How many other funds could blow up that haven’t blown up yet?

Peter closes the episode with his investment outlook, encouraging listeners to look past short-term dips and position themselves accordingly. He points to precious metals, mining stocks, and international assets as the places to be as the dollar faces mounting pressure:

I would be buying the dip in metals and in the mining stocks, and I’d be investing abroad. I think the dollar is going to really take a hit, especially when the Fed stops hiking rates or doesn’t follow through with the hikes that the market anticipates or the market realizes that those hikes are too little too late to actually do anything about reducing inflation. So I think you want to invest internationally in value, in raw materials, resources.