Schiff Sovereign Podcast

To the surprise of absolutely no one today, the Federal Reserve’s Open Market Committee chose to do nothing at the close of its two-day meeting. The White House is furious about the decision; the President believes that the Fed should be slashing rates, and that the current “high” rate of interest is costing the US government hundreds of billions of dollars each year in excess interest. (I put “high” in quotes because interest rates are still well below historic averages…) Now, I am no fan of the Fed. Quite the opposite— the organization is a total failure. Just consider that section 2A of the Federal Reserve Act (passed in 1913) states that the Fed is supposed to maintain a stable currency. Yet the US dollar has lost 97% of its purchasing power under the Fed’s stewardship over the past 112 years. Personally I think it’s difficult to find another organization that has been so terrible at its core mission for so long. Yet even with that scathing criticism in mind, it’s still not the Fed’s job to bail out the US government’s finances. If Congress and the White House want to pay a lower interest rate on the national debt, then they can make the hard decisions to cut spending, balance the budget, and attract foreign investment by acting like responsible adults. Unfortunately none of that seems to be in the cards. So instead there seems to be a clear plan being hatched: Project “Hijack the Fed”. Let’s start from the basics: In order to fund its roughly $2 trillion annual budget deficit, the US government has to sell debt (bonds) to investors to plug its funding gap. And this responsibility falls to the Treasury Department. Ordinarily, Treasury would sell a mix of US government bonds, ranging from ultra-short-term 28-day T-bills, to very long-term 30-year bonds. Lately, however, the Treasury Department has been focused on selling mostly short-term bonds… simply because those rates are lower. The yield on a 12-month T-bill, for example, is just 3.86%, whereas the yield on 10-year Treasury is almost 5%, so it’s a difference of roughly 1%. In some ways it’s sensible to take the lower rate. But it’s a risky strategy. If interest rates suddenly rise, then the US government could wind up paying even MORE interest in the next few years, just to save 1% today. So clearly the Treasury Department must have some confidence that rates won’t be going higher… and will probably be headed lower. Last month Secretary Bessent even said this out loud: “What I’m going to do is, I’m going to go very short-term. . . Wait until this guy [Fed Chairman Jerome Powell] gets out, get the rates way down, and then go long-term.” In other words, he’s going to keep selling the lower-interest short-term debt. Then, once Jerome Powell’s term as Fed Chairman ends next year, the Treasury Secretary thinks that HE will be able to “get the rates way down”, at which point he’ll start selling long-term debt to lock in lower rates. This is a stunning admission that the Treasury Secretary (and by extension the White House) think that they will be able to steer interest rates much lower through their new Fed pick next year. Coincidentally, Treasury Secretary Bessent also happens to be on Donald Trump’s shortlist to be the next Fed Chairman. So let’s skip over the obvious legal and reputational issues involved in such a move. The bigger problem is that there’s only one way for the Fed— even if Secretary Bessent becomes Chairman— to “get the rates way down”… and that is by expanding the money supply, i.e. what we often refer to as printing money. And just as we saw during the pandemic when the Fed printed $5 trillion, large-scale money printing can easily lead to some nasty inflation. Why it matters: We’ve been talking about the next inflation cycle for a while, explaining why 2033 is the key date to keep in mind; this is when Social Security’s major trust fund will run out of money, prompting the Fed to print trillions of dollars and trigger inflation. But given the Treasury Department and White House’s plan to hijack the Fed, it’s possible that the next inflation cycle could start up again as early as next year. This isn’t a foregone conclusion. But it makes sense to pay close attention to what they’re doing, because it’s starting to look pretty obvious that they plan to print a lot of money starting next summer. Today’s podcast: I want to stress that I’m not predicting some imminent doom. The end of the world is not upon us. There is no reason for rational people to panic. But it is becoming increasingly obvious where this trend will lead. The Treasury Secretary of the United States of America is flat-out saying that he’s going to “get the rates way down” as early as next summer. And it would be foolish to ignore the inflationary consequences of his plan. We discuss all of this in depth in today’s podcast episode, including: Will the next inflation cycle mean painfully higher food and fuel prices, or perhaps just an inflated stock and real estate market? Why there’s a straight line linking the post-GFC (2010-2016) stock market bubble and ‘asset price inflation’, to the rise of Donald Trump and Bernie Sanders We explain that, while the Fed has a lot of influence over short-term interest rates, they can’t control long-term rates (including mortgage rates) without printing tons of money. And, yes, that means inflation. How the next phase of money printing could make the 2020–2021 pandemic inflation look tame by comparison; it’s all about the sheer volume of money at stake, i.e. $5 trillion versus potentially $20+ trillion. Why the US could hit a fiscal wall sooner than anyone thinks, where 100% of tax revenue is consumed JUST by debt interest, Social Security, and Medicare We also talk about sensible ways to position yourself for inflation in ways that make sense regardless of what happens (or doesn’t happen) next. You can listen to today’s episode here. https://www.youtube.com/watch?v=LI28A1nfk38 You can access the podcast transcript here.

The US owes a LOT less money to China today than it did a few years ago. As recently as three years ago, for example, China held $1.3 trillion worth of US government bonds. Today they’re down to around $750 billion. In other words, China’s government has decided to cut back on its US dollar Treasury holdings by more than 40% over the past three years. And at first, that might sound like a good thing— HOORAY! More independence from foreign creditors! America is better off without that Chinese money! Right? But in reality this is a huge problem. Because it’s not just China. Going back to the years before Covid, roughly a third of US debt was owned by foreigner governments and foreign central banks. But then federal debt skyrocketed during the pandemic, and US government credibility plummeted. Even the government’s credit rating has been slashed. As a result, foreigners across the board began stepping back from Treasury securities. Today foreign ownership of US debt is less than 25%, and falling. This is a significant drop in just a few years. Why it matters: The US Treasury relies heavily on foreign capital to fund the federal government’s gargantuan (~$2 trillion) deficits. So if foreigners’ appetite to buy US government debt is waning— at a time when federal deficits are exploding higher— where will the Treasury Department come up with the money? There are essentially two answers. Either (1) the Federal Reserve will “print” the money, or (2) domestic investors within the US economy will buy government bonds and fund the deficit. But both of those options come at a significant cost. Consequences of the Fed funding US government deficits: In order for the Federal Reserve to buy US government bonds (and essentially fund the government’s annual budget deficit), the Fed must first expand the money supply. We often refer to this as “printing money” even though it all happens electronically. The Fed calls it “quantitative easing”, or QE, but it’s all the same thing. The consequence of QE is inflation. Serious, serious inflation. Think about it— during the pandemic, the Fed’s QE created roughly $5 trillion in new money… resulting in 9% inflation. Creating enough money to fund federal budget deficits over the next decade could result in the Fed having to print $15+ trillion. So most likely that’s going to be a LOT of inflation. Consequences of the US economy funding government deficits: American investors, i.e. banks, funds, corporate treasury departments, etc. could also buy more US government bonds in order to offset waning foreign demand. But this capital comes at a big opportunity cost Any private capital that goes in to the Treasury market means less money available to buy stocks, fund venture capital, or finance real estate mortgages The net result is lower stock prices, higher mortgage rates, and slower innovation.   Why China is first to ditch US government bonds: After sanctions on Russia, which included freezing their Treasury holdings, other countries got spooked — especially China. China probably fears becoming the next target of US financial weaponization. This may also be an indication that they will eventually invade Taiwan So China is hedging: they’re selling their US government bonds and buying literal metric tons of physical gold— driving gold prices to record highs. The bottom line: The shrinking foreign appetite for US debt is a glaring red flag. It signals waning confidence in US fiscal credibility and could lead to a capital squeeze at home — or nasty inflation spiral if the Fed fills the gap. Many Americans might cheer the idea of being less reliant on Chinese or other foreign money. But in reality, foreign investment in government debt is the closest thing to a ‘free lunch’ in economics. It means that foreigners are financing federal deficits, meaning less inflation at home, and allowing private capital to invest directly in the US economy. Losing this benefit is a bad thing for America. You can listen to my full thoughts on the matter in this brief Podcast. https://www.youtube.com/watch?v=8iytXWF37cQ You can access the podcast transcript here.

Dive into the wild world of Bitcoin, where investors are paying double for shares in a company holding massive amounts of crypto. Explore the intriguing strategies of Michael Saylor, who advocates borrowing to buy Bitcoin as a potential lifeline for Social Security. Discover how modern finance clashes with traditional safety nets, and ponder the quirky metrics investors swallow. With Social Security facing a looming crisis, could crypto be an innovative solution? Tune in for a mix of finance, innovation, and a dash of humor!

Capitol Hill is buzzing with debates over crypto legislation, particularly the GENIUS Act, which aims to regulate stablecoins. While it may seem beneficial for the economy, this act primarily seeks to secure more funding for US government bonds, revealing a deeper issue of reckless spending. The podcast dives into the future of stablecoins, exploring how impending regulations could limit their usefulness. It raises critical questions about their true value and the risks involved, particularly relating to potential backing by US government assets.

Many of our readers know that I was an Army intelligence officer, and so I want to start by clearing up some basic terminology. When people talk about intelligence work, they often confuse terms like asset, agent, and operative. An asset is someone who provides intelligence—intentionally or not—to an agency. Even a guy who’s bragging in bed to some woman he doesn’t realize is part of a honeypot intelligence operation. He’s spilling secrets and doesn’t even know it. That’s an asset. An agent, by contrast, knows what they’re doing. They’re actively, willingly working with an intelligence agency. They’re recruited, trained, and they know who they’re talking to. And an operative is someone actually doing the work—on the ground, collecting the data, running the missions. When people say “CIA agent,” thinking of a James Bond style spy, what they probably mean is an “operative.” Which brings us to Jeffrey Epstein. Is it plausible that Epstein was in the intelligence business, either as an agent or even an operative? Of course. It is extremely likely. This was a guy with deep access to powerful people in politics, finance, science, and media. He was inside every major institution and had personal relationships with celebrities, billionaires, royalty, and heads of state. Clearly the intelligence community would take an interest in someone like that. Epstein had access, influence, dirt, connections—and he knew how to use them. Combine that with his ability to blackmail people who committed the most vile crimes imaginable and you’ve got leverage more powerful than aircraft carriers and nuclear warheads. And that may be why no real information has been released. If Epstein was working with US intelligence, the implications are beyond horrifying. We’re talking about the federal government—funded by your tax dollars—knowingly enabling a long-term blackmail operation built on the exploitation of children. If they admit Epstein was one of theirs, they’d be admitting that senior officials knew what he was doing, who he was abusing. They let it happen, and they used it as a tool of statecraft. That kind of admission would light a match to the powder keg that is American distrust in government. And they know it. There’s also the possibility, that Epstein worked for a foreign intelligence service— and the US intelligence and law enforcement establishment didn’t even realize it. Which would mean the entire US intelligence community—the CIA, FBI, DOJ, NSA—missed the fact that a foreign service was running a massive blackmail operation on US soil, targeting US officials, abusing children… and they did nothing about it. That’s not just a failure. That’s catastrophic incompetence. And their motivation to cover that up would be similar to the UK “Grooming Gangs” cover-up that I recently wrote about. In the UK, grooming gangs operated for years while the government and media looked the other way. Why? Because investigating them might have been politically incorrect. It might’ve been an admission that mass migration and multicultural policies went horribly wrong. So instead, they gaslit the public, censored speech, and criminalized dissent. The same pattern is happening here. A massive scandal implicating the highest levels of government, media, academia, celebrity, and global finance is being buried—because admitting the truth would mean admitting failure on a colossal, nation-destroying scale. I ask a couple other questions in today’s brief podcast, such as: Where are the investigative journalists? Do you remember the clowns at ProPublica who got their hands on Warren Buffett’s tax returns and paraded them like it was the scoop of the century? Why haven’t they gone after Epstein’s hedge fund, his financials, his filings? Where’s the Pulitzer Prize-winning exposé? Same with The New York Times, the Washington Post, and the rest of the self-righteous media establishment. These were the same outlets that spent years on the Russia hoax—yet they can’t be bothered to find out who funded a billionaire trafficker with mysterious money inflows and deep ties to intelligence? Let’s believe, for a moment, there is no “client list.” What about the IRS data? The FinCEN filings? There’s NOTHING? If there were really no evidence, why did they even bother arresting the guy to begin with? How were they going to convict him? Or perhaps, did the Trump administration look at what Epstein had and decide to weaponize it for national leverage? Maybe the files are being used to squeeze foreign leaders into signing trade deals, backing US policy, or bending the knee on global negotiations. That kind of leverage could be seen as a strategic asset in the cold calculus of geopolitics. But if that’s the play, then I’d expect the President to level with the American public. If you’re going to make the morally repugnant decision to use evidence of unspeakable crimes as a tool of statecraft rather than bring the perpetrators to justice, then admit it. Own it. Ironically, the clearest voice of reason I’ve heard on this came from Rob Schneider. Yes, the actor from Deuce Bigalow. He said, “Release all the Epstein files, no matter the consequences. This is America. We’ll deal with whatever happens.” And he’s right. The fact that they are not releasing any information makes me believe that the truth is so bad,  the consequences of doing so would be truly Revolutionary— with a capital R. You can listen to my complete thoughts on the matter here. https://www.youtube.com/watch?v=mf63XL35ZQY You can access the podcast transcript here.

This discussion tackles the overarching question of America’s decline, with a surprising focus on the implications of uninformed voting. It examines whether individuals who lack basic civic knowledge should have a say in government. The conversation also critiques the notion of term limits, questioning if voters can be trusted regardless of the politicians in power. Predictions about looming financial crises and foreign shifts away from U.S. Treasuries add urgency. The analysis digs deep into the consequences of our electoral practices and historical changes that shaped today’s governance.

This discussion tackles the abandonment of principles in American governance, highlighting inconsistencies between political rhetoric and fiscal reality. It also reveals how Supreme Court decisions can shift power dynamics in policy implementation. The looming financial crisis and rising national debt draw attention, while a deeper dive into the fall in foreign bond investments raises alarms. Additionally, the podcast explores a shift towards gold as a strategic asset, uncovering undervalued investment opportunities amidst a volatile market.

Concerns about World War 3 are debated, with a focus on the U.S. military's deterrent power and its impact on adversaries like Iran. The discussion emphasizes the looming Social Security deficit, predicting significant benefit cuts if reforms aren’t made. Historical lessons on foreign engagements and the importance of thorough cost-benefit analyses are explored. Shifts in global central bank strategies towards gold highlight instability in the U.S. dollar. Potential investments in undervalued commodities are also discussed as people prepare for fiscal challenges.

https://www.youtube.com/watch?v=i-tlc4P0iDw Today’s topic is so far-reaching, deep, and important that we had to dedicate an entire podcast episode to it. Frankly, it is one of the most interesting we have ever done. With so much conflict in the world—and the potential for even more escalation, particularly in the Middle East—we have heard a lot of worry, concern, and even hyperbole in the media about “World War III.” I actually have the opposite view: that after the recent strikes and counter-strikes between Israel and Iran, I wholeheartedly believe that World War III is far less likely than it was even just a couple of months ago. Read that again: in the wake of growing conflict in the Middle East, and even with the potential for US involvement, World War III is less likely. In today’s podcast, I put on my old hat as an Army intelligence officer and discuss the Iranian order of battle, their weapons and defense systems, much of which, frankly, is derived from Chinese military technology. Over the past several days, that Iranian-based Chinese military tech was obliterated—completely overwhelmed by Israel’s precision strikes. And where did Israel get its technology from? Some of it is homegrown, of course, but the majority comes from the United States. So the way I look at this Israel-Iran conflict is almost like a live-fire exercise or war game that models what a real conflict between the United States and China might look like. And based on the results, it is not looking good for China—or Russia, for that matter. It leads me to the conclusion that no adversary nation wants to risk an armed conflict with the United States right now, lest they too get obliterated by America’s F-35s. Towards the end, we talk about whether or not the United States should be involved. I do not have the definitive answer. But I walk through the rational framework that I hope America’s leaders are using to make that kind of decision. There is not enough reason and rational decision-making in Washington these days. Too many politicians make knee-jerk, emotional reactions for the benefit of Twitter likes, rather than conducting a clear cost-benefit analysis. There is so much more we unpack in this episode—it is definitely worth a listen, and we hope you tune in to join us. Once again, you can listen in to the podcast here. https://www.youtube.com/watch?v=i-tlc4P0iDw And you can access the podcast transcript, here.

CLICK HERE to listen to today’s podcast. “Mostly peaceful” yet “occasionally violent” protesters across the US will hit the streets for “No Kings Day” this Saturday in support of the right for illegal immigrants to break the law. No big deal, just a little looting and property damage in the name of justice. But while the media fixates on the drama and conflict, they’re not talking about how this issue was completely avoidable and the result of a desperately broken immigration system. America has a laundry list of challenges. Deficits are too high. Social Security desperately needs reform. Medicare needs to be completely overhauled. The list goes on and on. Immigration is another major problem. The system is totally broken. Everyone in Congress knows this is true— there’s not a single Senator or Representative who would stand behind the current immigration system. Simultaneously, most everyone in Congress generally agrees that the US needs hard-working, law-abiding immigrants who can bring capital, labor, professional skills, or entrepreneurial abilities. This means that immigration stands nearly alone among America’s big challenges where both sides are largely in agreement. They don’t agree about bringing down the deficit. They don’t agree about Social Security and Medicare. They don’t agree about a number of social issues. But they do agree on immigration… making it THE most fixable of America’s major problems. And fixing it would be incredibly useful. If there were actually a straightforward, simple path to legal residency, millions of people could become law-abiding taxpayers. More small businesses, more truck drivers, more researchers, more engineers, more construction workers, more data scientists. Faster economic growth, higher savings, greater production, more investment. All of this would be an unequivocal win for the economy… and frankly it’s exactly what the federal government needs to pull out of its fiscal nosedive. Yet, inexplicably, no one seems to want to fix the most fixable problem in America. Both sides agree on both the problem and solution. But instead everyone is battling it out… whether in the streets or on Twitter. What a waste. We get into all of this in today’s podcast episode. We also discuss: How the US is following Europe’s self-destructive lead Why Western Civilization is in decline How these dysfunctional policies are showing up in the price of gold How our thesis on gold stocks has come true— especially over the last couple months In fact, we’re running a flash sale on The 4th Pillar investment research newsletter which has identified several of these precious metals company that have surged in value by as much as 153% in as little as three months. It’s not quite too late— we still have two gold companies that haven’t yet taken off, but are primed to follow the same catalysts. Which is why we chose to provide one more opportunity to join The 4th Pillar for a discount. CLICK HERE to learn more. CLICK HERE to listen to the podcast. https://www.youtube.com/watch?v=UBj8BwnI5h4 The podcast transcript is available here.