Peter Schiff: The Next Collapse Is Starting In The Bond Market

Peter Schiff (0:00)

There's no stop in this train, right? This is gonna be a wreck. What will eventually work to strengthen the yen is going to be higher rates in Japan and a weaker dollar. And eventually, the dollar is gonna collapse under its own weight. Inflation doesn't necessarily have to make prices go up. It can prevent them from going down. The real impact is not how much prices went up, but how much higher are prices than they otherwise would have been if we didn't create inflation. So if it took 40 years for the yields to get from 16% to 0%, it could probably take 10 years to go from 0% back up to 16%.

And we're already 6 years into it. So they may not be that many more. The bottom could drop out of the bond market. We could have a crash in the bond market. Yields could just go through the roof.

David Lin (0:50)

Pleased to welcome back to the show Peter Schiff, host of the Peter Schiff Podcast. He's also the founder of Schiff Gold and Chief Assets.

Strategist at Euro Pacific Asset Management. Welcome back, Peter. Good to see you again. Hey, so the 10-year yield is now almost at 5%. You've been talking about the rising bond yields and the debt sell-off for quite some time on your own show. Everybody should check out the Schiff Podcast, by the way, if you haven't already, link down below. Back in July, let me just pull this tweet up that you wrote back in July. You said that Kevin Warsh has chosen inflation versus the yen. So, taking pressure off the Japanese yen, which is up 2.5% today. This is back July 30th, by the way. This is on the day they announced the yen intervention. And the yen rally continues in the short-term rate differentials between the US and Japan. Now, the yen carry trade can unwind quickly. The yen has gone up a lot since then. It's now at 153

So, we're closer now than in July. Basically, the yen intervention, did it work or not?

Peter Schiff (1:56)

Well, I mean, it worked a little bit because the yen has come off the lows.

But I don't know that it's going to work in the long run. I think what will eventually work to strengthen the yen is going to be higher rates in Japan and a weaker dollar. And eventually, the dollar is going to collapse under its own weight. I think there's a problem with the dollar. But also, to the extent that the yen stops going down, which was the goal of the intervention, that creates a whole different problem. Because if the yen isn't going to go down, it's probably going to go up. And that means an unwinding of the yen carry trade. And there's a lot of risk there too. So I think you're kind of damned if you do and you're damned if you don't when it comes to the yen. Because whichever way it goes, it's going to create a problem.

David Lin (2:50)

You published a video on September 8th entitled The Bond Market Is About To Break. And you wrote on Twitter, X, today that traders now believe the Fed hikes rates next week. By the way, there's an 88% chance on the CME Fed Watch tool. Long-term bond yields will fall as the hike will improve the Fed's inflation fighting credibility. But the expected hike will be far too little to win the inflation fight, so long-term yields will rise regardless of a hike. So your interpretation of events. Will the Fed or the Treasury, both of them, will either of them be successful in bringing down the long end of the yield curve, which is what Scott Besson is trying to do?

Peter Schiff (3:27)

I know. I think they're going to fail. I think the market is going to work rates higher, regardless of what the government does. I mean, if the government actually did the right thing, which is not even among the possible choices, which would be substantial cuts to government spending. So that would help the bond market. I mean, real, meaningful, credible fiscal policy.

But that's not even on the table at the moment. So I think all these gimmicks that they may try are not going to work. In fact, they're more than likely to backfire and accelerate the process of yields rising because they're all going to be inflationary. Everything that they do to try to suppress yields involves creating more inflation. But it's the inflation that is the reason yields are rising. So if your solution to high yields is to create more inflation to slow down the rise, you've actually accelerated what's driving the rise. So there's no way that the government is going to succeed with the approaches that it's considering or pursuing.