Peter Schiff Warns "Trump Deficits Will Be Yuuge": What That Means For Gold & The Dollar

Tyler Durden's picture

Submitted by Peter Schiff via Euro Pacific Capital,

There is much we don’t know about how the Trump presidency will play out. Will the Wall get built? Who will pay for it? Will it have at least some fencing? Will repeal and replace happen at exactly the same time? Will Trump throw a ceremonial switch? Will there be a Trump National Golf Course in Sochi? It’s anyone’s guess.  But of one thing we can be fairly certain. President Trump is very likely to preside over the largest expansion of Federal budget deficits in our history. Trump has built his companies with debt and I’m sure he thinks he can do the same with the country. His annual budget deficits are likely going to be huge. This development will make a greater impact on the investment landscape than most on Wall Street can imagine.

In the past half-century, Republican presidents have been the going away winners at the deficit derby, a fact that should make any true conservative blush. The sad truth is that annual deficits exploded under Ronald Reagan and George W. Bush, and generally contracted under Bill Clinton and Barack Obama (despite the latter's distinction of having added more total debt than all previous presidents combined.) Some of the explanation is just luck of the draw, some walked into office in the midst of recessions they didn’t create. But the better part of the explanation is baked into the political dynamics.

Democrats want to raise spending and taxes. Republicans want to cut spending and taxes. But whereas Democrats have generally succeeded on both of their missions, Republicans have just succeeded in one. (Actual spending cuts require politically difficult choices that are much harder to vote for than perennially popular tax cuts). This puts a giant thumb on the Republicans’ budgetary scale.

Like prior Republicans, Trump has promised to cut taxes, on both corporations and individual taxpayers…even the wealthy. But unlike prior Republicans, he has not paid a word of lip service to spending cuts. He has promised to spend now, and spend big. Trump just doesn’t do the austerity thing. It’s for losers.

In addition to fronting the cost of building the 2,000 mile Wall (accounts receivable has a reliable address in Mexico), Trump plans big increases in military spending, both on active military and on our veterans. His reboot of Obamacare has yet to be presented, but as he has promised that no one will lose coverage, not even those with pre-existing conditions, we can be sure that Trumpcare won’t be cheap. But his big project will likely be his promised $1 trillion plus infrastructure spending plan. Most importantly, he diverges from most Republicans by promising no structural changes in Social Security and Medicare, the entitlement leviathans that are the sources of the vast majority of Federal red ink.

To aid him in these budget-busting efforts, Trump will have the benefit of a compliant Congress in which his own party controls both Houses. Most Republican senators and representatives now seem eager to jump aboard the Trump train and will likely pass anything he sends to the Hill. Those who resist should prepare for the kind of political hardball that we have rarely seen in this country (I’m talking to you Lindsay Graham). If Republicans couldn’t hold the line on Obama, how will they do so with Trump and, politically, why would they even want to? Grandstanding against Obama’s big deficits, even to the point of forcing a government shutdown, did not play well politically. Standing up against Trump will involve considerably more risk with Republican primary voters.

Even if none of Trump’s taxing and spending plans come to fruition, the United States would still be on the threshold of a sobering era of debt expansion. The age of trillion dollar plus annual deficits began in 2009 when the financial crisis tripled a very large $458 billion deficit in 2008 into a record smashing $1.4 trillion in 2009. Three more trillion-dollar deficits followed. But since 2009, excluding a small increase from 2010 to 2011, the deficits have declined steadily. By 2015, they had decreased to $438 billion, slightly below where they were before the crisis began. (Of course these smaller deficits exclude hundreds of billions of additional debt that is borrowed off budget.) These developments have caused many to conclude that budgetary issues are no longer at the top of the agenda.

But, as a result of the failure of Republicans and Democrats to achieve any kind of agreement on long-term budgetary reform, the six-year run of declining deficits has come to an end. The 2016 deficit was more than $100 billion wider than 2015. This marks the first year since 2009 that the deficit increased from the prior year (except for a minimal .001% expansion in 2011 over 2010). This is just a down payment on things to come.

The Congressional Budget Office (CBO) - the closest Washington comes to actual objectivity - issues long-term budget assumptions. Except for a relatively small dip from 2017 to 2018, the CBO sees continuous deficit expansions every year through the end of the next decade, culminating in continual $1 trillion deficits every year starting in 2024. (8/23/16 CBO report) That’s the good news. The bad news is that in making these projections, the CBO has to make some very rosy assumptions. The most egregious of these is that the U.S. economy will avoid recession for the entirety of the next decade.

Over the past century we have seen a recession, on average, every 60 months (based on data from National Bureau of Economic Research and Bureau of Labor Statistics). According to current figures, the economy has been in expansion for 92 consecutive months. This means that the current expansion is already 50% longer than average. Expecting it to last for nearly 18 years is completely without precedent.  I believe it will be sooner rather than later that we will have another recession, which will greatly enlarge the deficits. History is clear on that point. The Great Recession caused the deficit to triple. Even the mild recession of 2001 turned a $236 billion surplus into a $157 billion deficit in just two years. The next recession I expect to work similar magic. But, in addition to being blind to recessions, the CBO was also blind to Donald Trump.

In making its projections, the CBO simply assumed that the taxing and spending laws currently on the books would remain unchanged. The projections do not account for any tax cuts or spending increases. As mentioned previously, Trump has virtually promised to do both in the first year of his presidency. If he is successful, we could return to trillion dollar deficits much sooner than the CBO thinks. A recession could push the red ink well into record territory.

The graphs below chart the prices of gold and the dollar versus annual budget deficits since 1990. The data shows clearly that after a few months of lag time, the price of gold has followed the long-term expansion and contraction of deficits, while the dollar has moved in the opposite direction.

Of course, who on Wall Street has picked up on these macro trends. In fact, one of the biggest issues currently being discussed is how the U.S. economy will deal with a perennially strengthening dollar. They are assuming that the Federal Reserve will be raising rates and that the economy will be expanding under the Trump stimulus thereby strengthening the dollar and attracting flows from abroad. This type of “trees grow to the sky” thinking is similar to Clinton-era assumptions that the national debt would be repaid by perpetual budget surpluses, or the feeling earlier in this century that real estate prices could never decline.

To make these assumptions, Wall Street must ignore the obvious ramifications of big deficits, in particular the need for the Federal Reserve to step up and buy all the new debt that the Trump administration will have to issue. The last time the government had to find buyers for more than a trillion dollars per year of debt, it relied on foreign central banks. Eight years ago, the vast majority of Treasury debt was purchased by China and Japan (and, to a lesser extent, Saudi Arabia, Russia and other emerging nations in Asia and Latin America). But as the debt surge persisted, the real heavy hitter became the Federal Reserve itself which, through its Quantitative Easing (QE) Program, bought more than half a trillion dollars of Treasury debt per year from 2009 to 2014.

But there can be little expectation that the foreign buyers will be returning for a repeat performance. Currently, both China and Japan are looking to draw down foreign exchange and are engaged in active selling of U.S. Treasuries in order to keep their currencies from declining against the dollar (Scott Lanman, 10/18/16, Bloomberg). What’s more, Donald Trump is likely to engage in aggressive trade wars that may certainly discourage other foreign central banks from supporting our debt issuance.

Also, bond analysts are now convinced that the 35-year plus bond bull market, which began in 1980, finally topped out in July of 2016, when European and Japanese yields sank deeply into negative territory and yields on the 10-year Treasury hit 1.36% (Peter Boockvar, 9/19/16, CNBC). Since then bond prices are down significantly across the board.  If this trend continues, it will discourage private buyers from making the jump into Treasuries. In other words, the Fed may be the only game in town when it comes to financing future deficits in a new bond bear market. 

This would mean that the QE programs that many had assumed to be a thing of the past can return with a vengeance, becoming the signature program of the Trump era. When this reality sinks in, you may witness the dollar begin a long and steady decline from its current decades-high strength. At the same time, gold, gold stocks, commodities and foreign stocks could finally enter a turnaround. 

Ultimately, I expect years of dollar decline to culminate in a crisis, with the dollar plunging in value, as the world abandons it as its primary reserve currency. The last time the dollar was on the brink of collapse it was saved by the financial crisis of 2008. Next time we will not be so lucky!

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Escrava Isaura's picture

Morons like Peter Schiff now say we need to save more and we need incentives for that: higher interest rates. Peter Schiff is not explaining how people, who already lose more than half of their income to usury (partly passed on in prices and taxes), are going to save more when they have to pay even more interest to the rich, while they are already living from pay check to pay check, as most Americans are today. Even a good man like Paul Craig Roberts falls for this. It’s our economic illiteracy, not understanding money and Usury.

Because the simple fact is: by saying ‘I wouldn’t lend without interest’ (but give it to Wall Street), we relegate ourselves and our brethren to interest slavery. Because we don’t lend, we borrow. By not lending to our brethren, they will not lend to us. We will have to go to the rich and to the banks. Why was the middle class sending their children to the bank for a mortgage when they had the assets (wages placed at Wall Street) to set them up with a good start in life with an interest-free mortgage?

It’s alright that we pay 300k interest over a 200k mortgage over 30 years. We say: it’s grand that I lose up to 40% of my income to usury passed on in prices even if I have zero debts. We say: how splendid the Government is losing up to 450 billion per year on servicing the National Debt. — Anthony Migchels.




Crisismode's picture



So all the elderly that counted on 6% CDs to pay them survival in retirement,

just have to suffer through 0% return on their pensions and bonds,

so jackasses like you can be smug and happy?


NidStyles's picture

Which would never be an issue if there weren't interest in the first place.


No interest means that life gets cheaper the longer you live it. With interest it means it gets more expensive instead.


Interest is a Jewish tax on White lives. Schiff is Jewish Banker.

two hoots's picture

It cost money to drain the swamp, initially.

NidStyles's picture

No, it doesn't.


There's easily a few million unemployed men that would do it willingly to get their birthright back, that this current system thought was a good idea to hand over to people that can't even build a city that has clean water.

RedDwarf's picture

There is no lending in the free market without interest unless it is charity or a favor.  Why risk lending my money if I don't profit?

The Western central banking cartel is a massive criminal enterprise, and it is Jewish run.  That part is true.  However the vast majority of Jews are not part of the oligarchy / inner circle of said cartel, nor are they responsible for what a few do.  Nor is Peter Schiff a 'banker' in this context.  He runs an investment firm, not a bank that prints money.  As for the fraudulent tax and slavery that the fiat currency / fractional reserve system amounts to, it applies to nearly everyone, not just 'Whites'.

You're being bigoted, collectivist, and racist with your statements, which is ironic since it looks like you are flying the banner of anarcho-capitalism, which is a libertarian / individualist / anti-collectivist philosophy.

NidStyles's picture

Easily disproven. One man does not lend to other outside of his society without a profit. Therefore to lend within his society he needs only to benefit whether financially or in quality of lifestyle.


A society whose only motivate is financial profit will collapse, as there are no real benefit to improving conditions. Without your tribe, you are merely a minority standing up to be trimmed. When you remove yourself from your tribe, you ignore reality.


There is no such thing as anti-collective, without first recognizing that we are divided by more than just socio-economic status. An philosophy that seeks to remove your tribe, or you from your tribe is not a philosophy, but a weapon of your own demise.

Jews do not belong in European Societies. Not real Jews, and not Khazars.

Lockesmith's picture

>I do not understand the value of time

Escrava Isaura's picture

Stock Market and interest should not exist. The money should be directed towards job creation. Your retirement will come not from (Ponzi schemes) savings but the current workers. Again, all savings will be directed into job creation, period.  

“Wealth is a flow and it cannot be saved. Spent it must be as it accrues, whether on consumption or on capital outlay designed to produce future wealth.”Frederick Soddy, 1921.



Hohum's picture

"Investing" is anti-investment.

Crisismode's picture

Oh, really?


And the youth of the country are going to be happy and content

to see their wealth given away to the elderly non-producing

part of society,

Because you don't want to pay them interest on all the money

they accumulated through hard work through their lives?


JUST BECAUSE YOU dictate so?

You are a bigger fool than any of us here ever estimated you to be.



not dead yet's picture

Until recent years when the stock market was used by the founders and those invested in them to cash out big the stock market was used to grow companies and create jobs and not be beholden to the money changers. Even those that cashed out created a business worthy of investing in. If I'm a saver why shouldn't I or any other saver be paid for the use of our money, better known as interest. If no one saves any money where will one get it to invest and create jobs? You rant about Ponzi's but isn't that what you are advocating by saying your retirement will come from current workers? One guy above ranted about 300 grand in interest on a 200 grand mortgage but no one held a gun to his head when he signed the papers. I'm sure he laughed when he got his taxes reduced with that mortgage or how much he saved by paying the bank instead a landlord in some apartment house chock full of loud shitty neighbors. If he had saved for that house and paid cash he never would have saved enough to do so by paying rent. By staying within my means and not pissing away my money on butts, booze, and drugs I paid off my little hovel in 12 years and even with taxes and upkeep I've saved hundreds of thousands over paying rent. It's servitude to the bank or the landlord, take your pick. Bankers may be considerd scum but most landlords are even lower on the shit scale. Another of your falicies is savings will be used to create jobs. Less money would be spent on goods and sevices if everyone saved leading to increased unemployment and bankruptcys as no one stepped up to buy the goods that were created with the invested savings.

Lockesmith's picture

>I do not understand the value of time

Mungo9000's picture

I think you're on the wrong website. We're all seeking or preserving wealth over here... we're not complaining about successful "morons" like Schiff. 

BandGap's picture

Look at wht you wrote, check your math.

You're an idiot.

Lockesmith's picture

>I do not understand the value of time

Crisismode's picture


Schiff is right.

Gold goes up in 2017.

Gold goes through the roof in 2018.

Gold becomes the dominant world currency in 2019.

The world goes to barter in 2020.

Gold becomes the only currency in 2121.

Read it and weep.

ne14truth's picture

Not a chance, there is and will never be enough gold to carry the weight of any countries debt problems. I read that all the gold in the world would fit into one swimming pool....that is just not enough physical to carry the monatary systems of the planet. At best they could confiscate all gold, then make it worth a billoin and ounce, then make a currancy backed by best. Who ever owns the gold and sets the price is just another CB, very little would change in truth.


3 olympic sized swimming pools and like everything else price would resolve the issue

sarz's picture

It would be a good thing if gold were honestly priced and if gold medals of assured weight and purity were freely tradeable without any sort of tax on buying or selling. It would be assuring to have available that sort of store of value. 

Backing the currency with gold is something else. It means that for purposes such as war the nation would have to borrow from holders of gold. These people would be forever scheming to get wars going.

The whole point of sovereignty is not needing to borrow. Debt-basing of currency adds hugely to the cost of everything. 

Better for the government not to own gold or promise gold to holders of its money but to use the price of gold or a basket of commodities or goods as a benchmark for the currency. 

The currency itself should be freely created and spent into existence by the government. Or created by banks in the process of lending. Look up the details at 

Zang's picture

Bollocks it's the value/amount of what ever fiat currency they wasn't to impose next per ounce that needs to remove all debt. Stackers are laughing to somewhere !!!

----_-'s picture
----_- (not verified) Crisismode Jan 19, 2017 8:49 PM

schiff is more or less right

stupid cockroach kikes are ridiculing people like schiff and and zerohedge. the thing zh and schiff are right.

the pile of shit-tower all should have collapsed long ago.


its just that its too corrupt. zh is shaming people like bill ackmann but lets be top honest. ackmann was 100% right about ponzi herbalife. its just he didnt understood about that there is no market, everything is decided from some shithole intel bunker. if the company benefits (((this people))) they dont allow it to go down no matter what. if they dont need it anymore they pull out their investment and let it float until it crashes.


not dead yet's picture

If the economy goes to barter that means the world economy has collapsed. Same when gold is the currency of choice. If I want a TV off Amazon I charge it to my card and pay it off at the end of the month and get the TV in 2 days. How will that be possible with gold? Or trade 7 chickens and 3 lizards for it and wait for them to be shipped and accepted by Amazon before they ship? Or maybe a used water heater? What would I use to pay UPS to ship them? Your company needs 20 ton of steel and pays for it with a wire transfer and gets delivery in a few days. If it was barter how would they pay the steel company for it if the products they made with the steel were not needed by the steel company? You would need a huge staff at every company to buy, sell, and take physical delivery of goods to barter. For instance your steel supplier wanted 10 tons of coal, 200 bagels, 5000 kwh of electricity, and sundry other items in exchange for the steel which they barter for other items. What do you do if your employer pays you in products, like widgets, and you have to spend hours bartering them for food and fuel rather than spending minutes at the store and gas station paying in cash or credit like you do now? What if your area is awash in widgets and no one will accept them? Starve is what you'll do and you'll do it in a hovel with no heat, electricity, or running water. Once you go to barter modern civilization has ended and wars will finish off whats left.

Twee Surgeon's picture

There is no such thing as ' Expand a Deficit' except in the mind of certain people. Deficit means, Lack, Shortage, Shortcoming.

What he means is 'a bigger bill'. Whoever spent the dough ( Ultra Vires, without Lawfull Authority to do so), are liable for the bill.

No Consent was asked, to break the Law of the land, and no Consent was given. I owe fuck all and will be paying that amount.


Takeaction2's picture
Takeaction2 (not verified) Jan 19, 2017 6:06 PM

So I have to wait till 2026 to reach the top again..I am not waiting any longer...Not me...I am going to start selling all of it as it goes up...Screw this.  I can't wait any more..I tripled my money...and that is that.....My boat is so heavy...too heavy. I am just going to keep buying more and more rental properties.  Gold and Silver do not fund my retirement like rent money does.

SmilinJoeFizzion's picture

He's gonna cut taxes but pay for it by cutting the fat- and there is plenty of fat in DC

onewayticket2's picture

Deficits will be material, but only bc that's the norm and a president can get away with it.   They would be FAR higher without the machete he's going to take to each of those departments.  a trillion a year, baby.

1000 splendid suns's picture

Gold won't go up because it is M-A-N-I-P-U-L-A-T-E-D!!!.......

Now, a 1799 $5 in mint state... now that'll go up and up..

Devotional's picture

((( Schiff ))) is a charlatan

XqWretch's picture

More like a Cassandra. He is a smart guy but his shtick gets a little tired after a while.

not dead yet's picture

Schiff lost me when he said Obama did okay because his deficits weren't that big so adding more debt than all previous presidents combined was no big deal. I guess he missed the part where Obama's deficits the last 2 years set records and that deficits are debt. I love the Obama lovers who claim the same thing that the debt doesn't matter only the size of the deficits, stupidly not comprehending deficits are debt, which they claimed Obama shrunk. As if that is some kind of success.

misterb4096's picture

Schiff always forgets to mention Bitcoin!

FinalEvent's picture

Because the fucker is buying.

Chipped ham's picture

I wish I had seen these charts a long time ago.  Schiff was holding out on us.

FlipSide's picture

As Hillary would say, "what difference does it make!? The deficit is already Yuuge!"

AlexCharting's picture

I started to listen to his podcast in 2016... probably a much different experience then doing so between late 2011 and 2015. 

Hohum's picture

Is Schiff one of the "wealth creators?"

La morte sorride a tutti's picture

The question has always been when?

RedDwarf's picture

Trump, Sanders, Clinton.  On this front it would not have mattered.  Fiat collapse, deflation, hyperinflation, massive deficits, this was baked into the cake long ago thanks to the institutional and moral mistake that fiat currencies represent, and the Ponzi scheme that fractional reserve banking equates to.

Sudden Debt's picture





Hohum's picture

Wow! You can see the future?

RedDwarf's picture

Maybe he watched Obama's 2012 inauguration again and got confused.

FinalEvent's picture

No, he's probably one of the script writers.

CTG_Sweden's picture



Building the 2,000 mile Wall would not be expensive. And the rewards for building it would be generated almost instantly.


Improving the electric grid in order to facilitate fast charging for electric vehicles is also something that would stimulate the American economy almost instantly. More electric vehicles = less imported oil or more exported American oil. The trade balance would improve fast. Also keep in mind that the US public sector does not depend on gasoline and diesel tax revenues to the same extent as the public sector in European countries.


Moving as much tuition as possible to the Internet would be less painful than reduce Medicare and Medicaid spending. 2/3 of the tuition over the Internet = public spending cuts that would equal 2.5 % of the US GDP. Stop hiring new teachers. Move existing teachers to other public sector jobs. Shutting down military bases abroad would also save some money, but not as much.


hoyeru's picture
hoyeru (not verified) CTG_Sweden Jan 19, 2017 7:21 PM

you didnt mention the most important part that eats the most money: stopping building useless toys such as F-35 will save literally trillions of dollars.

No.Fifth.Turning's picture

The wall is un-necessary. The existing laws would stop illegal immigration immediately if they were enforced.  The Dems (wants the voter) and the Repubs (wants cheap labor.)  If Trump throws in jail those that hire illegals, problem pretty much solved.


I'd like to see a ban on taxes, interest and marketing for five years just to see what the hell would happen.  I guess the unintended consequences would be too great for the average elite.

Kirk2NCC1701's picture

PM will continue to be manipulated as long as they want to. ECONOMIC TOTALITARIANISM.

All classical laws of economics are not applicable in economic totalitarianism.

Hedge and speculate accordingly.

When you don't know if you're gonna have rain or shine, you carry both: a rain cost and sun screen. Duh!

IOW... Diversify or die.