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Schiff: This War Is "Going To Cost A Lot Of Money We Don't Have"

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by Tyler Durden
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Last night, ZeroHedge hosted investor Peter Schiff and Rabobank's Michael Every to debate the question: Will the war in Iran accelerate the U.S. dollar’s collapse or is it a geopolitical chess move that could strengthen its hegemony?

Moderated by Cornell professor Dave Collum, Schiff - based in Austrian economics - argued that the war will do nothing but harm the American economy via higher prices and interest rates, while the dollar weakens.

Every believes Trump can pull a rabbit out of a hat and come out of this with the U.S. and the dollar in a stronger position. Though, he notes that some measure of economic pain is likely a necessity of war.

Below were the highlights for those short on time but we recommend listening to the full debate, linked at the bottom.

War: An Economic Nightmare

Schiff: “The war itself is inherently going to end up being inflationary… it’s going to cost a lot of money that we don’t have.”

With no plan to raise taxes, the path is clear. “We’re just going to run bigger budget deficits,” Schiff said. This will weaken the dollar while raising interest rates, an ugly combo.

“We’re going to have to borrow more money to fund the war… the Fed is going to monetize that debt because the markets can’t absorb it,” he said. “Interest on the debt is already the number two line item… and pretty soon it’s going to pass Social Security.” Already the Treasury is moving to suppress rising interest rates with the largest buybacks in history.

Schiff is predicting a return of stagflation or as he’s called it, an “inflationary depression.”

“We’re going to have more inflation to pay for this war… a weaker economy, upward pressure on interest rates.” Higher energy, food, and input costs feed into that dynamic. Housing sits at the center of the fallout. “We could have a 30% decline nationwide in home prices very easily,” raising the risk of defaults, foreclosures, and stress across the banking system.

“Q4 GDP growth was 0.7… 2025 was 2.5%.” As growth slows, deficits widen on their own. Add war spending, and the trajectory steepens. “As the economy weakens, the government collects less taxes… you get bigger deficits anyway, and the war is just going to exacerbate that.”

Maintaining Hegemony By Force

Michael Every argued that economic sacrifice is not a side effect but a requirement. The U.S., in his view, must redirect resources away from consumption and toward production that sustains a war effort, even if that means lower living standards and enduring economic pain. Once the war is presumably won, the economy adjusts around that outcome. 

“You ultimately win a war… with enough bullets,” he said. In a world where rivals are mobilizing, he argued, the rules change. “It’s not the same game.”

According to Every, other countries are already preparing for conflict, willing to impose controls and sacrifice efficiency to guarantee output. In that environment, refusing to do the same is a losing strategy.

Schiff viewed the war with Iran as a war of choice and thus not worth the unnecessary economic burden.  “Look at what we did during World War 2. All of our production was diverted… you couldn’t buy anything… everything was rationed. The whole economy suffered for the war effort.”

Watch to the full debate below (also available on YouTube and Spotify):