Oct 21, 2026 · 10 min · 5 segments
This is a free preview of a paid episode. To hear more, visit vblgoldfix.substack.com In this week's GoldFix Competent…
Peter SchiffGuestTom BodrovicsHostWell, and in a, in a way they're, they're trapped because- You know, higher rates just mean bigger deficits, bigger interest expense, right? Which quickly become-
It's the box that I warned that they would be in years ago, um, before they, they, they created it.
But as they raise interest rates to fight inflation, they actually make inflation worse [laughs] because not only are those higher interest rates a cost that gets passed on to consumers just the way businesses pass on their rents and their raw materials and their wages, but the higher interest rates themselves mean the US government has to pay more interest to bondholders.
A, that's kinda like a stimulus in and of itself because now you're putting more money in the hands of the bondholders to go, to go out and spend and push up prices.
But those bigger deficits, um, those, the, the higher interest expense pushes up the budget deficits.
So now the budget deficits become bigger, and that puts more upward pressure on interest rates.
Uh, and it also puts more pressure on the Fed to monetize those larger deficits to prevent the interest rates from rising, which creates even more inflation, which puts even more upward pressure on interest rates and budget deficits.
So it, th- this is a, you know, self-perpetuating doom loop that you can't get out of.
Because if the Fed says, "Oh, oh, then we're not gonna, we're, we're not gonna raise rates," well, then the dollar crashes and then prices soar for that reason.
So all they're gonna do is pick the route that does the least political damage in the short run, and that's probably just to create massive inflation.
Well, and in a, in a way they're, they're trapped because- You know, higher rates just mean bigger deficits, bigger interest expense, right? Which quickly become-
It's the box that I warned that they would be in years ago, um, before they, they, they created it.
But as they raise interest rates to fight inflation, they actually make inflation worse [laughs] because not only are those higher interest rates a cost that gets passed on to consumers just the way businesses pass on their rents and their raw materials and their wages, but the higher interest rates themselves mean the US government has to pay more interest to bondholders.
A, that's kinda like a stimulus in and of itself because now you're putting more money in the hands of the bondholders to go, to go out and spend and push up prices.
But those bigger deficits, um, those, the, the higher interest expense pushes up the budget deficits.
So now the budget deficits become bigger, and that puts more upward pressure on interest rates.
Uh, and it also puts more pressure on the Fed to monetize those larger deficits to prevent the interest rates from rising, which creates even more inflation, which puts even more upward pressure on interest rates and budget deficits.
So it, th- this is a, you know, self-perpetuating doom loop that you can't get out of.
Because if the Fed says, "Oh, oh, then we're not gonna, we're, we're not gonna raise rates," well, then the dollar crashes and then prices soar for that reason.
So all they're gonna do is pick the route that does the least political damage in the short run, and that's probably just to create massive inflation.
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