Economist Schiff engaged in a heated debate with Trump over inflation, revealing that the Federal Reserve is implementing a covert quantitative easing policy, which will cause its balance sheet to exceed $10 trillion. He warned that inflationary pressures will intensify in 2026, with gold targeting $5,000 and silver projected to reach $100.
As the market moves toward 2026, economist and precious metals dealer Peter Schiff stated that the Federal Reserve has quietly reverted to policies that once fueled past inflation crises, despite political leaders still publicly debating whether inflation remains an issue. This debate recently escalated into a high-profile public confrontation between Schiff and U.S. President Trump, highlighting the growing gap between official messaging and market signals.
Peter Schiff, chief economist at Euro Pacific Capital, said in an interview with Kitco News that the Federal Reserve’s new program of purchasing $40 billion in U.S. Treasuries monthly marks a new phase of debt monetization, which is already reshaping inflation expectations, the precious metals market, and investor behavior. “I don’t care what they call it,” Schiff said, “this is debt monetization, and it is inflation.”
Fed Bond-Buying Program Reveals Deeper Financial Pressures
Schiff believes that the return to balance sheet expansion reflects pressures beneath the surface of the financial system, particularly within the banking sector. Although the current plan focuses on short-term Treasuries, he expects its scale and duration to increase. “At some point next year, possibly even in the first half, they will eventually expand the scale beyond $40 billion and extend the maturities of the bonds they purchase,” he said.
He argued that the Fed’s reluctance to label this program as quantitative easing reflects credibility issues, and acknowledging a return to quantitative easing would imply that the economy has become dependent on perpetual money creation. “It’s like a habit we can never break,” Schiff added, noting that after peaking at nearly $8 trillion in the last cycle, the Fed’s balance sheet could exceed $10 trillion by 2026.
Schiff also warned that vulnerabilities in the banking sector are more severe than aggregate data suggests, pointing out that substantial unrealized losses remain unaccounted for, while Treasury purchases may be serving as a backstop rather than conventional liquidity operations.
Trump Rebuts Schiff’s Inflation Warning
Schiff’s inflation warning drew a direct response from Trump. Following Schiff’s appearance on 'Fox and Friends Weekend' earlier this month, Trump posted a critique on Truth Social on December 6, calling him a “Trump-hating loser” and a “jerk,” while refuting claims of rising prices. Trump noted in his post that gas prices in some states had dropped to $1.99 per gallon and stated that prices “are coming down significantly.”
Schiff countered this claim, arguing that focusing on fuel prices overlooks broader affordability pressures. “Inflation is rising,” Schiff said, adding that “it has little chance of declining and will only rise.” He pointed to rising rents, insurance, and service costs as evidence that inflation remains deeply embedded in the economy.
In publicly responding to Trump’s remarks, Schiff stated that inflation is driven by policy choices made by successive administrations, not political rhetoric. “Biden has received a lot of ‘help’ in triggering the ‘affordability crisis,’ including ‘contributions’ from Trump during his first term, and instead of solving the problem, he is exacerbating it,” Schiff said. He concluded that the broader issue lies not in rhetoric but in monetary policy, warning that regardless of opposing claims, interest rate cuts and renewed balance sheet expansion could push inflation higher by 2026.
Silver Breakout Signals Release of Monetary Pressure
Schiff stated that the sharp movement of silver prices breaking through $66 per ounce reflects suppressed prices finally giving way to currency and supply-driven demand. He pointed out that surpassing $50 represents a decisive technical event, adding that once silver reaches $50, "there will no longer be any resistance."
Looking ahead to 2026, Schiff referred to the $100 silver target as "a very realistic goal," supplementing that prices could rise even higher if monetary instability intensifies. He also projected gold to reach at least $5,000, noting that silver’s growth often foreshadows deeper pressures within the financial system.
He believes that the substantial retail capital inflow into digital assets over the past decade came at the expense of gold and silver. He noted that this dynamic is reversing as precious metals begin to outperform.
The resurgence in strength of gold and silver reflects a broader rotation of capital from speculative narratives toward tangible assets, according to him.
Mining Stocks Lag Despite Record Profits
Despite strong performance by precious metals stocks in 2025, Schiff stated that mining equities remain undervalued relative to current metal prices. He emphasized that profit margins are at historic highs, pointing out that many producers mine gold at costs close to $1,500 per ounce but sell it for over $4,300.
"Even if metal prices retrace, their pullback levels would still be far above the prices currently reflected in these stocks," Schiff said. He anticipates that earnings growth in 2026 will force a revaluation across the entire sector.
Schiff cited increased dividends, stock buybacks, and potential growth in mergers and acquisitions as key catalysts, particularly among junior and mid-tier miners. He believes large producers may find it more economical to acquire proven deposits than to fund new exploration and development, thereby creating opportunities downstream in the mining value chain.
Dollar Risks and Potential Catalysts for 2026
Looking ahead, Schiff stated that the biggest risk in 2026 would be the loss of confidence in the fiscal and monetary credibility of the United States. He pointed out the possibility of failed U.S. Treasury auctions as a potential catalyst, which would force the Federal Reserve to intervene more aggressively as the buyer of last resort.
Although the specific trigger cannot be predicted, Schiff emphasized the importance of early positioning. “You need to have largely moved away from the dollar,” Schiff said, so that “when the crisis happens, you are not forced to react hastily.”
He also noted that if capital outflows accelerate, policymakers may attempt to impose controls, which he believes would further boost demand for physical gold and silver held outside the financial system.
Schiff indicated that 2026 is shaping up to be a year characterized by inflation volatility, balance sheet expansion, and capital outflows from crowded trades. As political rhetoric collides with market signals, he anticipates that precious metals and mining stocks will play a central role as investors navigate the next cycle.
Editor/KOKO