## When economic strength masks monetary alarms: is Peter Schiff right?

The contradiction between current economic results and long-term structural concerns is becoming increasingly evident. On one hand, fresh macroeconomic data indicate vitality; on the other, experts like Peter Schiff warn that the foundations of the financial system are in crisis.

### The market reacts to good news but is undermined by doubts

Recent economic readings exceeded forecasts – a GDP growth of 4.3% compared to an estimated 3.3% signals a clear continuation of economic momentum despite persistent inflation fears and high borrowing costs. The (ISM) service sector indicators regularly stay above the 55 threshold, which traditionally signifies expansion and encourages investors to increase exposure to high-risk assets.

Historically, periods of such decisive economic activity have brought significant rises in stock and cryptocurrency markets. Bear cycles in 2017 and 2021 began precisely against the backdrop of strong signals from the real economy. Bitcoin typically experienced short declines of 4–5% following surprising data releases, then resumed growth.

### Peter Schiff and the hypothesis of deep threats

However, financier Peter Schiff presents an alternative view of this situation. His thesis is controversial: rising stock and securities prices mask something much more alarming – the erosion of faith in the dollar’s strength as a reserve store of value.

Schiff points to systematic signs of weakening currency position: rising public debt, decreasing savings rates, and increasing dependence on foreign investors. As an indicator of this loss of trust, he cites rising gold and silver prices, which, in his view, reflect investors’ subjective choice – a preference for safety over profit, even if it means sacrificing bond yields.

In Schiff’s scenario, when trust in the currency is finally undermined, dramatic processes may ensue: mass sell-offs of the dollar, forced interest rate hikes, sharp declines in bond valuations, and a lowering of living standards.

### Cryptocurrencies – both beneficiaries of growth and products of crisis

Bitcoin and other cryptocurrencies occupy an extraordinary position in this narrative. In conditions of strong economic growth, they serve as speculative instruments for investors seeking risk exposure. However, in the context of Schiff’s warnings, they also act as hedges against monetary destabilization – protective instruments for those losing faith in traditional value storage systems.

The paradox is that even Schiff’s criticism of cryptocurrencies – expressed in a dislike for decentralized assets lacking “intrinsic value” – simultaneously reinforces the fundamental thesis about their usefulness: precisely because the currency and financial system are failing, alternatives are emerging.

### Chain of effects for bonds, stocks, and daily life

If Schiff’s forecast proves accurate, the effects will spread across a broad front. Government bonds may become the target of a mass capital flight, which will raise their yields and lower their market value – meaning a tangible loss for current holders. Stock markets will feel the impact of tightening financial conditions and decreasing consumer purchasing power, which will hit corporate profit margins.

For the average American, this could mean a noticeable increase in debt servicing costs – mortgages, car loans, credit card payments. As the prices of basic goods rise simultaneously, disposable income will decrease, and living standards will deteriorate.

### Questions investors are asking themselves

**Does the rise in government bond yields always transfer to the average American’s portfolio?**

Almost always. Higher bond yields are the result of higher interest rates; commercial banks pass these costs onto borrowers. The first affected are those planning to refinance their mortgage or extend their car loan – they may face significantly higher payments.

**Under what conditions do cryptocurrencies gain importance?**

When traditional monetary security wavers. When investors begin to doubt central banks’ ability to control inflation, or when rising debt levels raise concerns about the currency’s future – then assets like Bitcoin, with a finite supply, become more attractive for those seeking an alternative store of value.

**Who will suffer the greatest losses in a dollar devaluation scenario?**

Holders of large portfolios of dollar-denominated securities – financial institutions, pension funds, foreign central banks – may face significant losses. For ordinary people, the pain will be more insidious: a slow decline in purchasing power, higher inflation, rising unemployment as companies cut investments amid higher financing costs.

### Conclusion: how much weight to give to both narratives?

Current economic data indeed suggest that the US economy still shows resilience. However, Peter Schiff’s warnings concern deep structures – long-term trends that will not change quickly. History shows that sometimes the economy appears strong just before a sudden shock.

For investors, this means considering both time horizons: the short-term trend remains supported by data, but the long-term portfolio requires protection against monetary risk – whether through gold or decentralized assets like Bitcoin.