‘We’re all in debt’: Peter Schiff warns US economy depends on global lending. Here’s what that means for investors

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What happens when the world stops lending to the United States? That’s the question raised by economist and gold advocate Peter Schiff in a recent appearance on The Iced Coffee Hour, where he laid out a stark warning about the foundation of the American economy (1).

“We rely on the rest of the world to produce what we can’t,” Schiff said on the podcast, “And because we don’t really have any savings, we’re all in debt.”

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“When the world doesn’t do that, what do we got?” Schiff continued, “How does this economy function?”

Schiff has recently been vocal in his warnings about the direction of the U.S. economy. Just a couple of weeks ago, he wrote on X that, “We are headed for a full-blown financial crisis.” (2)

On the podcast, Schiff argued that the U.S. has grown structurally dependent on foreign capital — and the data backs him up. The U.S. uses foreign capital to finance its budget deficits and sustain economic growth, as domestic savings fall short of covering its investment spending (3).

This reliance is most evident in the fact that foreign investors hold $35 trillion in U.S. securities as of June 2025 (4), and that the U.S. received nearly a third of all global foreign direct investment from 2021-2023 (5).

If global demand for U.S. debt ebbs, borrowing costs could rise, and the dollar could weaken. Americans would feel the squeeze through higher prices and tighter credit.

For investors, it raises another question: How do you position yourself in a system that may be more fragile than it appears?

A worldwide buy-in

The heart of Schiff’s argument is that the U.S. economy isn’t just large, it’s uniquely dependent on global participation.

Unlike many countries that rely heavily on exports or domestic savings, the United States runs persistent trade deficits. It imports more than it exports, consuming goods produced elsewhere while paying for that gap largely through debt. In fact, the U.S. has run a trade deficit every single year since 1976, totaling about 3.1% of GDP in 2024 (6).

This works for the U.S. because the dollar sits at the center of the global financial system.

As the world’s primary reserve currency, the dollar is used in everything from international trade to central bank reserves. This is thanks to the Bretton Woods Agreement, which officially crowned the dollar as the world’s reserve currency and modified the gold standard so that only the U.S. dollar was directly convertible to gold for around $35 per ounce (in 1958) (7).

Now, countries accumulate dollars and reinvest them in U.S. assets, like Treasury bonds, effectively lending money back to the United States.

And if you squint a little, you can see that there’s a loop here: The U.S. buys goods from abroad, dollars go out, and then those dollars get recycled right back into American debt markets, rinse, repeat.

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An ‘exorbitant privilege’ and its risk

Economists have long referred to this setup as an “exorbitant privilege” — a term popularized in the 60s about dollar dominance (8). It allows the U.S. government to borrow at relatively low interest rates and run large deficits without the immediate consequences other countries could face.

However, that privilege comes with a condition: Trust.

If foreign governments, institutions or investors decide to reduce their exposure to U.S. debt for whatever reason, the system strains. Demand for Treasury falls. Borrowing costs rise. And the cost of maintaining that consumption-heavy economy shoots up.

A debt spiral

Schiff’s concern isn’t that lending will stop overnight. He’s worried that it slows down, gradually but materially.

If fewer buyers step in for U.S. debt, interest rates could rise to attract capital at the consumer level. The dollar would weaken as demand falls, and inflation becomes more persistent as the costs of importing rise.

For households, that means higher borrowing costs, more expensive goods and a tighter budget overall.

Even if Schiff’s concerns are only partially founded and the U.S. can’t rely on the world to keep financing its deficits, then the question isn’t whether the markets get volatile. It’s what’s going to hold value when confidence goes out the window.

All that glitters

Confidence in the dollar isn’t guaranteed forever, and that’s what Schiff’s warning is about.

That idea is part of why gold has long been viewed as a hedge against currency weakness and concerns about sovereign debt. When faith in financial systems falters, gold is the store of value that investors turn to for protection.

One way to invest in gold, which also offers significant tax advantages, is to open a gold IRA with Priority Gold.

Gold IRAs allow investors to hold physical gold or gold-related assets within a retirement account, combining the tax advantages of an IRA with the protective benefits of gold, making it an attractive option for those looking to potentially hedge their retirement funds against economic uncertainty.

To learn more, you can get a free information guide that includes details on how to get up to $10,000 in free silver on qualifying purchases.

In an environment where debt levels are high and global relationships are shifting, holding an asset that isn’t tied to any single government’s balance sheet may offer a layer of protection.

A finer asset

One challenge in today’s market is correlation — when stocks and bonds move together, achieving diversification becomes harder. In 1999, the S&P 500 peaked, and it took 14 long years to fully recover.

Today? Goldman Sachs is forecasting just 3% annual returns from 2024 to 2034. It sounds bleak but not surprising: the S&P is trading at its highest price-to-earnings ratio since the dot-com boom. Vanguard isn’t far off, projecting around 5%.

In fact, nearly everything feels priced near all-time highs — equities, crypto, you name it.

That’s why billionaires have long carved out a slice of their portfolios in an asset class with low correlation to the market and strong rebound potential: Post-war and contemporary art.

It may sound surprising, but more than 70,000 investors have followed suit since 2019 — through Masterworks. Now you can own fractional shares of works by Banksy, Basquiat, Picasso, and more.

Masterworks has sold 27 artworks so far, yielding net annualized returns like 14.6%, 17.6%, and 17.8%.

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In a world of macro risks, adding assets that are driven by entirely different factors could help smooth out portfolio volatility.

But if Schiff is right about structural imbalances, income-generating assets could become even more important.

Real assets

Real estate can also hedge against inflation and currency erosion, particularly when it generates consistent income.

Rental properties have long been a proven source of steady, passive income for high-net-worth investors. It’s no wonder that real estate accounts for nearly 25% of the typical family office portfolio.

However, the time, effort, and costs involved in managing and maintaining multiple properties prevent many from investing. So unless you’re a hedge fund titan or an oil baron, you’ve been shut out of one of the most profitable corners of the market.

That’s where mogul comes in. This real estate investment platform offers fractional ownership in blue-chip rental properties, which gives investors monthly rental income, real-time appreciation and tax benefits — without the need for a hefty down payment or 3 a.m. tenant calls.

Founded by former Goldman Sachs real estate investors, the mogul team handpicks the top 1% of single-family rental homes nationwide for you. Simply put, you can invest in institutional-quality offerings at a fraction of the usual cost.

Each property undergoes a vetting process that requires a minimum 12% return, even in downside scenarios. Across the board, the platform features an average annual IRR of 18.8%. Their cash-on-cash yields, meanwhile, average between 10% to 12% annually. Offerings often sell out in under three hours, with investments typically ranging between $15,000 and $40,000 per property.

Every investment is secured by real assets and is not dependent on the platform’s viability. Each property is held in a standalone Propco LLC, so investors own the property — not the platform. Blockchain-based fractionalization adds a layer of safety, ensuring a permanent, verifiable record of each stake.

Getting started is quick and easy. You can sign up for an account and then browse available properties. Once you verify your information with their team, you can invest like a mogul in just a few clicks.

Go bigger

Institutional investors have long looked to private-market real estate as a way to help stabilize their portfolios. The asset class offers a mix of potential tax benefits, regular cash flow, inflation hedging and returns that are less correlated with public equities.

Historically, individual investors haven’t had many options to access high-quality private-market real estate.

In recent years, crowdfunding platforms have opened access to a broader demographic, but outcomes often depend on factors such as deal structure, platform incentives and the sponsor’s expertise.

Lightstone DIRECT’s direct-to-investor model ensures a high degree of alignment between individual investors and a vertically integrated, institutional owner-operator — a sophisticated, streamlined option for individual investors looking to diversify into private-market real estate.

With Lightstone DIRECT, accredited individuals can access the same multifamily and industrial assets Lightstone pursues with its own capital, with minimum investments starting at $100,000.

These investments can offer potential cash flow and long-term appreciation, while also providing exposure to tangible assets — something Schiff and others often argue is critical in a debt-heavy system.

In the scenario where borrowing becomes even more expensive, assets tied to real-world demand could be more resilient than purely financial instruments.

The biggest takeaway here is not to panic. It’s to prepare. Diversification and a willingness to look beyond traditional portfolios could make all the difference in the years ahead.

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Article Sources

We rely only on vetted sources and credible third-party reporting. For details, see our ethics and guidelines.

The Iced Coffee Hour, YouTube (1); @PeterSchiff, X (2); Bureau of Economic Analysis (3); U.S. Department of the Treasury (4); Stone Oak Wealth (5); U.S. Congress (6); Investopedia (7); Policy Center for the New South (8)

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.