Economist Schiff warns: The US dollar, US Treasuries, and stocks may face a massive dumping. Can Bitcoin become a safe haven?

The U.S. market is shrouded in the potential shadow of a triple blow, as the convergence of inflation risks, tariff threats, and flawed fiscal policies could lead to a massive asset dumping. Economist and gold advocate Peter Schiff posted a series of messages on the social media platform X on July 5, warning that a new round of tariffs could trigger market turbulence and urging investors to prepare for the impact. He predicted that the dollar, government bonds, and stocks would face a sharp decline, which would be the "reciprocal" tariff effects that the market has not yet fully reflected.

1. Trade Tensions and Tariff Threats: The Trigger for Market Volatility

Schiff warns: "Prepare for a repeat of the sharp fall in the dollar, government bonds, and stocks as investors realize that 'reciprocal' tariffs will make a comeback." He believes these tariffs may not be as high as during the initial imposition, but will be significantly above the levels expected by bargain buyers of stocks and bonds. The gold supporter pointed out that the market has not fully reflected the impact of reimposing trade restrictions, echoing concerns from earlier tariff escalations.

He also challenged President Donald Trump's recent statement regarding the trade agreement with Vietnam. Trump stated that the agreement would impose a tariff of 20% to 40% on Vietnamese goods. Schiff rebutted this logic, explaining, "Vietnam will not pay us anything. If Americans buy Vietnamese-made goods, they will pay 20% to 40% to the U.S. government, while Vietnamese do not need to pay anything to their government when buying our goods." His remarks highlight the economic burden on American consumers, rather than foreign exporters.

2. Structural Defects of Fiscal Policy and Inflation Risks

In terms of fiscal policy, Schiff believes that Trump's tax cuts are structurally flawed because they do not address the supply-side issues of the economy. Economists warn that such measures will ultimately put pressure on the economy: "On the contrary, they will lead to higher long-term interest rates and inflation."

Schiff emphasized that sustainable growth requires incentives for savings and capital investment, rather than just short-term consumer stimulus. His view differs from those who advocate for demand-side intervention, but it highlights the deepening divide on how to respond to economic headwinds.

Schiff criticized the fiscal and monetary policy approaches of both parties, stating that these policies could exacerbate the dollar's weakness. He particularly criticized Trump's tendency to lower interest rates to reduce government financing costs, arguing that cutting spending is a more effective way to address the underlying issues.

3. Bitcoin vs. Gold: Who is the Effective Hedge Against a Weakening Dollar?

Economist Peter Schiff questioned Coin Edition's assertion that Bitcoin is an effective hedge against a weak dollar. The dollar index has fallen below 96.5, prompting Schiff to issue a warning that consumer prices could rise in 2026 if the Federal Reserve does not intervene immediately.

Schiff believes that gold, rather than Bitcoin, will benefit from the continued weakness of the dollar based on historical correlations and market behavior. He argues that Bitcoin's negative correlation with gold undermines its effectiveness as a traditional safe-haven asset during periods of currency depreciation. The economist claims that buying Bitcoin not only fails to alleviate the burden on the dollar but actually adds pressure to it. In his article on June 29, he pointed out that "dumping the dollar to buy Bitcoin is putting pressure on the dollar," and stated that investing in Bitcoin is a waste of money and harmful to the country.

This viewpoint is in stark contrast to that of cryptocurrency advocates, who position Bitcoin as digital gold, a means of storing value independent of traditional financial systems. Coin Edition's response points out that the limited circulation and decentralization of Bitcoin are advantages over fiat currencies printed and managed by central banks. They also believe that the increasing volatility of fiat currencies favors Bitcoin as the ultimate value proposition of a "sound currency," making it immune to central bank control.

Peter Schiff believes that gold will perform better during a period of dollar weakness, a view supported by historical precedents. Schiff did not analyze in detail the other assets he expects to benefit from a weaker dollar apart from precious metals. This controversy highlights the potential differences in asset correlations during times of monetary stress. Traditional economists like Schiff focus on historical cases of gold performance during periods of dollar weakness, while cryptocurrency advocates refer to the monetary characteristics of Bitcoin. The decline in the dollar index provides an opportunity for supporters of gold and Bitcoin to observe real-world behavior during times of currency weakness.

Conclusion:

Peter Schiff's warning has sounded the alarm for the US market. Trade tensions, flawed fiscal policies, and the potential weakness of the dollar collectively pose a potential triple threat to stocks, bonds, and the dollar. He emphasized that the market has not fully reflected these risks and predicted that a massive dumping is imminent. In the debate over Bitcoin versus gold as a safe-haven asset, Schiff firmly stands on the side of gold. This controversy highlights the challenges and choices investors face in asset allocation in the current complex economic environment.