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Charles’ Note: In perhaps the most unsurprising “surprise” all year, June inflation numbers came in hotter than expected this morning. 

Headline consumer price inflation (CPI) increased 2.7% over last year, higher than the 2.4% jump in May and higher than the 2.6% economists expected. 

But I’m more interested in the “core” CPI number, which excludes food and energy prices. Those tend to jump around from month to month. This is where you can see the real underlying trend. 

And those prices are still trending higher. 

Core inflation came in at 2.9% in June, higher than the 2.8% recorded in May. 

Of course, this may only be a preview of what’s to come. As my fellow libertarian James Hickman points out, we have a real crisis brewing… one that is set to come to a boil in just eight years.

James is the co-founder of Schiff Sovereign, a lifelong entrepreneur and investor who’s traveled to more than 120 countries on all seven continents. He’s started, invested in, or acquired businesses all over the world. 

I won’t steal James’ thunder… but let’s just say you might want to hold on to your gold. 

Take it from here, James! 

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Crisis 2033 Is Eight Years Away… Are You Ready?

By James Hickman, Co-Founder, Schiff Sovereign

U.S. President Dwight D. Eisenhower was absolutely terrified of inflation.

That’s really saying something for a guy who had commanded Allied forces against the Nazis, faced down the Soviet Union during the Cold War, and overseen the dawn of the Atomic Age.

Sure, those threats might seem more serious than a 5% increase in the price of milk. But Eisenhower felt strongly that inflation was a matter of national security.

In a speech on May 19, 1957, for example, Eisenhower told the American public that inflation “weakens the foundation of our defense. We must maintain a dollar that holds its value, for without it, our ability to sustain our military strength and support our allies would falter.”

He wasn’t kidding. That same year the U.S. economy fell into recession, and plenty of politicians wanted to stimulate the economy by increasing government spending.

For example, Congress passed two “make work” bills (HR 9302 and HR 7441) designed to support the economy and boost employment.

But Eisenhower was true to his word. He felt that excess government spending and deficits would invite inflation… so he vetoed both bills.

Eisenhower’s resolve turned out to be right. The U.S. economy quickly recovered, and the recession ended in early 1958. The following year, inflation was only 0.7%.

In fact, inflation averaged just 1.4% during his entire presidency, with strong economic growth and budget surpluses.

Things started to change in the 1960s. John F. Kennedy admitted that he knew very little about economics and even confessed that he didn’t know the difference between fiscal policy (government spending) and monetary policy (the central bank’s control of the money supply).

Nevertheless, on June 7, 1962, President Kennedy announced his intention to pass a major tax cut.

At the time, Kennedy’s proposal was highly controversial. The U.S. economy was in good shape, inflation was low, and unemployment was low. So, the idea of passing a tax cut (which would almost certainly cause a budget deficit) was seen as reckless… even heretical.

Kennedy was assassinated before he was able to win enough votes in Congress. But his successor, Lyndon Johnson, took up the mantle and kept pushing for the tax cut.

He finally succeeded when the Revenue Act was passed in 1964.

The U.S. economy was in great shape that year. Growth was robust, the job market was heating up, and inflation was low. So, the government deliberately running a deficit to stimulate such a strong economy was still considered bizarre and unnecessary. But they plowed ahead anyhow.

At first the U.S. economy became a rocket ship, growing by a whopping 8.5% in 1965. Unemployment fell to just 4%. And inflation sat at just 1.9%. It was a hell of a year.

But the boom quickly started losing steam. Federal Reserve Chairman William Martin even gave a speech suggesting that the economic boom was unsustainable and might lead to a 1929-style crash.

President Johnson was furious. He even asked his Attorney General if he could fire the Fed Chairman. He couldn’t. So, Johnson instead tried to undermine Martin in every way possible… including pushing him to cut interest rates.

Investors were aghast at the public feud between the President of the United States and the Chairman of the Federal Reserve. But things only got worse.

Johnson began demanding that Congress increase military spending to fund the war in Vietnam. Yet he also wanted more spending for his “Great Society” domestic programs – welfare, Medicaid, federal housing assistance, etc.

Quite predictably, the U.S. federal deficit ballooned as a result of so much spending. So did the federal bureaucracy, with dozens of new laws, thousands of new regulations, and hundreds of thousands of new federal workers.

Economic growth stalled (with GDP growth eventually falling to 0%). Inflation rose.

And investors – already uncomfortable given the feud between the White House and the Fed – became very pessimistic about the inflation and the deficits. So, they started demanding higher rates on U.S. government debt to compensate for the additional risk.

Bond yields on the U.S. government 10-year note, for example, rose from less than 4% when the Kennedy/Johnson tax cut was passed in 1964, to more than 7% at the end of the decade.

More importantly, foreign governments and central banks began losing confidence in America’s finances. The national debt was rising rapidly, and foreigners began selling (redeeming) their U.S. dollars and holding physical gold instead.

If this story sounds familiar, it should… because the circumstances are very similar.

The U.S. government passed its One Big Beautiful Bill (OBBB) on Friday, July 4, which is essentially a combination of the Kennedy/Johnson 1964 tax cut combined with Johnson’s enormous spending programs.

Granted the OBBB priorities are totally different – like cutting Medicaid versus spending more on it. But the end result is a massive deficit spending bonanza that the U.S. simply cannot afford.

It also comes at a time when the U.S. economy is in reasonable shape and in no need of government stimulus. This deficit will likely invite more inflation and higher interest rates, causing an eventual recession.

The White House and the Fed are in the midst of their own public feud – which has shocked investors.

And foreign governments and central banks have been swapping their U.S. dollars and Treasury holdings for gold at a record pace – pushing gold to an all-time high.

The government’s pitiful finances in the 1960s resulted in the painful stagflation of the 1970s. 

Unfortunately, the extreme irresponsibility of the 2020s may result in something much worse.

At least back then, the U.S. government only spent around 10% of tax revenue to pay interest on the national debt.

Today it takes nearly 25% of revenue. 

By 2033, it could easily take 40% to 50% of tax revenue just to cover the interest bill.

2033 is crucial because that’s the year Social Security’s major trust fund will run out of money and require a multi-trillion-dollar bailout. It’s an extremely predictable crisis.

Look, I’m all for tax cuts. They’re clearly linked to more robust economic growth… which the country desperately needs right now.

But tax cuts are pointless if they’re not accompanied by serious spending cuts and major reform – like overhauling immigration, fixing Social Security, and slashing federal regulations.

So, if we’re being intellectually honest, it’s important to acknowledge that this OBBB brings the country even closer to Crisis 2033. It’s eight years away, at best. Are you ready?

To your freedom,

James Hickman

Co-Founder, Schiff Sovereign