U.S. Interest Expense Just Hit $1.6 Trillion Annually. Peter Schiff Warns a Dollar Crisis Arrives When It Hits $2 Trillion.

Peter Schiff has been sounding the alarm on U.S. sovereign debt for years, and his latest warning on The Peter Schiff Show Podcast segment titled “A Complete Meltdown Is Coming” sharpens the math behind why he thinks the next chapter ends in a dollar crisis. The numbers he is citing this time line up uncomfortably well with what the Treasury yield curve is actually showing in real time.

Even though Schiff is obviously a permabear, he will eventually be right on one of his calls. Whether you disagree with him or not, it’s worth reading his take since he is deeply influential and can cause other market players (including your golfing buddy) to make drastic investing decisions.

His headline figure: “Interest expense exploded by 44% in just one year. The US government is now spending $1.6 trillion a year on interest.” To put a frame around that, Schiff offers a striking historical anchor: “In 1997, the entire budget of the federal government was $1.6 trillion. So we are now spending in interest alone as much as the entire government spent as late as 1997.”

The 30% Tipping Point

Schiff’s projection gets darker from there. He claims 30% of all federal tax revenue now goes solely to servicing interest, and he forecasts that figure climbing to 40% by next year as trillions in low-coupon debt issued during the zero-rate era hits maturity and rolls over at today’s yields. His refinancing window assumption: “somewhere between 4 and 5%.”

That is not a wild assumption. The Treasury curve as of June 12, 2026 shows the 2-Year at 4.09%, the 5-Year at 4.21%, the 10-Year at 4.48%, and the 30-Year at 4.97%. The 10-Year sits in the 89.2 percentile of its 12-month range, with a high of 4.67% on May 19, 2026. Every coupon issued at 1% or 2% during 2020 and 2021 that matures into this curve resets the federal interest bill higher.

Why $2 Trillion Is His Line in the Sand

Schiff pushes the projection to its conclusion: rolling that low-rate paper at current yields pushes annual interest costs past $2 trillion. At that level he calls the outcome “a complete meltdown, a sovereign debt crisis, a US dollar crisis.”

He grounds the warning in real-time deficit data. Per Schiff, the May 2025 deficit hit $292 billion, up 32% from $215 billion in May 2024, and $133 billion in monthly interest payments is now the running rate. He invokes former Treasury Secretary Hank Paulson, who he says has already called for a “break the glass plan” for the day foreign buyers stop showing up at auction. Schiff’s view: “looking at the data, they should already be balking at buying our bonds.” You can hear the full segment on Schiff’s podcast feed.

The Fed Has Already Started Cutting

Here is where the dynamic gets interesting. The Fed Funds upper bound is currently 3.75%, down from 4.5% a year ago, and held at that level since December 11, 2025. Yet the long end of the curve refuses to follow short rates lower. The 30-Year sitting near 5% while the Fed cuts is exactly the bond vigilante dynamic Schiff has been describing.

Meanwhile, M2 money supply hit $22.80 trillion in April 2026, the 90.9th percentile of its 12-month range, and CPI just printed a 334.0 reading for May 2026, also at the 90.9 percentile of the trailing year. Expanding money supply, sticky inflation, and a refinancing wall is the combination Schiff says forces the Fed to monetize debt rather than fight it.

What to Watch

Treasury auction tail data, the foreign holdings TIC report, and the monthly Treasury Statement are where Schiff’s thesis either confirms or falls apart. If you believe his projection, the playbook tilts toward hard assets, non-dollar exposure, and shorter-duration Treasuries that reprice quickly. If you believe the dollar’s reserve status still buys decades of runway, the same data looks like cyclical noise.

Schiff’s $1.6 trillion to $2 trillion arc is a forecast, with the usual caveats that forecasts carry. But the curve, the CPI print, and the M2 chart line up with his case. The window he keeps pointing to is the gap between a $1.6 trillion interest bill we already have and the $2 trillion one he says is coming.

For me, I’m not changing any of my investing decisions based on his points. My time horizon is enormous and I’ve seen him make seemingly monthly calls like this for the past decade.