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Presumptive Republican presidential nominee Donald Trump just revealed an inconvenient truth about U.S. debt, the outspoken and often controversial Peter Schiff told CNBC in a recent interview.

Last week, Trump joined CNBC's "Squawk Box" to discuss a wide range of topics including U.S. debt, interest rates and replacing Fed ChairJanet Yellen. It was Trump's comments about potentially renegotiating the more than $19 trillion in U.S. debt and the sensitivity surrounding higher interest rates that raised eyebrows.

While some observers argued that Trump's approach could betantamount to a debt default, Schiff told CNBC the GOP nominee was fundamentally correct in his observation.

"Trump just admitted on CNBC that America has too much debt to afford a rate hike, and that he wants our creditors to accept less than 100 cents on their Treasuries," the Euro Pacific Capital CEO explained on CNBC's "Futures Now" last week. "In other words, Trump knows a U.S. government default is inevitable."

Last year, the widespread belief that the Federal Reserve would tighten monetary policy unsettled markets. Recently, soft economic data and turmoil around the globe have softened expectations of a rate hike. Still, Schiff said an eventual rate hike could leave the world's largest economy exposed to a growing risk.

"If rates go up, refinancing [debt] doesn't help. The only thing that helps is restructuring," said Schiff, who compared the situation to the crisis in Puerto Rico.

The commonwealth "can't pay because they are broke, well math applies on the main land just like it applies in Puerto Rico, we can't pay either," he said. "And if interest rates go up Donald Trump is right, we have no choice than to tell our creditors they are taking a big haircut," he added.

- Source, CNBC

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