Warning: The World is Beginning to Shun U.S. Debt
Posted February 11, 2021
The single biggest problem in the financial system is the fact that Treasury yields continue to rise.
The yield on the all-important 10-Year U.S. Treasury continues to rise with few, if any, significant pullbacks. The last time we talked about this yield, it was 1.10%. It’s now at 1.2%.
Let’s take a step back here for a moment. This chart is telling us that the yield on the 10-year US Treasury has more than doubled since August.
This is a BIG deal, particularly when you consider that this trend is likely to continue. Indeed, when you look at the long-term chart, there doesn’t appear to be any kind of resistance until the yield gets to 1.5%.
As you can see in the chart above, the 10-Year yields have previously traded at this level in 2019, 2016 and 2012.
The big difference between now and then is the U.S. now has over $27 trillion in debt. It only had $22 trillion, $19 trillion and $16 trillion on those other dates, respectively.
To see yields double in six months when you’ve got $27 trillion in debt is FAR more disturbing than when you’ve got $22 trillion or less. And what’s even more disturbing is the fact that yields are rising for the 20-Year U.S. Treasury…
…as well as the 30-year U.S. Treasury.
Bond investing is a very complicated thing. So the simplest interpretation of these charts is that the bond market is saying, “I don’t want ANYTHING to do with long-term U.S. debt. If you want me to fund your outrageous debt levels, you’re going to have to pay me a LOT more in yield.”
This is EXTREMELY dangerous, particularly when you consider that the U.S. is going to run a $3 trillion deficit this year, AND the Biden administration plans to spend $1.9 trillion in stimulus, $2 trillion for infrastructure, and $1.7 trillion to fight climate change.
Put simply, the U.S. already has a MASSIVE debt problem. President Trump left office with the U.S. sporting a debt-to-GDP ratio of 130%. And President Biden plans on issuing even MORE debt than President Trump did.
This has the makings of a MAJOR crisis.
I’ll outline why in tomorrow’s article.
In the meantime, I’ve created a presentation that exposes the cracks that are forming in the financial foundation of our country. It describes, in detail, the epic failure of the Federal Reserve over the last 10-plus years. And outlines exactly where I believe our economy is headed. If you have a few spare minutes, you can watch it here.
Editor, Money & Crisis