- Foreign nations dump U.S. Treasuries, pushing yields higher and increasing pressure on the U.S. Dollar.
- A potential debt spiral looms as rising interest costs strain the U.S. economy.
- Investors turn to hard assets like Bitcoin and gold as hedges against inflation and currency risk.
The global economy is in shambles right now, as the US Dollar risks losing its status as the world’s ultimate reserve currency. The situation along the Strait of Hormuz, which is basically the world’s most important oil choke point, is getting even more tense.
Because Iran is getting threatened with complete demolition by President Donald Trump, that passage is closed, and 20 million barrels of oil a day are stuck.
Foreign Countries are Selling U.S. Debt
This matters for your crypto bags because oil is priced in dollars. Foreign countries like China and Japan need that oil, but since the gates are locked, they are desperate for cash. To get those funds, they are dumping their US Treasury bonds at speeds we haven’t seen since 2012.
As of the time of writing, the US10Y yield is 4.297%, according to CNBC. When everyone begins to sell these bonds, the yield (the interest rate) goes up.
If the 10-year Treasury yield hits that 4.6% to 4.8% danger zone, the U.S. will likely enter a debt death spiral.
The US is $40 trillion in debt, and, hence, when rates go up, the interest on that debt becomes so expensive that the government has to borrow even more just to pay the interest, which makes rates go even higher. It’s a never-ending loop of pain that ultimately trickles down to the common citizen.
Fed Likely to Turn on the Money Printer Soon
The Fed has three choices, and most of them are not really lucrative. They can let the market crash, or they can walk away (the Suez Canal moment where the US Empire basically ends), or they can start printing money again.
Printing money to save the bond market is the most likely move, but that leads straight to double-digit inflation or stagflation, where your dollars will buy fewer items.
The bottom line is the U.S. is losing its grip. If it cannot protect the oil lanes, countries will stop using the dollar for trade. That’s a major skill issue for the US Treasury.
Investors who want to protect their wealth might want to look into real assets like physical gold, silver, or self-custodied Bitcoin, so the central planners cannot just delete their net worth with a button.
