Posted on 05/22/2025 9:57:24 AM PDT by SeekAndFind
As we keep warning… a debt crisis is coming.
The first round appears to be striking Japan, which is the grandfather of monetary insanity. Japan first introduced Zero Interest Rate Policy (ZIRP) and large-scale Quantitative Easing (QE) programs nearly a decade before the Fed or other major central banks introduced similar policies. As a result of its near-nonstop interventions running for 25+ years, Japan’s Debt to GDP is over 200% and its central bank’s balance sheet is equal to 90% of the country’s GDP.
As I noted yesterday, Japan finally appears to be losing control of its debt markets. Yields on the all-important 10-year Japanese Government Bonds are exploding higher, at a time when the country needs to service a truly gargantuan amount of debt. Simultaneously, investors are beginning to shun the long end of Japan’s bond market with the country just experiencing its worst bond auction since 1987!
Japan is not the only country that will soon find itself facing a debt crisis. The U.S. is well on its way as well.
For all its talk of cutting spending and balancing the budget, the Trump administration is running the same playbook the Biden administration used from 2021-2024: spend, spend, spend!
The “Big Beautiful Bill” that the Trump administration is championing will increase the U.S.’s fiscal deficit by nearly $4 trillion over the next 10 years. There is little to any actual cuts in spending, and all told the bill is expected to add at least $3 trillion to the debt (which is already at $36 trillion with the U.S. running a Debt to GDP ratio of over 120%).
How will this play out?
A debt crisis will hit when the bond market finally revolts against the U.S.’s spending, just as it is doing with Japan today. At that point, the Fed will have to choose.
Choosing #1 means the system remains intact and functions, albeit with higher inflation. Choose #2 means that bonds collapse and the financial system experiences a debt crisis that would make 2008 look like a joke.
Which one do you think the Fed will pick?
This is why gold and other inflation hedges are exploding higher: these assets have figured out that there is NO WAY out of the current situation that doesn’t involve a mind-blowing amount of money printing. Heck, the U.S. dollar has already lost over a third of its purchasing power since 2008… and the debt crisis hasn’t even hit yet!
There is a limited amount of time to prepare for this. And smart investors are already taking steps to make sure they’re ready for when it hits.
An important thing to remember: If Zimbabwe goes bust, or Argentina, or Japan, it’s a very bad thing for them. If the US goes bust, it is a very bad thing for the world.
True. However, Argentina seems to be going in the right direction. I’m not sure if we are ( see recent big so-called beautiful bill, which doesn’t control unnecessary spending ).
I was all excited about the “no tax on tips” bill until I saw the details. To me, “no tax on tips” means you don’t have to claim tips at all. i.e. it puts them outside the government’s swim lane. But nope. Overly complicated as usual.
My change: I’ll never tip on my credit card again. It’s all cash tips from here on out.
I’m putting a tip jar in our laboratory for us engineers.
I’m in Japan right now and they are fixing their issue by a weak yen. They are bringing in a ton of foreign money due to the weak yen and the high productivity. They didn’t fall victim to the covid pay to stay home game. They still work like they did pre-covid. So they had no drop off in productivity as the USA did.
Honestly I think the USA would go bankrupt before Japan does...they still work over here.
garbage statement with no reference. I will presume this is based on static scoring which is also garbage since much of the so called tax reductions come in the form of leaving present tax rules in place and not let them sunset and raise taxes.
You raise taxes you will kill the economy. GDP will go flat or worse decline. Debt to GDP ratio will go up making things worse.
If you read the debt to GDP ratio chart we are already down from the COVID highs. There was nothing that the Biden shadow regime did to accomplish that. Now President Trump is trying to put in place a pro growth agenda and we get all the debt hawks and gold bugs crying foul.
Gold also already went up significantly from over a year ago (Biden shadow regime has credit for that) we have come off our April highs in the 3400 range. So you have missed the lion share of the increase already.
Pass the big beautiful bill!
Put more than 10% of your wealth into Gold at your own risk (opinion not financial advice).
Income tax cuts are always good the more broad the better they are.
Even better would be to repeal the 16th amendment altogether (17th too while we are at it).
So far, so good, but what about government spending?
Revenue increases coming from the result of tax cuts won’t do squat if spending increases even faster. That’s what happened EVEN after the tax cuts of 2017.
Higher spending, higher deficits, higher deficits, either more debt or money printing.
Not expanding spending is enough for the first FY. The thing about military spending, it is limited by the amount of places to build the really expensive items.
What I have noticed is the cost of things that government wants should be going down with automation, with robotic production, with web interfaces to users of services, with less employees per work until but somehow the last 10 years the budget has doubled, and 70% of that is inside the beltway with middle management.
“going bust” is a relative term. The US Government can’t go bust, because the debt is denominated in a currency it can print.
But, holders of debt can demand higher interest rates, and/or the constant monetizing of new debt will create higher inflation.
Probably a mix of both.
I wonder if this is why the Federal Reserve has been buying up bonds lately.
I think they plan on defending the dollar and buying up bonds to shore the currency. They can sell stocks to buy the bonds if needed. That means stock prices will be stagnant for a bit, but if the US economy picks up, it might even out.
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I was very impressed how fast they repaired damage to roads & buildings from that powerful tsunami. Japan is amazing country.
Tell that to neocons and zeepers.
When voters figure out they can get more freebies by electing big spenders, it is beginning of end of a Republic. I am afraid we have reached that stage.
It really is. It is like 1950s America. People are polite and work hard
Wasteful Spending = Financial Irregularities
Elon still giving notices
There is not enough waste to cut that will make any significant difference. It's not really discretionary spending that is killing us. Additionally you will NEVER get a significant spending cut bill through congress. It's also all the entitlement programs that are the real problem and President Trump rightly understands that a majority of the voting public are dependent on them.
The only way out is to grow our way out of this. You will never get to a point where we are debt free. If we are lucky a growing economy may get us to a few balanced budgets 10 years from now.
GDP has to go up significantly over the next 10 years. Guess what the Federal Reserve will fight it every step of the way. They hate fast growth because they think it's inflationary. This is why President Trump is starting to complain about the Fed and the Fed chair.
So for you people who think it's spending, stop it. You are falling into the trap of the lame stream media. You would need large majorities of both houses of congress with representatives that wanted to cut spending. That is never going to happen. You will never get a congress that will cut spending in any significant way. So stop with the whining on Spending.
Pro growth, reshoring manufacturing (vital for defense and our security), tariffs to encourage FAIR trade (NOT FREE TRADE), low or NO income taxes.
“It’s all cash tips from here on out.”
I’ve been doing that for a long time.
As for how to pay for all this, here’s the plan... Just raise the federal debt limit again... ( where have we heard this before?)
The bill proposes raising the debt ceiling by $4 trillion...
If that doesn’t happen, the federal government will be unable to pay its bills as an already $36 trillion in federal debt continues to snowball. Several analyses project the bill, as written, would add $3.8 trillion to the federal deficit over the next decade.
Turns out, the once-promising Department of Government Efficiency’s projected $150 billion in cuts for fiscal 2026 is nowhere near enough to make a big difference. We, the taxpayers, will bear the inflation burden in the future.
Some things, it appears, will never change.
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