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Japan is Going Bust… and the U.S. is Not Far Behind
Phoenix Capital Research ^ | 05/21/2025 | Graham Summers

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.

  1. Defend the bond market.

  2. Defend the U.S. dollar.

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.


TOPICS: Business/Economy; Government; Society
KEYWORDS: debt; japan; spending
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To: SeekAndFind
would add $3.8 trillion to the federal deficit over the next decade.

throwing out numbers without telling us how much of that is allowing current tax law to continue and not sunset are worthless.

21 posted on 05/23/2025 8:17:21 AM PDT by stig
[ Post Reply | Private Reply | To 20 | View Replies]


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