The U.S. is heading in the direction of a debt disaster.
It’s been heading in the direction of one for years… however the large rise in Treasury yields could lastly be the match that lights the fuse.
I’ve written extensively in regards to the rise in Treasury yields over the previous few weeks. I’ve primarily achieved this from the attitude of yields rising resulting from inflation… which triggered the bear market in shares.
Nonetheless, it’s value noting that this rise in yields has one other way more systemic consequence. That’s: the U.S. is now paying a WHOLE LOT extra on its debt.
Contemplate the next…
On Monday, the U.S. issued $48 billion value of six months T-Payments.
This time final 12 months, primarily based on the place yields have been, the U.S. would pay simply ~$180 million in curiosity on these bonds.
At the moment, it’s going to finish up paying ~$1.3 BILLION.
This is only one instance. However this situation will apply to ALL new money owed the U.S. points going ahead: larger charges will imply larger debt funds.
And keep in mind, the U.S. has over $31 trillion in debt excellent… and is including to this mountain through its $1+ TRILLION deficit this 12 months.
So we’re speaking about larger debt funds on a mountain of debt that may must be rolled over or paid again someday within the close to future.
In the meantime, buyers are piling into shares as if a brand new bull market has simply begun. Regardless of the 20% drop final 12 months, shares proceed to commerce at a market cap to GDP of 150%+. To place this into perspective, it’s roughly the identical stage that the markets hit relative to GDP on the PEAK OF THE TECH BUBBLE!
Oh… and by the way in which… our proprietary Bear Market Set off… the one which predicted the Tech Crash in addition to the Nice Monetary Disaster… is on a confirmed SELL sign for the primary time since 2008.