As the U.S. plunges further into debt beyond a staggering $27 trillion, the dollar’s time is running out. But the problem is much deeper than that.
With inflation on the rise, and long-term bond yields rising in concert with massive debt, some disturbing scenarios could develop that spell trouble for the dollar.
The most disturbing possibility on the horizon could develop in the huge bond market (about $500 trillion in size). According to the January 14 issue of One Last Thing by Three Founders Publishing, if it were to collapse, the result would be catastrophic:
“If Treasuries begin to collapse, forcing yields through the roof, it will result in crashes in stocks, real estate, corporate bonds, and municipal bonds all at the same time.”
So let’s take a closer look at what’s happening, which could bring the possibility of a Treasury market collapse or other troubling financial realities closer to the near-term.
Starting with the U.S. Dollar
The value of the U.S. dollar rose 0.55% on Monday, January 11, and that was enough for Barron’s to trumpet, “The Dollar Is Rising.”
That’s a misleading headline. The dollar’s gain vanished quickly. Furthermore, the dollar’s value has remained fairly steady since 2015. In fact, the dollar has yet to come near its most recent peak in 2002.
Barron’s explained the fall of the dollar from March until the recent uptick:
The dollar has fallen by double-digit percentages since March because economic growth is expected to rebound faster globally than in the U.S. this year, while the Federal Reserve has slashed short-term interest rates to near zero. That has reduced the appeal of dollar-denominated debt, limiting overseas investors’ need to buy greenbacks.
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