Japan Just Triggered the $40T US Debt Crisis as Yields Hit 2007 Highs

A client called this week with a question that stopped me dead in my tracks. They wanted to know how high will gold go if foreign nations stop buying U.S. debt. And it's a great question, I'm sure many of you have it, and today we're going to look at what's going to happen to gold. But the reason why it caught my breath was because I've been coming on this channel for the last couple of years warning about de-dollarization, or a global move away from the dollar at the center of the global monetary system. I've been warning about how dollars are accounting for less total percentage of foreign exchange reserves. And I have been warning about how we are going to reach a crisis, a tipping point, where these nations will no longer be buying U.S. debt. And at that point in time, we will see any standard of living that we're accustomed to here in the United States, whether you're in the haves or the have-nots, go out the window entirely. And that is what brings us to today. With bond yields reaching a level not seen since 2007, and no, this isn't some boring economic technicality, I know people hear bonds and they start to glass over, but this impacts each and every one of us. So today, I want to walk you through some stuff I'm seeing, what exactly is going on, and let's start with framing it from that question from the client, because again, I thought it was a really good question. And I logged on this morning to X and actually saw my friend Mario Mineko64, shout out to him if you don't already follow him, he's terrific on YouTube, asking a question here on X. During the European sovereign debt crisis, 2009 to 2012, gold almost doubled from about 1000 to 1920. What do you think gold will do in the naysayant global sovereign debt crisis that will include the USA, Japan, Eurozone, and UK? Now, we're going to break down exactly what's happening with all those nations and why he's talking about a global debt crisis, but this is a very similar framing of a question to what I saw someone ask. And of course, we have to start this conversation with what's going on today right here in the United States. Now, in case you missed it this week, it came out that the 30-year treasury yield has hit the highest level since 2007, 5.19, okay? And that number is continuing to tick up, up, up. The reason why this is such a big deal, because you might go, okay, what is this 2008 all over again? Not necessarily, right? I'm not talking about the housing crisis and a derivative crisis, although that absolutely is in the works too, just in a completely different way. We're not talking about mortgage-backed securities this time, right? There are derivatives that are even larger. The total market is actually bigger than it was in 2007. Many people I talk to say, wait a second, didn't that go away? No, just because you don't hear about it or see it does not mean it's still in the shadows, very much so. But the reason why this is so scary is that essentially, yields are the interest we pay on our debt as a nation, right? So the higher the yield, the more we're paying on our debt. Now, since 2007, something very important has changed. And I don't know if anyone out there can tell me what it is. Let me know in the comments before I tell you, do you know what has changed since 2007 and why these yields are so terrifying? I'm gonna show you right now. This is a chart from Fred, right? The total public debt that we have, okay? Basically, we're almost at 40,000 today. So if we see 40,000 today, well, what about back in 2007? Over here, where were we? This was roughly eight, didn't mean to cross that out. This was roughly $8 trillion, $8 trillion in 2007 versus today, roughly $40 trillion. Think about what that means for anyone out there who's paid interest on a credit card. Imagine paying 5% on a balance of 8 trillion, right? We're not talking about a couple thousands or 10 thousands. We're talking about 8 trillion versus now paying 5% on 40 trillion. It is so much higher. And that is why right now our interest payments in the United States are more than what we spend on our total defense budget, okay? And the problem with this is that it's not just a US problem. We talk about the US debt all the time, but this is a global issue we're seeing. See here, if we look at globally, what's happening right now, these are 10 years, that's why you're seeing 4.67 instead of 5.1 for the US. Green normally means good, but green here means bad because it means the yields are rising. It means that there's less confidence in debt as a total, as a whole. So it's the US, the UK, Japan, Germany, Brazil, Russia, all green. And even the red, it's barely going down, right? So this is happening on a global level where we're seeing all these nations now having to offer even higher yields to just finance and service their debt. Look at these related articles here on Trading Economics. German, 30-year bond yield hits highest since 2011. UK, 30-year borrowing costs hits fresh 27-year high, right? This is not indicative of a healthy global economy. We focus a lot on the United States because it's home for me and home for many of our viewers. And of course, again, the dollar is the global reserve currency. So whatever happens to the dollar is going to impact everyone. But this is happening on a big scale. In particular, when we look at these different yields that are going up, there's been a lot of talk in the news this week about Japan. Now, Japan means a great deal to the United States for a variety of reasons. But the Japanese yield, what's happening right now with the 10-year, rose to 2.73%, its highest level since May 1997. The reason why this is so concerning is that the higher the yields go, the more that's being offered on the interest here, it's going to trigger bets on repatriation. You might be familiar with repatriation when I talk about it in a gold context, which is essentially nations repatriating their gold or bringing it home. The same could happen here with investors. So they would sell their US treasuries and instead bring that cash back on home. And it's something we're starting to see. There was a chart I liked here, right? So we're seeing investors pouring into these funds, right? This is going up, up, up. As the yields go up, investors say, well, the return's looking pretty good here at home. I actually think I'm just going to go ahead and do this. Now, why does that matter so much to the United States? Well, it matters because Japan is the world's largest predator. Historically, what they've done is they send all their investments overseas. And the United States, right, benefits. Here's the top foreign holders of treasury securities. The United States, number one is Japan. So you have the largest holder, the largest foreign holder of US debt. Now, in a situation where all of those funds could be bringing back home, back to Japan, what does that mean for the United States? At a time when our yields are already rising, it means we're going to have to offer even higher yields. So 5%, what we're seeing today, that's just the starting point. That's not the end point, right? Let's look at this. What do we have here? Japan's 30-year, okay? 4.1% on the 30-year. And if you remember, we had a carry trade issue before, right, where we saw all that fund go back to Japan. And what happened, right? We saw a stock market crisis that was narrowly avoided. Could have been a catastrophe, though. And now we're seeing these yields even higher. You know, how much time do we have, really, before we just wake up one day and everything globally has come crashing down? Because today, the world is so intertwined, including the stock markets, that if something happens in Japan, it's going to impact the United States and vice versa. And let's look here at the U.S., okay? If we look at the U.S. 30-year treasury bond, if we go, again, 5.17, okay? This is scary, you guys. This is spooky stuff. Let me see if I can get this back to 2007. Yeah, here we go. Look at that line. So it goes back to 2007. That was the last time that these yields were this high. Now, I just talked about foreign central banks, right, ditching the dollar, okay? It's not just Japan. China, obviously, has been doing this for a long time. And in fact, it's not just China either, right? And I think a lot of these nations have just been holding on, waiting to sell because they don't want to ruffle any feathers with the U.S. But if there is a war and if there is a global debt crisis, and the nations kind of have to go, well, we had to sell. We have to sell to protect ourselves. And the U.S. can't get mad at them. I mean, the U.S. could. But then you're going to see even more selling. It's going to spark a cascade effect. Because again, remember, this is a global issue that we're seeing with debt. If you look at that, yes, the U.S. has a ton of debt as a percentage of total GDP, right, of all advanced economies here. But it's everyone. It's everyone. There's actually a cool chart down here. Let me see. Right here where it shows. Net debt as percentage of GDP. Here's 100 percent of GDP. If you're above that line, it means that your debt is actually higher than the total of all of your economic output for the year. All goods and services for the year. See, Italy, Japan, the U.S., France, Belgium, UK is almost there, right? This is not good because globally we're having this issue, which brings us to where we started this with gold. What's going to happen to gold? Well, central bank gold buying stronger than official data suggests just this week. And I have a video coming out on this topic itself this Sunday, actually, because I thought it was very interesting. Basically, since August, what's been going on is that the official central bank gold reportings have been lower or the estimates have been lower than what central banks have actually been buying. This is because there really aren't any official reports. Nations self-report to the IMF. But Goldman Sachs and others have been able to estimate how much gold they're actually buying, and they've been seriously underestimating since August, revising it up 70 percent. Why are central banks buying so much gold? It's because they know that the monetary system that we live in right now, the dollar-based system cannot go on forever. And when the fiat currencies start to collapse, when this debt bubble pops, gold, physical gold, the reason why they're buying physical gold, there's no counterparty risk. You can't print more of it out of thin air, right? It's not political. If you have your gold, you're protected. They understand this. The ones printing the currencies understand this. So what I want to look at, because again, the question we started this, right, if we go back to Mario's question here and our client's question who called in, you know, what's going to happen to gold? Talking about 2009 to 2012, gold almost doubled from $1,000 to $2,000, basically. What's going to happen with the global sovereign debt crisis? That is the question, because there is no doubt, right, with everything we just looked at, we are in a global debt crisis. So what's going to happen to gold? When we look at the spot price of gold today, I often see people looking at it year-to-date or really, I would say, since January to today. And they focus on the fact that gold is down. And they say to me, well, gold's down, it should be up. We're in a war. Why isn't it up? What's going on, right? And I get it. Listen, I get it. Because with everything that's happening, you think, well, gold should be surging, right? But what I always say to people is, what happens when you zoom out? What happens when you zoom out and look at this chart? Yeah, sure, there's been a pullback. I'm not denying that. No one is, right? But ultimately, you can see when you zoom out what the real pattern is. And if you look at this chart too, I always think this is interesting. Let's compare it to U.S. debt. This is from last year. But U.S. debt, as U.S. debt continues to grow, what happens to gold's spot price? Okay, the same can be said on a global level. See, both go up together, right? If you're measuring gold against the failing fiat dollars, right, what's going to happen? Yeah, you're going to see that spot price go up. Demand is going to continue to go up. Because at the end of the day, this is going to protect wealth in a way that currency cannot. And that is the bottom line. Now, can I tell you exactly how much gold is going to be worth? No. But if you study currency resets throughout history, if you look at different currency resets, they often will show that gold will jump sometimes 6x in price, sometimes up to 10x in price. If you look at Venezuela, or if you look at Argentina, or if you look at Mexico, right, all of these countries who have had a currency collapse basically go to zero, get reset. And the dollar is on that trajectory. And it's not just the dollar, it's globally debt is on that trajectory. So while I can't tell you an exact price for gold, where we're going to be at the end of the year, or how much gold is going to be, all I can tell you is that history shows us and patterns show us what's coming next. Now, many people out there won't see it, or they don't want to see it. Because the reality is, is that if gold reaches by the end of the year or next year, if we see gold 6x, 10x, that's actually scary, right? It's scary. Now, I'm protected because I have my physical gold. I know many of you are protected because you have your physical gold. There are going to be a lot of people out there who lose everything. And then there's going to be a lot of people come out the other side on top with opportunity. Now, I don't know if you personally, if you're one of the ones watching right now who don't have physical gold and silver, or you have some, but you don't know if your strategy is correct for what's coming next. That's what we're here to help with. That's why that client called this week, right? When you call us, you have access to our expert analysts who are always here for you. Yes, we at ITM Trading, we sell physical gold and silver. But more importantly, even I think is making sure that you have that education, that you understand all of this that's going on, what's coming next, and how to best position. Because if you don't know what's coming next, how can you possibly prepare for it? So if you have any questions at all, we have the answers. You can always call us at the number below. You can scan the QR code to set up a time that works best for you. Or there is a link down below in the description too, where you can set up a time to talk to one of our expert analysts. Call us with your questions. We love to hear them. That is what we are here for. And as always, thank you so much for being here. I'm Taylor Kenney with ITM Trading, your trusted source for all things gold, silver, and lifelong wealth protection. Until next time.