The Government is Planning a Debt Reset

The U.S. needs to sell a quantity of debt that the world does not want to buy. That is a quote from Ray Dalio, billionaire investor and founder of the world's largest hedge fund, Bridgewater. And if we just look around at what is happening right before our eyes in the world today, that seems spot on. But right now, the Treasury is trying to work through a plan in order to reset this debt crisis, the $40 trillion debt bomb. That is spiraling out of control. And don't get me wrong. This reset plan has nothing to do with some grand conspiracy or some 5D chess in order to engineer prosperity. The plan to deal with this debt crisis is one out of necessity. They must force a fix if they want to avoid catastrophe. So I'm going to show you exactly what the problem is. I'm going to show you their multi-pronged approach to try and reset this debt crisis. And then number three, share with you what I think I think the most likely outcome. of their plan. First up is the deficit. This is the amount of money that the United States is forced to borrow. Because they spend so much more than they take from us in taxes. Right now, it's running about $2 trillion per year. And if you look at this on a longer term chart, you can see that this is not slowing down. In fact, it is accelerating. There are some years where the deficit does get a little bit better. But longer term, it is just getting worse. That means that the total amount the government has borrowed has now surpassed $40 trillion. And it is growing by approximately $2 trillion a year. This is a problem because they have to pay interest. And over just the last couple of years, the interest cost on the debt has absolutely exploded, reaching almost $1.3 trillion per year. And interest rates are going up, especially recently, which means that the cost of that debt for the government is growing every year because of two things. Number one, the cost of that is growing because the actual total amount of debt is growing. But number two, the cost of that debt is growing because the interest that they are being charged on that debt is growing. Every year, this is like loading up more and more on your credit card every single year, despite the fact that your interest rate is growing. This would be an only thing, which is that your minimum payments would continue to climb. And that's exactly what is going on with the government. Now, one reason why interest rates are going up, especially so much and recently, is basically because lenders are going away. There are simply not enough dollars in the system and lenders globally that want to lend their money to the government, especially long term. And so with less buyers of government debt, a government appetite for borrowing still growing, it means interest rates have to rise. And this is not a new thing. Foreign investors in U.S. debt have been shrinking for quite some time now. In fact, foreign holders of U.S. debt as a share of the total publicly held debt. Peaked back in the Great Recession, and it has been declining since then. You can look at this another way by looking at a chart that shows the total foreign holdings of U.S. debt versus the total national debt pile. One is clearly accelerating much faster than the other. And so foreign lenders are drying up. So the government can no longer rely on foreign central banks and borrowers around the world like it used to be able to. Now, look, guys, you know that I do not give out personalized investing advice on this channel, but midterm elections are coming up right around the corner. If you buy a single stock, Bitcoin, or ounce of gold before the election, I think it's possible you could be making a very big mistake. And that is because the IMF recently released a strange paper that could have devastating consequences for your money. This paper is called the Coming Great Repression. Not a recession, not a depression, a repression. You see, in a recession, the economy suffers publicly. But in a repression, Washington makes you pay And the worst part is they do this without having to seize your bank account, without having to raise your taxes. Instead, they do it in a sneaky and sinister way by locking you into the dollar financial system. And then once they have you locked inside and they've prevented you from using your wealth to escape, then they inflate their debt away, making you pay the price. And according to this IMF paper, they already have the final chess pieces being put. into place. And so that is why I just recorded a free training for you to show you exactly what's coming and exactly what you can do about it. So you might be thinking, well, if it hasn't happened yet, how do you know how to play it? And it's because this has actually happened before. The financial repression playbook is something they've done already. In the past, and it wasn't simply people holding gold or traditional inflation hedges that came out ahead. It was people that made a very few specific moves. The moves that I'm making in my portfolio right now. So if you're interested in learning the exact things that I'm doing to prepare for the coming financial repression and what you can do to protect yourself as well, click on the link in the description below to access my 100% free training. And remember, this training is completely free. But time is running out because midterm elections are right around the corner. And depending on how the election goes, if you wait too long, it might be too late. So don't wait. Click on the link in the description below and access your training today. The government also used to be able to rely on the Federal Reserve to borrow from. And it did so quite extensively ever since the financial crisis. And every single time they needed it, the Fed would open up another round of QE, buy a bunch of government debt. And their balance sheet would rise. But that ended a couple of years ago. And despite the fact that the Federal Reserve's balance sheet has climbed a little bit in the last couple of years, it is nowhere near enough to compensate for the amount of debt that the government needs to borrow. So as a result of the largest buyers of U.S. Treasuries evaporating, the U.S. government is no longer able to borrow as much long-term debt as they would like to, which is forcing the Treasury now to be in a position where they simply will reduce the amount of bonds offered at those long-term auctions. In fact, some are saying that a reduction or perhaps even a cancellation of the 20-year bond is going to take place. But if the government can no longer borrow with long-term debt, they have to make up that borrowing somewhere else. This isn't them just borrowing less. They have to borrow from somewhere else. And so increasingly, the United States government has had to rely on the short end of the curve. They're borrowing more short-term debt that matures and is due to be paid back within a couple of months to a couple of years instead of the longer-term 10, 20, or 30-year debt. In fact, as it stands right now, almost 80% of the entire national debt matures in under 10 years. And that is only going to be accelerating, especially because now the Treasury is actively buying back its own long-term debt, paying it off early, and using new... Borrowed short-term debt in order to do that. In fact, just the last couple of months, the treasury has increased its long-term debt buybacks from 2 billion to 4 billion and now 6 billion, triple the normal level. Now, the reason they're able to do this is because so far there is still sufficient demand at the short end because a lot of the cash in the system behind the scenes is going into T-bills. When you have cash in a checking account, in a savings account, in a brokerage account, in a money market fund, in retirement account, Behind the scenes, that is all. being funneled into T-bills. And so even if you yourself are not a holder of government debt, if you have any dollars at all behind the scenes, they're being used to hold U.S. government short-term debt. But this is a problem in and of itself because it means that the total interest cost of the debt is far more dependent on what the Federal Reserve does with interest rates. Over the last three years, from September of 2023 until October of 2026, You can see short-term interest rates are actually much lower than they were three years ago. However, over that exact same time frame, you can see long-term interest rates like the 10-year yield are much higher. And that's true of the 30-year as well. Because the shorter term the debt is, the more influenced it is by the overnight rate, which is what the Federal Reserve sets. And so as the government moves more and more of its debt from long-term to short-term, it becomes more dependent on what the Federal Reserve does with interest rates. And if inflation doesn't get under control and the Federal Reserve has to keep on raising short term interest rates and it means the amount of money that the U.S. government has to spend just on interest on the debt will continue to skyrocket out of control, which means the government will have to borrow even more money just to cover the interest and the debt spiral continues to accelerate. So in summary, the big problem is that the government needs to borrow more and more and more, which means they need more and more and more lenders. And they need to do so at lower and lower and lower interest rates in order to afford it. But the way the situation is right now is that the government has to borrow more and more and more and more at higher and higher and higher costs because there are fewer and fewer and fewer lenders. So what is the government's plan to reset this and get themselves out of this position that they have put themselves in? We are looking at a five pronged approach. Number one, get the Federal Reserve to actually lower interest rates. Now, we all know that President Trump and former chairman of the Fed, Jerome Powell, We're not friends. Trump was very upset that Powell was not lowering interest rates for him, and so he was really hoping that the new guy he put in, Kevin Warsh, would lower interest rates for him. And now that that still has not happened, the administration and the Federal Reserve are at odds once again. The president said that the Federal Reserve Board is very hostile, very political, and is doing what he still can to try and pressure the Fed into lowering interest rates. But if inflation doesn't come down, the Fed probably will not do that. That's a problem because this administration also is saying that they are going to try and use inflation to pay for the debt, which is prong number two. In a recent statement, President Trump literally said that certain levels of inflation could help pay down the national debt very rapidly. The way this works is that the government is able to borrow money at today's purchasing power. And then later, when they need to get new dollars to pay that debt back, it's easier to get their hands on those dollars because there's a higher supply of them. Taxes are higher, GDP is higher, and so it's cheaper for them to get new dollars in order to pay off those old dollars. But you still need somebody to come in and actually be the lender and buy those treasuries. Which brings us to the third prong of this plan, which is to rely on new stablecoin. In a paper published by the treasury itself, you can see their projected increase in stable coin demand for treasuries. Back in 2025, stable coin issuers currently held a little under 1% of all treasuries outstanding. But you can see how quickly that demand was growing. And the majority of that was in T-bills. In fact, one stable coin, Tether, would be the 17th largest holder of US treasuries if it was a country. That one stable coin alone holds more treasuries than South Korea, Saudi Arabia, the UAE, and Germany. And this is a very, very quickly growing market, especially due to prediction markets. And this is because many prediction markets behind the scenes use stablecoins like USDC to hold the dollar deposits on their platform. Obviously, if you've been paying attention to everybody in your work office, to your friends' group chats, and to the ads you see online, prediction markets are growing insanely fast. And the reason why the government isn't trying to step in to stop this, and in fact, To encourage this is because behind the scenes, this ensures there's more demand going in to treasuries behind the scenes. But it's not just crypto and betting markets. This is a global market as well. So let's say you are stuck living in a country like Lebanon and your inflation rate just in August was 16.7%. Having increasing global access to digital payment systems and stable coins means you now have the ability to much easier Get your savings into the dollar. You don't care that it's maybe not keeping up completely with the inflation rate in the United States. It is doing far better than your local currency, and this is something that many analysts and researchers have noticed a growing trend around the world, especially in countries where they do not have the best currencies, and it is actively being encouraged. Prong number four is to deregulate the banks, because as I've harped on many, many times over the past couple of years, right now, banks are restrained from buying as many treasuries as they could or as they would because of regulation. Specifically, the regulation is called the supplementary leverage ratio, and it And it forces banks to buy some treasuries, but then dings their risk limits for doing so. And when this specific regulation was temporarily removed in 2020 and 2021, banks went on a buying binge, lent a ton of money to the United States government, and it drove interest rates lower. Now, this only lasted for one year. And so after that, They were forced to go back underneath the supplementary leverage ratio. But many people, like former Federal Reserve board member Stephen Moran, have pushed for completely and permanently getting rid of the supplementary leverage ratio because banks would be able to unleash their balance sheet capacity and buy more treasuries. And then the fifth prong of this plan is deregulation for the economy to make sure that it continues to grow. We haven't seen much deregulation yet, but we have seen a ton of pushback. against new regulation, especially in AI. Many of the AI companies like OpenAI and Anthropic have been begging the government to regulate them, but really that's just so that they can try and stop competitors because the more regulation that comes into a space, the harder it is for new upcoming. competitors and startups to disrupt and gain market share. This is why large corporations always lobby for more laws and more regulations because it protects them. So right now this five-pronged approach of getting the Federal Reserve to lower interest rates, using inflation to pay for the debt, increasing demand for treasuries through stable coins. Increasing demand for treasuries by deregulating the banks and helping the economy to continue to grow through deregulation or at least less new regulation is the approach that they're going to try and take in order to pay for their debt. not have it be such a large burden. Now, here is the likely outcome, how it plays out for you. Number one, the Federal Reserve is not going to lower interest rates with inflation high. And the number one cause of inflation being higher than it should be right now is oil. And the number one cause of oil price being high right now is the war. And so unless there is a decisive, definitive, and believable end to the conflict in Iran right now, oil will not be moving meaningfully lower. And if oil doesn't meaningfully move lower than the Federal Reserve, is probably not going to budge lower on interest rates. Number two, for inflating the debt away to work, the government has to be able to borrow beneath the rate of inflation. Right now, whether the government is borrowing at the short end at 4.3% or at the long end at 5.5%, they're currently paying more for their debt than the inflation rate. And this will not change unless you get some active buyer of government bonds like the Federal Reserve who does not care about their real return. If you get the Federal Reserve to start up QE again or do yield curve control, you probably won't see the government being able to borrow beneath the rate of inflation. Regarding stable coins, we're probably going to need something like the Clarity Act to actually finally pass. That will give the entire financial system the rules and regulations and the structure that it needs to be able to sort of shift a lot of demand into treasuries through stable coins. Now, it's worth noting that much of that new demand for stable coins would just be shifted, So it's not net new demand. In the system, outside of what it may bring in globally. And then for that last piece of the plan to work, which is GDP growth. We're really, really banking here on AI and robotics. For big production booms that we've had in the past, it has always resulted from a large increase in productive output, which usually corresponds with some sort of technological innovation, but it also is usually paired with a large boom in the productive workforce. Following World War II, there was a big boom because all the soldiers came home, a bunch of women entered the workforce, and so we had a bunch of new people who were working and being productive. The birth rate in America is below the replacement level, And so the only population growth that we have in America is from immigration and that has largely shut down over the last couple of years and so we are not getting a population growth in the United States anymore which means if we have a production growth that's only going to come from the technological side of things. In other words increasing our workforce or our productive output through machines and technology. Obviously all of this is not going to go as planned. Probably little pieces of this will help out, but if it doesn't help out enough, they are going to need some crisis as cover to force the Fed's hand. Because if none of that other stuff works, they will need to get the Federal Reserve to step in and start buying up treasuries again. And at the end of the day, we know that will always be their fallback plan. You can go back to the beginning of central banking and government will always... Sacrifice the economy and sacrifice the purchasing power of the currency in order to maintain its power. And as always, that will continue to be a tailwind for asset prices. Those who are betting on a crash are actually betting on deflation. And deflation is the one thing. That policymakers are absolutely committed to never, ever letting happen again. They will always err on the side of devaluation, always err on the side of inflation. Good for asset holders, bad for savers and wage earners. And they're okay with that because that just means more people are dependent on the government. And one last thing, you guys have heard me talk a lot about inflation and the current sovereign debt crisis that the US government is trying to deal with. And if you think those fears have been overblown, I want you to take a look at this, which is a paper that was just released by a team of researchers at the International Monetary Fund This is what they refer to as the coming Great Repression. In short, our government is currently making plans to lock as many of its citizens inside the dollar system as possible, block off your exits to protect your wealth from inflation through things like capital controls and financial repression to make you pay for it once they start to get going with inflating the debt away. And they are currently moving the final chess pieces in place. And the most important part here is that midterm elections are coming up. right around the corner and it's possible that once that happens they will start putting the guardrails in place to lock you inside the system that's why i've just created a completely free training for you to show you exactly what they are planning with financial repression exactly what they did the last time and how they're following the exact same playbook i'm going to show you exactly what i'm doing to prepare and protect my wealth and show you what you can do as well so if you're interested in learning about how to protect yourself from the coming So click on the link in the description below to access your training. Now remember, it is completely free, but midterm elections are coming up right around the corner. And once that happens, it is very possible that they start putting the final pieces in place for financial repression very quickly. So don't wait. Click below. I'll see you there. As always, thank you so much for watching. Have a great day.