Will The US Debt Get Worse?

Speaker 1: 00:00 If the debt can't be canceled and it's not going to be paid off, well then, is this just slowly going to keep getting worse, or will something actually break?

I want to show you a tweet from someone who spent 30 years trading U.S. interest rates, but his answer is yes, this breaks, and probably very soon. The 30-year rate is at 5.6% right now. He says that we will soon see 6%, maybe 7%, and within the next six months, we find out what it looks like when the Treasury market breaks.

His whole argument basically comes down to this idea of what's called a fulcrum, right? The fulcrum is the point in the middle that everything sort of balances on. Now, in the financial system, that is the U.S. Treasury market, aka the bond market. Every loan, every mortgage, every stock price depends on it. And his rule as a trader is that you never mess with this fulcrum. But we did.

How is the U.S. stock market worth more than every market in the world combined? His answer is the U.S. got access to cheap money, leaning on the bond market, which was effectively fueled by the most rock-solid, stable asset in the world: real estate. So the bond market holds up everything. And who was holding up the bond market? For a long time, it was China.