Indications Of The Onset Of A US And Global Credit Crisis

Interest Rates Aren't Behaving

The Federal Reserve’s (Fed’s) $102 trillion (T) leaning tower of debt that it has created over the last 40 years is showing signs of an accelerating list.

The Fed announced last year it would be lowering the Fed Funds Rate starting on September 18, 2024, and yet the yield on 2-year, 10-year, and 30-year Treasuries are all higher today.

Now, the looming new BRICS ‘Unit’ currency that is backed 40% by gold, is threatening to expose the weakness of the US naked fiat dollar and associated US dollar (USD) denominated Treasuries and bonds forcing the hand of the US financial system. All naked fiat currencies are exposed.

With its April 2, 2025 tariffs announcement, it appears the Trump administration is now acting precipitously in an attempt to onshore production of as many goods and services as possible before importing goods and services in return for exported fiat currency becomes greatly complicated - it’s not all about merely balancing trade to maximize US growth.

The problem with a sudden rebalancing of trade is that the annual net exportation of $1.2T USD to the world (the US Current Account Deficit) will be stopped relatively suddenly.

This drying-up of exported USD represents a threat to offshore borrowers owing $12.7T of USD denominated debt who will find it increasingly difficult to source USD to pay the interest and principle, precipitating a credit crisis and potentially a currency crisis.

Countries holding reserves in the form of USD denominated Treasuries and other credit instruments will forced to sell such instruments to provide local liquidity and paradoxically forcing US interest rates higher by doing so - just what is not wanted in the Fed’s credit bubble addicted US economy.

The Weakest Credit Dies First

Before any credit crisis starts, the signals typically become most visible in the least credit-worthy debt instruments first.

In the last 5 trading days since the April 2, 2025 tariff announcement, the lowest credit rating junk bonds have seen their yields rise by 1.5% as can be seen in Figure 1 for CCC credit rated and lower US junk bonds.

Figure 1 - CCC & Lower US High Yield Bonds Interest Rates; source - St. Louis Fed,

and tradingeconomics.com

However, it is not just the riskiest bonds that are selling off and pushing their rates higher.

Since the April 2 tariff announcement, yields on longer duration US 10Yr and 30Yr Treasuries have also moved smartly higher by 40 bps and 51 bps, respectively.

Given that there are $8.5T of Treasuries held offshore, it would not be surprising to see selling of US Treasuries offshore impacting US rates.

Figure 2 - 10 Yr. Trsy. Yield (blue) vs 30 Yr. Trsy. Yield (green) vs S&P500 (red) vs Gold (gold) vs Silver (silver); source: TradingView.com

Continuation of the central bank fiat currency and debt bubble expansion, operated at an accelerating pace since 1987 with the Bank of England/BIS rigging of gold’s global price (as gold serves as a limiter of extended loose monetary policy), was always going to lead to a global bank, credit, and economic crash and associated social disorder.

Higher interest rates will initiate the termination of this age of paper and its abuse by central planners.

Best regards,

David Jensen