American entrepreneur and investor Balaji Srinivasan has just published an article in which he warns us of an astronomical debt crisis that is inevitable. Are you ready for this $175 trillion financial tsunami?
A Debt Crisis Prophesied
Like Elon Musk, Ray Dalio or Jamie Dimon recognize it, The Western world is heading towards a sovereign debt crisis.
As the establishment hid President Biden's senility, he also hides the true state of the economy.
More emergency loans than in 2008
First, did you know that The Fed made more emergency loans in 2023 than during the 2008 financial crisis?
The banking system is on life support thanks to the US government which first sold billions of bonds to financial institutions before devaluing them through surprise rate hikes.
More borrowing than during COVID
Second, did you know that US borrowing more under Biden boom than during COVID?
At least, COVID loans were taken out at rates of around 0%.
But today, The US government is borrowing historic amounts of money in peacetime…and at rates of 5%!
This is the act of a desperate man who uses his credit cards to the maximum to pay his bills!
More interest than military spending
Third, did you know that all of these loans have made interest payments on the national debt the government's largest expense?
More than defense, or social security, or anything else.
From 2024, Payments to bondholders will be the first thing taxpayers' money is used for.
A new devaluation of the dollar
Did you know that the dollar has lost at least 25% of its value in just four years?
You are probably familiar with this question, having experienced it with inflation.
But Larry Summers believes that purchasing power has been eroded even more radically, with annual figures reaching 18% if we include the huge spike in loan payments due to rate hikes.
Compounded over four years, this would easily represent more than 25% of the value of the dollar.
More Treasury Dumping by China
Subsequently, did you know that China (the largest foreign buyer of US Treasuries) has been getting rid of American paper at an increasingly rapid pace?
It's a bit technical, but China is an “outside investor” in the United States, much like a new venture capitalist investing in your tech company is an outside investor.
Even if you buy only 5% of your equity (or, in this case, debt), she sets the price for everyone else. And show that there is a strong external demand, from people who do not need to buy.
BRICS to Buy More Gold
But isn't the dollar a store of value?
What do other countries save in if not US Treasury bonds?
Well, China is a bellwether for much of the non-American world. And these countries began to stockpile historic amounts of gold, even as Western countries were selling gold.
A de-dollarization stronger than ever
The latest data shows that Chinese currency takes up larger share of cross-border payments : 52.9% in March-2024, compared to 42.8% for the US dollar (and only 2.1% for the euro).
Sanctions less effective than ever
Okay, but can't the dollar still be used as a weapon of sanction?
Don't countries need access to the US financial system? Actually, no. All the sanctions imposed on Russia ended up hurting Europe more than Russia.
Europe needed Russian oil and gas, but Russia had other customers.
According to the World Bank (not a Russian source!), Russia has just overtaken Japan to become the world's fourth largest economy in terms of GDP per PPP.
Peacetime debt close to World War II
Okay, but what about the US military?
Can't she finally go to war to protect the dollar? This is a much longer conversation, but see the graph below.
Today, the United States is in “peacetime.”
And yet they have a debt comparable to that of the Second World War.
This means that the United States does not have neither the money nor the manufacturing base to wage a sustained military campaign against a rival like China.
You can't fight your factory, especially when you have no more money.
A real debt greater than that of any empire in history
Finally, perhaps the most important figure is the 175.3T. It is actually about the real debt of the United States, if you take into account all entitlements, such as Social Security and Medicare.
And this figure increase quickly.
This debt of 175T is unpayable. And the U.S. government is far from being able to pay what it owes.
He made promises to everyone that he simply cannot keep.
To cling to power amidst this web of unfulfilled obligations, he's going to get mean on a level that most people can't really understand.
The US dollar is less needed as the US needs to borrow more
If you are intellectually honest, you realize that the dollar's position is rapidly eroding.
It's simply no longer the indispensable asset it once was.
China doesn’t need the dollar to trade because it uses the yuan instead of the dollar. The BRICS don’t need the dollar to save because they buy gold instead of US bonds. Russia doesn’t need the dollar to live because it is the world’s fourth largest economy after being shut out of the US economy. Yet the US needs as much of the world as possible to accept the dollar because it is borrowing at levels that exceed COVID, WWII, and any other empire in history. A debt crisis is coming.
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