Transcription
The US just triggered the largest short-term debt sale in history, and the implications for you and I are massive.
Now, in case you missed it, the US plans record $100 billion sale as borrowing needs mount. An unprecedented figure that showcases both the magnitude of its borrowing needs and its ability to attract investors. In plain English, the government needs cash and it needs cash fast. We are talking about four-week T-bills. This is short-term gap funding. That is not a good sign for the largest and strongest nation with the global reserve currency. In fact, many could see this as a sign of desperation or of the trying times ahead. And again, if you think that none of this is going to impact you, think again. They are counting on the majority of people not understanding or not caring about this because it sounds like one of those financial technical headlines that doesn't really impact your day-to-day life. But do not let them get away with this. The reality is this is one of the clearest alarm bells we've seen as far as the acceleration of the dollar collapse that is already underway. Something that will absolutely impact the quality and standard of our daily lives.
But I'm getting ahead of myself. Let's go ahead and start with what exactly is happening and why it's so concerning. So, just like any other debt, when the US borrows, eventually that debt comes due at which point the US has two options. Option one, pay off the debt. Simple enough, except that we cannot afford to do that. So, that leaves the US with option two, which is to roll over the debt, essentially issue new debt to cover what's outstanding. But the problem is we have a lot of debt maturing. We also have a deficit that's going to be continuing to grow and interest payments on our debt that also are costing us more and more, which means we are going to be issuing a lot of debt in the form of Treasury bills.
Now, this article says, "A Treasury bill deluge is here. What could go wrong?" Obviously, that's sarcasm. A lot could go wrong. And it says, "No trouble is expected in the near term," which is questionable, but beyond that, worries loom. Yeah, you think I think that's putting it nicely. See, you've probably heard the saying before that there will always be a buyer for US debt, which historically has been somewhat true because we hold the global reserve currency. But as countries continue to move away from the dollar because of the United States' weaponization of the dollar, because of our exportation of inflation, because of concerns around our credibility, well, we're going to have a situation where demand for our debt continues to shrink. It's something that we're already seeing happen now.
And before someone out there says, "Oh, but the US will never default on their debt." Which, side note, technically the US actually already has multiple times. Look it up if you don't believe me. But we don't even have to be talking about an official, "We're not paying you back." I mean, think about it. If you borrowed a hundred bucks from someone 50 years ago and they paid you back that hundred bucks today, it's going to be worth significantly less. And that's 50 years. But I mean, look at just the last five years, it's going to be worth what? $25 less. Now, imagine if we're talking about billions, hundreds of billions of dollars, right? Any amount of inflation that's going to happen, you might get paid back nominally the same amount, but you don't want to get paid back valuewise less. That's why all these countries are shifting into reliable stores of value such as gold.
And this is why it makes sense when we look at President Trump, you know, coming after Jerome Powell and saying, "We need to lower rates." Regardless of whether you agree with that or not, a big component of lowering rates is, of course, that we need to borrow a lot of money. So, if rates come down, well, then in theory, that's going to help make our borrowing costs come down, and it's going to allow us to refinance a lot of our debt at lower rates. Because right now, as foreign demand for our debt continues to decline, what does that mean? It means we can still borrow, but it's going to be a lot more expensive.
So, what are we doing? Well, we are shifting our focus to stop-gap measures like short-term bills, right? I mean, you can have a 30-year Treasury, or you could have a multi-day, but really four weeks, that is nothing in the grand scheme. Historically, that has been used as a quick cash need, not a stop-gap for a hundred billion dollars that we're going to borrow because that means in four weeks we have to refinance that again. This is not a sustainable tool. It leaves us completely vulnerable to any kind of market volatility or the whims of anyone out there who's borrowing, and leaves us very, very exposed.
But if you think that this is a one-off, think again. Last week, US Treasury Secretary Scott Bessant came out and said that this is going to be the new norm. We could expect a lot more of this. And to put it into context for you, too, because you might be sitting there and thinking, "So still, what's the big deal? $100 billion." It says here that that four-week bill offer is equivalent to more than a quarter of the total amount of bonds sold in the UK in the 2024-2025 fiscal year. But we are pushing that out as a four-week short sale bond offering.
So, who's actually buying this? Well, it's money market funds, which, okay, that's fine right on the surface, but it does bring up some other problems. And this is where we're really starting to get to where the risk could come from, the volatility I mentioned earlier. Now, it says here, "One potential complication for money fund managers is that the Federal Reserve is expected to lower rates again as soon as September." So typically, when this happens, you could see an exodus from the short-term, and you could see more people piling into the long-term. That could mean that right away, there's no more demand for the short-term debt. Now, short-term debt, which historically was a tool as a stop-gap or emergency or quick cash flow, now there's no interest for it. So when you use something that you historically had kind of in your back pocket, and there's no demand for it, well, what's your next tool, right? What's the next layer of protection?
And it doesn't just stop there either. There's serious liquidity concerns here with bringing in the money market funds and actually having them potentially jeopardize US banks, the system as a whole. We could see a serious liquidity problem from having them pile into all these short-term bonds. Let me explain. It says, "The Treasury risks tipping the market to a point where it doesn't have enough liquidity to absorb all the debt." One gauge of excess liquidity is the Fed's overnight reverse repo facility, or RRP. Now, I've talked about this before in the past, and in fact, I'm going to do an in-depth video on the reverse repo facility and where it stands today because it is sharply declining in numbers, and it's a lot to get into and try and cram it into this video too. So, I'll be doing a whole separate deep dive on it next week. But essentially, it hasn't always been around, and it was created in the aftermath of the 2008 Great Financial Crisis. So you could argue, well, we don't even need it. But the reality is, it's here, and we've seen before what happens when it gets too low. Essentially, there's no flexibility, there's no liquidity in the system, and that's when things start to freeze and seize, and that's when the Fed has to step in and fire up the printing press and help with QE. And they have all kinds of different tools now, right? Stealth QE where they're kind of under the radar helping and manipulating. But ultimately, that means more inflation. That means a devaluation of your dollar, and that's assuming that they step in and help. Of course, they will, because they're the lender of last resort. But in the meantime, we could see all kinds of issues popping up from this, bank failures, who knows what else?
You know, it says, "As the Treasury floods the market with a competing asset, T-bills, money is expected to drain out of the RRP." And it's something we are already seeing happen now. So imagine what's going to happen as this flood of short-term Treasury bills continues to hit the market. If they are an interesting proposition for these funds, they're of course all going to pile into it, meaning that there's no liquidity left in the system.
Now, I don't know if all of this is making sense. I know it gets a little bit convoluted, but the bottom line is that this is not a good beacon of what's to come. This is showing that we are using emergency tools as regular tools, therefore limiting our options in the future. It also is leaving us vulnerable to any volatility in the market. It's also leaving us vulnerable to the whims of private funds that obviously operate for profit. So, they're not interested in saving the system. They're going to go wherever the profit takes them. And it also is a sign of the fact that the US dollar is completely losing its dominance on a global stage. Right? That's the biggest thing right there. That is a big, blaring alarm sign that I am hearing in my head is that ultimately, we are adding debt, not taking away debt. Yet, who is buying it? People are buying it, but at what cost, right? How long can this go on for? That's when we say unsustainable, that's what we mean.
I think that ultimately, for me, when I look at all of this, the picture becomes very clear when you zoom out and see what's really going on. The future is not bright for the dollar, right? I mean, we've known that for a while, but it's accelerating, and that's what I keep saying. When you look at the timeline, things are speeding up. And this isn't to scare you. This is just to educate you, right? Because I keep encouraging everyone to make sure you have a strategy in place for what's coming next. That's what we focus on here at ITM Trading. And if, if you don't have one, or you have one and you want a second opinion from people who study this, who have helped people just like you for years, then call us at the number below or click the link in the description and talk to one of our expert analysts.
There's a reason that central banks and foreign nations are moving out of the dollar and into gold. If you look at the elites, if you look at those in power, if you look at those with insider knowledge who know what's coming next, why are they all piling into gold? Why are they piling into gold? The answer becomes very clear. It's because you cannot trust the dollar, right? You think the inflation we've had so far is bad? Wait until it gets a whole lot worse. But if you have something, a true store of value, an asset that can protect your wealth, well, then you're set up to not only protect what you have but thrive on the other side of this currency reset. That's what we study here. And if you want to learn more too about currency resets, where we are in today's timeline, if you do not already have a copy of our "Build to Endure" report, it is completely free. Download your copy today by scanning the QR code, or again, there's a download link below. We offer it free because it is information we believe everyone should have. And in the meantime, I so appreciate you being here. I'm Taylor Kenny with ITM Trading, your trusted source for all things gold, silver, and lifelong wealth protection. Until next time.
[Music]