The Bell Tolls For The US Dollar

Last Tuesday, the U.S.’s debt passed the $40 trillion mark.

D.C. enjoys ignoring the debt almost as much as it loves piling it up. But that grim mile marker forced some of D.C’.s denizens to extrude some fake concern.

The tenor of which was almost entirely that of innocent bystanders — rather than that of the malevolent participants they all are:

“Lawmakers are sounding the alarm over the nation’s $40 trillion debt, lamenting Congress’s inability to meaningfully confront a problem that has grown increasingly difficult to ignore.  Both parties have spent years trying to tackle the rising debt.”

No: Both parties have NOT spent years trying to tackle the rising debt. (I’ll leave it to your imaginations what or whom they have been trying to tackle.)

The last Joe Biden-Democrat budget had a Fiscal Year (FY) 2025 deficit of of $1.78 trillion. The Donald Trump-Republican Big Broke Bill has a FY 2026 deficit of $1.9 trillion. As in larger than the allegedly more profligate Democrats.

The U.S. is adding $1 trillion to the debt — every 92 days. And in FY 2025, the U.S. started paying over $1 trillion per year — just in interest on the debt.

To try to pay for all of DC’s excess spending?  The Treasury Department issues bonds — and then sells them at market auction.  The bonds’ terms are from less than one year — all the way up to thirty years.

Say you buy a $100 bond. You get an interest payment every month for the life of the bond — and then at the end get back your $100.

Allegedly. The bond markets only work — if the planet’s prospective buyers think buying them is a good idea. As in: They think the U.S. will still be around at the end of the bond’s term — so as to get paid all the way back.

Increasingly, the planet doesn’t think so.  Which makes them less and less likely to buy our new bonds. Which forces the U.S. to pay higher and higher interest rates — to rekindle the globe’s interest.

And when the planet really doesn’t think so? They start selling the bonds they already have. Which makes the auctions for the new bonds even less attractive. Because that lack of confidence can spread like wildfire.

The less confidence there is in U.S. bonds? The higher the interest rates the U.S. has to pay. Which precipitates the greatest of all problems:

Paying more interest — increases our debt. Which increases skepticism of the U.S. Which forces us to pay even higher interest rates to sell our debt.  Which increases our debt. Which increases skepticism of the U.S. Which forces us to pay even higher interest rates to sell our debt.  Which…

This is the death spiral about which many (including me) have long warned.

Japan is the largest outside holder of our debt — at about $1.2 trillion.  To shore up their currency, Japan has been selling their US bonds.

Recently — to hide that fact — Treasury Secretary Scott Bessent began buying back billions of dollars’ worth of our debt from Japan.

“Desperation – it’s the world’s worst cologne.”

— Cameron Crowe

Buying your own debt is an exceedingly bad look. Not very confidence inspiring. It means Japan is selling and we don’t think anyone besides us is buying.

That’s converting an IOU — into an IOI.

Which reminds of something I noticed in March….

40% of All New US Debt Purchased Since 2022? Has Been in the Cayman Islands:

“What if The Fed is setting up a whole bunch of Cayman corporations? Behind the corporate veil – that we can not penetrate.

And then using them to mass-purchase bonds. To soak up the new bonds. And the existing ones everyone else is fire-selling.

Again: 40% of ALL new debt purchase since 2022 – has been in the Caymans. That’s TRILLIONS of dollars.

If The Fed is doing this? It is postponing – oops, and massively intensifying – the coming collapse.”

Just a thought.  Just a thought….

And speaking of IOIs? The U.S. overtly owes itself $7.2 trillion of our debt.  Which makes the far-and-away largest holder of US debt — even if my Cayman hypothetical is inaccurate?  The US.

In a scam they call “intragovernmental holdings,” the U.S. uses money from programs like Social Security and Medicare to buy and hold U.S. debt.

Which shouldn’t complicate things. Given that Social Security and Medicare are a combined $175+ trillion short.

So we have all of this debt. And all of the continued, unchecked spending. And we see all of the … shenanigans in which the government engages to prop up the un-propable.

All of that — raises another question: What happens to the U.S. dollar?

Hint: It ain’t great. And we’re already dealing with a lot it.

It’s inflation. As bad as it already is?  You ain’t seen nothing yet.

Behold currency debasement:

“Currency debasement occurs when the value of a currency is intentionally reduced, often through increasing the money supply, leading to decreased purchasing power.”

The only possible option left to the U.S.? Such as it is? Is to inflate away the debt. If you owe $40 trillion?  Make each dollar you owe worth less. (Ask retirees who saved 1960s dollars for a 2020s retirement how inflation debasement works.)

Except the US still has to sell its ever-accumulating debt. And its prospective bond buyers? Can very easily see us debasing our money.

Which means they’ll demand ever higher interest rates. That is, if they haven’t lost all interest in buying.

We’ll owe more and more money.  With fewer and fewer interested bond buyers. In a currency worth less and less….

Death spiral, anyone?

Seton Motley is a consultant and the founder and president of Less Government, an organization dedicated to, well, less government. This op-ed was originally posted on the author’s Substack page, and can be viewed here.

The views and opinions expressed in this commentary are those of the author and do not reflect the official position of the Daily Caller News Foundation.