EVERYTHING is About To Go HAYWIRE in the U.S! | Debt Tsunami Explained

The US Treasury plans to increase debt sales to nearly a trillion dollars this quarter, a substantial hike from the previously forecast $733 billion. This is a cause for concern because numbers like these are usually associated with economic crises. Some predict could lead to a trillion dollars in US interest payments within the next two quarters. Now, here's where things get really messed up. The Treasury just announced the increase in the size of its quarterly sales of longer-term debt for the first time in over two and a half years. This boost is designed to accommodate the government's growing borrowing needs and reflects a debt issuance tsunami on deck. The markets responded to this news, causing yields to surge and signaling that investors might be growing weary of the US's escalating debt. We're also seeing an increase in auction sizes. Just next week, we are expecting to see $103 billion of longer-term securities sold. It's a significant leap from the $96 billion in gross issuance from the last quarter and larger than most dealers had expected. The larger than expected jump in issuance indicates the alarming increase in borrowing needs. And this situation could become even more dire. Fitch predicts that US finances will deteriorate over the next three years, but they may be working off of outdated assumptions. The current reality may be much worse. And here's the critical takeaway: As this escalating debt situation persists, the burden on the bond market increases. There's a widespread belief that yields will continue to rise. And who will be the buyer of last resort if the market becomes saturated with debt? The Fed. We may very well see the Federal Reserve step in with another round of Quantitative Easing (QE) to stabilize the market.

TOPICS AND TIMESTAMPS:
U.S. Debt Downgrade 0:00
What Comes Next? 7:29

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