10 Signs That Confidence In U.S. Treasuries Is Dying And That Financial Armageddon May Be Approaching
Selling government debt is a gigantic confidence game. For decades, investors all over the globe have gobbled up massive amounts of U.S. debt at incredibly low interest rates because they believed that it was a certainly that they would be paid back and be able to make a little bit of profit on top of it. Unfortunately, things have changed. Confidence is U.S. Treasuries is dying, and if confidence in U.S. government debt completely collapses at some point we could literally be looking at financial Armageddon. Why is that so? Well, when the world totally loses faith in U.S. Treasuries, interest rates on U.S. Treasuries will have to keep going up until enough investors are found to buy them. But much higher interest rates will mean much higher interest on the national debt and thus much higher federal budget deficits. That will erode confidence in U.S. Treasuries even further. In the end, a vicious cycle of eroding confidence and higher interest rates could ultimately lead to hyperinflation as the U.S. government and the Federal Reserve flood the system with endless amounts of paper money to try to keep the system solvent.
Faith in U.S. Treasury bonds is absolutely critical if the world financial system is going to continue to operate in a stable manner. In the post-World War 2 era, U.S. Treasuries have been largely viewed as the absolutely safest investment out there. So if there comes a point when the market for U.S. Treasuries completely collapses, it is going to cause unprecedented financial chaos. The worldwide derivatives market, which is already highly unstable, would almost certainly implode. Credit markets all over the globe would seize up. Global trade would quickly grind to a standstill.