This Secret Source of Inflation Will Destroy the Value of Your Money

This Secret Source of Inflation Will Destroy the Value of Your Money

The U.S. Treasury Department has a huge problem.

Over the next 36 months, 53% of U.S. debt is coming due for repayment. That is over $17 trillion. Does the Treasury have $17 trillion in cash available to pay that debt?

No. Of course it doesn’t. So what will the Treasury do? It will have to issue new bonds to pay off the old bonds.

And herein lies the huge problem…

Right now, the Treasury Department is paying an average interest rate of 2.32% on its debt. Today, that debt will have to be reissued at rates between 4% and 5.3%. That’s just about a doubling of interest payments.

That means for every $100 billion the United States now pays in interest, it would have to pay up to $200 billion in interest under the new rates.

Remember, this is no victimless crime. That’s your taxpayer money at work – paying for more and more debt.

So how will the government pay the increased interest expenses?

In this essay, I’ll reveal the answer… and explain why it will create a secret source of inflation that reduces the purchasing power of every American. Warning, it’s something you’ll never read about in the mainstream financial press.

The Secret Source of Inflation

The government has a problem… It’s spending more than it brings in.

According to the Congressional Budget Office, the Federal government will run a $1.6 trillion budget deficit this year.

Most responsible people would solve this problem by cutting back their spending.

But friends, the government has a tool at its disposal none of us can ever dream of.

It can issue even more debt.

Now, debt by itself is not a problem if you have an economy robust enough to service that debt. But that is no longer true for the United States. We all know the government won’t stop spending more than it takes in. So how will it make up the shortfall?

There are a few ways.

It can let interest rates rise to the point where they are attractive enough for the private sector to step in and buy the debt. But this is a low probability event because it would accelerate the indebtedness of the United States too quickly.

So if rates aren’t allowed to go up what else can be done?

The Federal Reserve can buy the debt. It did this after the 2008 Great Financial crisis.

This is called quantitative easing (QE) – a fancy term for money printing. It’s great for keeping interest rates low and the government well-funded. But it heavily dilutes the value of the U.S. dollar.

When you dilute the value of the dollar, each dollar has less purchasing power than before. Said another way, the prices of things rise to account for the devaluing of the dollar. So it’s inflationary.

This is a terrible outcome for the average American… but a wonderful outcome for the government because it allows it to pay back its debts in devalued dollars.

You’ll Never Hear About “Secret” Inflation in the Media

Another way the government can bring more buyers into the market for its debt is to change the reserve requirements on Treasury securities for banks.

Right now, banks must have at least 3% capital reserves. So for every $100 billion in assets they hold on their books, they only need $3 billion in actual assets backing it.

Big banks, considered globally systemically important banks (GSIBs) need 5% in reserve.

But what if the banking system didn’t need any reserve requirements at all?

What if they could hold as many Treasury bills, bonds and notes that they wanted without accounting for any reserve requirements?

This would allow the Fed to engage in a little back door QE. All while keeping its hands clean.

This type of backdoor money printing would drive interest rates lower because it would increase demand for U.S. Treasury securities. As demand for Treasuries rises, so does the price of the bond which causes rates to drop.

Never underestimate the sneaky brilliance of bankers.

I bring this possibility to your attention because on March 5, the International Swaps and Derivatives Association (ISDA) published a letter calling for the removal of reserve requirements on Treasury securities.

In the letter, the ISDA specifically called out the expected $9 trillion surge in new Treasury issuance from $26 trillion to $35 trillion.

Here is the stated reason, taken directly from the ISDA letter:

It is important that banks have a capacity to absorb a continued high volume of U.S. Treasury issuance, with the market projected to grow to exceed $35 trillion in the next five years.

Friends, this is a huge story. And the mainstream financial press is totally missing it.

Think about it. What do you think will happen to the value of your dollars over the next 3-5 years? Do you think your buying power will increase, stay the same or fall off a cliff?

Look at the facts in front of us...

It’s obvious that the purchasing power of the U.S. dollar must continue to decline in the face of such massive Treasury bond issuance.

Specifically, because that new issuance won’t be absorbed by participants in the “real” economy taking money out of their savings and placing it in U.S. bonds.

That would be net neutral to the money supply.

Instead, it will come from primary Treasury dealer banks creating “money” with a few strokes on their keyboards to “buy” bonds directly from the U.S. government. It’s inflationary because it increases the money supply.

That’s why I call it a secret source of inflation. And it’s why you must take steps to protect your money, your lifestyle and your financial future.

In my opinion, bitcoin is the most efficient way to protect yourself from a continued loss of your purchasing power.

If you missed it, I strongly urge you to read my article “Bitcoin is the Lowest Risk Inflation Hedge You Can Own.”

In that article, I show you exactly why bitcoin is the lowest risk, highest returning asset you can own to protect your financial future. It’s a must-read for anyone serious about protecting their financial future.

Let The Game Come To You!™

Big T