So there seems to be a global sovereign

debt crisis and countries are selling

their US debt and this is really bad.

>> Watch the bond market. The bond market

is the basis. It's the backbone

of all markets.

>> Markets have a bad case of the bond

blues and there's no quick relief in

sight.

>> The bond market is front and center.

We're seeing yields at the highest

levels in decades. Yet we see the stock

market keeps rallying. In fact, is again

in the money today. Should we be nervous

or not?

>> This happens when investors stop

trusting that governments could pay

their money back. So they want higher

and higher interest rates to keep

lending their money to them, which makes

the problem even worse. And how we know

this is happening is because the

interest rate or the yields of the bond

market are all going up right now. For

example, the US 30-year Treasury bond

yield just hit over 5%. The highest

level since July 2007, right before the

financial crisis, and the interest rate,

or the yield on the most important bond

in the US, which is the 10-year bond,

that has also gone up 75 basis points

since the Iran war has started. Now, if

you don't know what any of that means, I

will explain it. But I want to start

with a prediction that the market is

making right now. Chris Waller, who was

one of the first people to vote for rate

cuts, he's now saying he's prepared to

vote for rate increases if the war goes

on and inflation does not come down.

Here's a line from his speech. I can no

longer rule out rate hikes further down

the road if inflation does not abate

soon. And that is especially true if

measures of inflation expectations, some

of which have risen lately, show signs

of becoming unanchored.

It's what's about to happen to the cost

of borrowing money. Because right now,

the market is predicting a rate increase

by January 2027. In fact, we are over

70% odds that interest rates will go up,

which is the opposite of what everyone

thought would happen. Cuz a year ago,

everyone on Wall Street was betting that

the Federal Reserve would lower rates

three, four, maybe five times by now.

Goldman Sachs was saying this. The bond

market was predicting it. That was

allegedly the reason why Trump wanted

Kevin Worsh as the new Fed chair so that

he could lower interest rates. But

that's not what happened. Here's what

happened instead. Two of America's

biggest foreign buyers of debt are now

selling US government debt. Right? And

it's not just them. It is also Taiwan,

Saudi Arabia, India, the UAE, Norway,

and Singapore. They're selling as well.

At the same time, oil has been above

$100 a barrel for about 2 months now.

There's also something called the PPI

inflation, and that just hit 6%. Which

is the highest level since 2023. And

something called the CPI, which is the

consumer price index that measures

inflation. That's back up to 3.8%. For

reference, we want two, not 3.8. Right?

So, the combination of all these things

has created what economists call the

trap. Right? The trap is that the

Federal Reserve cannot lower interest

rates because if they do, it would break

the bond market. And a broken bond

market would affect everyone. It is our

mortgage rate. It's our credit card

interest rate. It's the cost of every

loan, every student loan, every business

loan in America. And it is also the US

government's ability to pay things like

social security, Medicare, and the

military without either raising our

taxes or printing more money. It also

affects the stock market. And it's not

just happening in the US. It is also

happening all across the world. Right

now, bond yields are hitting multi-deade

highs in countries like the UK, Germany,

France, Canada, Australia, and Italy. In

fact, Japan's 10-year bond yield has

gone almost vertical on this 20-year

chart. The Bank of Japan is basically

losing control of its own bond market.

And when Japan loses control of its bond

market, it has to sell US treasuries to

defend their currency, the yen, which

puts even more pressure on US bond

yields. This makes that Federal Reserve

trap much worse. So, in this video, I

want to explain exactly what's

happening, why it's happening, and what

it means for the stock market, for gold,

and for Bitcoin. So, with that said,

let's get into it. Hi, my name is Andre

Jick. Hope you're doing well. come for

the finance and stay for the sovereign

debt crisis. Now, before I explain why

this is happening, I just want to give

you a sense of how big the bond market

actually is because stocks usually get

all the attention. But the global bond

market is worth $140 trillion. It is the

biggest financial market on earth. So,

let me explain the basics of how this

works and what's happening so that the

rest of this video makes more sense.

Okay. So, what is a sovereign debt

crisis? Why is it being called that? So

the word sovereign just means

government. Like a king used to be

called a sovereign because it was the

highest authority in the land. So

sovereign debt just means government

debt. The money that governments borrow

to pay for everything they do. Things

like roads, military, social security,

all those things, right? Governments

borrow this money to pay for all those

things. And the way they borrow it is by

selling something called a bond. A bond

is an IOU. The US government says, "Give

me your money today and in 10 or 30

years from now, I'll give it back plus

I'll pay you something extra, some

interest." Right? Now, the common

misconception is that the yield is

decided by the government. But it is

not. It is decided by whoever is willing

to buy the bond, which is the market.

What is the market? Well, the market is

made up of a lot of different players.

things like foreign countries, private

investors, pension funds, basically

anyone with money to lend. And when

those investors feel confident, aka when

they feel like they could trust the

government to actually pay them back on

time, they will accept a low yield, a

lower interest rate. That's because they

feel safe. But when investors start

getting nervous, when they look at the

government and they're like, I'm not

sure you can pay me back this time or I

think inflation is going to go up more

than what you're going to pay me.

They're like, pay me more. Right? That

demand leads to higher interest rates,

aka a higher yield before they'll hand

you over their money. Same way that a

bank charges you a higher interest rate

on a loan if your credit score is bad.

Right? The worse the risk, the higher

the rate. Now, a sovereign debt crisis

is what happens when that nervousness

kind of reaches a tipping point. When

investors all around the world start

demanding so much yield and so much

interest that the government can barely

afford to borrow. And when you can

barely afford to borrow, you can't pay

your bills. And when you can't pay your

bills, you either have to raise taxes,

cut spending, or print money. And

historically, every single time this has

happened, governments chose to print

money because it's the only option

that's sort of invisible. It doesn't

require anyone to vote for something

they don't want. And the reason this is

so important, even if you've never

bought a bond in your life, is because

the yields are the foundation that every

other interest rate in the economy is

based on. When Treasury yields go up,

mortgage rates go up, car loan rates go

up, right? Credit card rates go up,

business loans get more expensive, the

cost of running the government goes up,

which means less money for things like

social security, Medicare, and for

everything else. So, when we hear the

30-year Treasury just hit its highest

level since 2007, what that really means

is the market's trust in the US

government's ability to manage its own

debt is at the lowest point in roughly

20 years. And when you see that yields

are going to multi-deade highs

everywhere, including the UK, Germany,

France, Japan, Canada, Australia, what

that tells you is that this is not just

a US problem. This is a global problem.

Investors are losing confidence in

governments all around the world. So the

question then is why are they losing

confidence? And there's a couple

reasons. But before I get into that,

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get back to it. So here's why investors

are losing confidence and why rates are

going higher. The first reason is

inflation. The cost of life is going up.

So investors are like, "Pay me more

money." Okay. The second reason is that

the countries who used to be our biggest

lenders are pulling back. They're

selling our debt. So we're like, "Why

are you selling? What if we paid you

more with higher yield?" Right. Okay.

The third reason is that the math of how

much these governments around the world

have collected is finally starting to

catch up with them. So, let me break

down each of these points. Inflation,

right? Since the war started in Iran,

oil has been above $100 a barrel. Now,

it's being managed and it's being

manipulated through the paper markets,

but the physical price of oil is going

up. And remember, oil is the cost of

making everything. It's fertilizer, it's

shipping, it's manufacturing, it's the

food. And that is why since the start of

the war, crude oil is up 60%. Jet fuel

is up 58%. Gasoline up 52%. European

natural gas is up 54%. Fertilizer up

20%. Right? All of these costs flow into

the prices of things we buy. Which is

also why something called the PPI,

that's the producer price index, or how

much it costs for businesses to make

things. that just went up to 6%. The

highest level since 2023. And it's also

why something called the CPI, which is

the price we pay at the store, that's

back up to 3.8%. Remember, their target

is supposed to be two. We're almost

double that right now. Now, you might be

thinking, okay, hold on. If oil is up

60%, and gas is up 52%. How is PPI only

6%. Are they lying? Seems way too low.

It's a really good question. And the way

to understand it is oil doesn't directly

go into our cereal boxes, right? It goes

into the truck that delivers things and

the factory that processes it, the

plastic packaging. And by the time it

filters through the whole supply chain

of the economy, the price increases get

diluted across all the other costs like

labor, rent, equipment, which by

comparison have not moved up as much

yet. So a 60% oil increase does not

necessarily become 60% PPI increase. to

get spread out. So that's good. However,

fertilizer prices going up 20% are not

going to show up in our grocery bill for

another 3 to 6 months. The supply chain

has a delay built into it. And you can

see that in this chart. This is where

commodities are lagging behind

fertilizer prices. Fertilizer moves

first and then the commodities. Which

means the 6% PPI reading we're seeing

right now is just an early warning.

Right? The full effect of what's

happened to commodity prices since

February has not shown up in stores just

yet, but it's still coming. Now, hold

on. Why then does the bond market care

about inflation? It cares because if you

lend your money to the US government at

4 12% interest for 10 years, but

inflation is at 3.8% and it's going

higher, you are barely breaking even in

real terms. And most people don't even

believe the inflation reading anyway.

That's the government's inflation

report. So, it's probably a lot higher.

Not to mention, they're thinking 10, 20,

30 years ahead. So, we are taking risk

with our money, lending it to a

government that's $39 trillion in debt,

and our real return after inflation is

almost nothing. So, what do you do? You

say, "Pay me more money or I'm not

buying your bonds." That is reason

number one why yields are going up right

now. Now, there's a second reason why

investors would want more money and

demand a higher bond yield. And it's

because the bond market is also made up

of countries. Countries that used to be

America's biggest lenders, aka the

buyers of our bonds. And they are now

pulling back, specifically China and

Japan, which are two of our biggest

lenders. So, let me start with China. At

their peak, China held about $1.3

trillion in US Treasury bonds. Today

that number is down to 650 billion which

is the lowest level since 2008. Now that

is not to say that China is dumping or

panic selling but it is to say that this

has been a 17-year trend. It's been

happening for a long time and they're

not dumping it all at once because that

would collapse the value of their bonds

and they wouldn't do that. That's why

they're selling a little bit every year,

but it's accelerating. And every time

they sell a US Treasury bond, that is

one less buyer in the market, which

means the US has to pay more to find a

replacement buyer. More supply, less

demand means higher prices to borrow.

Right? That's China. Now, Japan is a

different story. Japan is the biggest

foreign holder of US treasuries at

around $1.1 trillion. And Japan has been

selling them as well. But the reason

Japan has been selling US treasuries is

because it desperately needs dollars. It

needs dollars to defend its own

currency, the yen. Right? And it's

because they need to buy oil as well.

And that's why since 2022, Japan has

spent over $200 billion buying yen and

selling dollars, aka treasuries. That's

to stop their yen from collapsing. So to

put this in context, in the first

quarter of 2026, they have sold more US

treasuries than they've sold in the last

four years or so. So in a way, Japan is

actually being forced to do this because

in order to defend the strength of their

currency, they have to sell US

treasuries. And of course, to buy oil,

they need dollars. And where do they get

dollars? They get dollars by selling US

assets.

But selling US treasuries also pushes US

yields higher. and higher yields make

the dollar stronger relative to the yen,

which means Japan has to sell even more

treasuries to defend it. It's a doom

loop. So, how does Japan get out of it?

They get out of the loop the same way

the US has to. The only way Japan can

break this doom loop is to increase

their own interest rates. That's why

three of their board members already

voted to increase their rates at the

last meeting in May.

The outlook report indicates that the

BOJ is very concerned about upside risks

in prices. Three board members opposed

the governor's proposal to maintain the

rate and called for a rate hike. I

believe chances of raising the rate at

the next policy meeting in June are

quite high unless the Middle East

situation becomes very chaotic. But

there's a problem with Japan increasing

interest rates. And to sort of

understand it, there's a chart I want to

show you. This right here, this orange

line, is Japan's GDP, aka the size of

their whole economy. It's sitting at

roughly the same level that it was in

1992, right? But their money supply,

which is the amount of yen in

circulation, this blue line right here,

that has tripled over that same time

period. Meaning they have printed three

times more money over 34 years and their

economy has gone nowhere. This is what

happens when you get trapped in a cycle

of borrowing and printing and borrowing

and printing just to stay afloat. And

because of that, Japan has accumulated a

debt to GDP of around 260%.

Right? That means for every dollar of

economic output that Japan produces, it

owes $260

in debt. The US, for comparison, is at

roughly 120% of debt to GDP. And we

think that's bad. By some measures, our

national debt is over

120% of gross domestic product, which

according to historians, it once you get

over 100, it's unsustainable and

unreoverable.

>> So when Japan raises interest rates, the

cost of their 260% debt load goes up by

a lot. It means they have to pay even

more in interest on a debt that's

already huge relative to their economy.

Which means Japan raising rates to save

the yen could also break their own bond

market. And that's why Japan's 10-year

bond yield has gone almost vertical on a

20-year chart. So all of this is

basically a complicated way of saying

that investors are now predicting a

world where Japan has no good options

left. So that is reason number two why

rates around the world are going up.

China is exiting US treasuries. Japan is

being forced to sell to keep its

currency alive. And both of them selling

means the US government bonds have less

buyers which means the US has to

incentivize more buyers with higher

yields. And the question is who's going

to be the new buyers? The new buyers

will have to be Americans themselves

through things like pension funds,

market funds, and eventually the Fed.

And that brings us to reason number

three. Okay, reason number three why

rates are going up is because the US

government is spending money it doesn't

have. That's it. And it has been for a

very long time. The bill is now so big

there is no realistic way to pay it off.

So here's the only number you need to

look at. The US government has 39

trillion in official debt. It adds

roughly 2.5 to that number every year.

And to put that in perspective, that's

roughly half of everything the

government makes in taxes before it

spends a dollar on anything like the

military, social security, roads, right?

Half of all the tax revenue just goes

towards covering this new debt that gets

added every year. Now, on top of the

official debt, there are tens of

trillions of dollars more in promises

that are already made to American

citizens for things like Medicare,

Medicaid, Social Security, pensions,

that's not even counted in this $39

trillion number yet. But the point is

that the math doesn't work. And the

people who buy government bonds, the

ones lending us the money, right? They

could see the math and they're like,

"Well, there's only one way this ends,

and that is the government has to print

money to cover for what it can't pay,

which means inflation, which means your

money is worth less, which means they

want to be paid more in interest before

they'll lend that money. That's why

yields are going up." And believe it or

not, the US has been here before. In

1970, the government was looking at the

same impossible math. They couldn't

raise the taxes, right? They couldn't

cut benefits without losing their

elections and upsetting people. So, they

did what governments always do. They

picked the invisible option. They

inflated their way out. They lowered the

purchasing power of the dollar through

inflation. And what that meant was an

older person who was making $400 a month

in social security was still making $400

a month. But that $400 bought them less

and less every year. The purchasing

power of the US dollar dropped about 50%

from 1970 to 1980. Half of the dollar's

value was lost in just 10 years. And

during that same decade, gold went from

$35 an ounce to $850 an ounce. So when

bond investors are looking at these

numbers and they're thinking the next

10, 20, 30 years ahead, they're seeing

the government has no good options left

other than to print its way out. So this

expectation of future money printing is

why those interest rates are high. Cuz

why would anyone lock up their money for

30 years at 5% if they believe their

purchasing power would go down faster

than that, right? They wouldn't unless

the government paid you more. That's

what the market is demanding right now.

It is also, by the way, another possible

explanation for why the stock market is

still doing so well despite the world

sort of falling apart. Cuz the stock

market is also predicting this

assumption that the Fed's going to print

money. And when the Fed prints money,

asset prices go up. So the stock

market's like, I'm going to skip the

crash part, okay? Cuz they're going to

bail me out anyway. So why interest

rates are going up is because

inflation's already here and more is

coming through the supply chain. Two of

the biggest foreign buyers of US debt

are pulling back and selling. And three,

the math of US governments have no exit

that doesn't involve printing money.

Right? All three of those things are

pointing in the same direction, which is

higher yields and higher borrowing

costs. And here's what history says

typically happens next. Normally, when

the economy slows down or when something

bad happens in the world, the Federal

Reserve can just lower rates cuz lower

rates means people borrow money,

corporations borrow money, they hire

more people, they spend more, the

economy gets a boost. Okay? But right

now, that strategy is broken. It's

broken because if the Fed cuts rates

today with PPI at 6% and CPI at 3.8 8

and oil above $100 a barrel. It

basically sends a message to every bond

investor in the world. And the message

is, hey, we care more about the economy

than protecting your money over

inflation, right? And when bond

investors hear that, they're like, okay,

well, I'm selling, right? I'm not going

to hold your 30-year bond at 5% when

inflation is going to be higher than

that. So paradoxically, if the Fed tries

to lower interest rates to stimulate the

economy, bond yields could actually go

up anyway cuz the bond market would

revolt. You cut rates, bond market

panics, yields go up, and borrowing

costs go up. So the thing that you're

trying to prevent happens anyway. That

is the trap of lowering rates while

inflation's going up like it is right

now. Now, on the flip side of that, if

the Fed decides to raise the rates or

even just keeps them where they are, we

get a different problem because the US

government is now paying more in

interest on this $39 trillion in debt.

And at the current rate, the yearly

interest bill on that debt has crossed

over a trillion a year just in interest.

So, every time rates go up, that number

goes up with it. So the Fed is sitting

with an impossible choice. Do we lower

the rates and break the bond market or

do we increase rates and break the

economy? The side effect of raising

rates

is that you break the economy at a time

when credit card delinquencies are

already above 12%. Autoloan defaults are

going up. Private credit markets are at

risk. The housing market is

significantly slowed down. And the stock

market valuations are super high. So

what's the government going to do?

There's a clue. The stock market,

remember, is always trying to predict

the future. And here's what it's

predicting. The stock market thinks that

there's going to be a rate increase by

January 2027. the odds of a rate

increase are above 70% and going up. The

market is basically saying that the Fed

has lost control of the situation and

the only thing they can do about it is

to raise rates so that people keep

buying our debt, which means also

charging you and I more to borrow money.

Now, Kevin Worsh, who Trump wanted as

the new Fed chair, specifically to lower

rates, sort of finds himself in his new

job with an impossible situation.

But I think he has a plan. And this is

the plan I want you to pay attention to.

Under Kevin Wars, the Fed is now

proposing a change to how they measure

inflation. They're going to try to move

away from something called the standard

core PCE to something called the trimmed

mean PCE. Right? This is convenient at a

time when oil is up 60%. Because that

new metric will strip out those extreme

price increases. And on paper, it'll

show us a lower inflation number. So,

I'll let you draw your own conclusions,

but that is why the market is predicting

a rate increase and all of that will

have an effect on our wallets and our

investments. So, let me explain what

this could mean for the stock market,

for gold, and for Bitcoin. So, let's

start with the stock market cuz on the

surface, the stock market looks amazing.

It's basically at an all-time high and

there's actually a logical reason for

it. The stock market might be pricing in

this assumption that when things get bad

enough, the Fed is going to print money.

And when it does, asset prices go up.

The stock market is basically betting I

don't need to crash cuz they're going to

bail me out eventually. I'm going to

skip that part. And historically, that

bet has been right. But the Fed can't

actually print money so easily this time

without breaking the bond market. So the

stock market might be pricing in

something that might not happen. We

don't know. But when you look at the

actual value of the stock market right

now, it looks very expensive by a couple

different metrics. For example,

something called the price to sales

ratio is at a record high, right?

Something called the price to book ratio

is also at a record high. The forward

price to earnings ratio is sitting at

around 24 times, which is historically

very high. And the dividend yield is

close to a record low at 1%. Right?

which means you are paying maximum

prices for minimum income. That is not a

good combination under any

circumstances. But it is especially bad

when the riskfree rate, meaning what you

can get today from a government bond is

sitting at above 5%. It's probably going

higher. Think about it this way. Why

would you buy a stock that pays you 1%

in dividends when you can buy a Treasury

bond that pays you 5% with essentially

no risk? Right? The only reason you

would do that is if you thought the

stock market would grow more than that

at a time when the market is already at

a very expensive value. Right now,

there's also another thing about the

stock market that makes it historically

expensive. It's called the Buffett

indicator, but with Luke Groman's

adjustment from FFTT. So, if you took

the total value of the market, aka the

market cap, and you divide it by

something called the GDP, the economy,

but then you adjusted it for the amount

of federal debt that's been used to

artificially boost that number. When you

run this adjusted version, there have

been exactly three moments in the last

70 years where the indicator has went

above 100%. The peak of the dot bubble

in the year 2000, the everything bubble

peak in late 2021, and of course, right

now. And in both previous cases, the

market dropped between 25 to 47% from

peak to bottom. And it took between 2 to

13 years to recover. And we're at that

level again. So that's the stock market.

Now, let's talk about gold. Under

traditional financial theory, rising

rates should actually hurt gold because

higher interest rates means it makes

more sense to hold cash or bonds, right?

Because gold pays no interest. So money

should technically flow out of gold and

into assets that pay us interest and it

is very possible that we could see that

phase. Now gold is also still very

expensive. And it's expensive because

central banks around the world have been

buying over a thousand tons of it in

2024 alone. And that's kind of

interesting to me that banks are

choosing gold over treasury bonds

because they're not sensitive to

interest rates the way we are and they

usually know things ahead of time. So I

think they're making a a bet a

geopolitical diversification into

another potential world reserve currency

that is maybe backed by gold. That's

just a theory, but you can watch that

video somewhere up here that explains

it. So gold is basically an insurance

policy. And then there's Bitcoin, which

is kind of different, but it's driven by

the same idea. Bitcoin is essentially

the same argument that in a world where

every government's going to print money

and every currency is going to lose

purchasing power, you want something

with a fixed supply that no government

can inflate away or freeze. And how we

know that countries want that and demand

that was just proven by Iran. They're

demanding Bitcoin for their oil as

insurance. And that's also a video you

can watch in the member section which

also talks about how low I think Bitcoin

could go from here and at what price

point it would take me to buy more

Bitcoin. Now, if you want to see how I'm

personally preparing for all of this and

the specific assets I'm holding and what

I'm doing with my own money, those

videos are in the members section. I

also post more videos there and you'll

get access to the videos earlier than

the main channel if that's useful. The

link is down below. Thank you for the

support. It allows me to take on fewer

sponsors in the future and continue to

make videos like this one. In the

meantime, I'd love to hear your thoughts

about all of this. I hope you have a

wonderful rest of your day. Smash the

like button. Subscribe if you haven't

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next week. I'll see you soon. Bye-bye.