US Debt Market Cracks Widen, Inflation Looms Large

Peter Schiff joined host Danny on CapitalCosm to discuss the deepening cracks in the US debt market and its implications for the dollar, oil, and the political landscape. He pointed out that a recent Treasury auction barely registered a ripple in the bond market, despite revealing a lack of appetite for US government debt due to low yields that don't compensate investors for inflation risk over the long haul.

According to Schiff, today's yields are not high enough to offset the loss to inflation over the maturity of 10-30 year US Treasuries. He explained that this is a result of the massive amount of debt in the market and the fact that rates should be higher than they were pre-2008 financial crisis.

Schiff also discussed Japan's fragile yen carry trade, which he described as a dangerous feedback loop where currency moves in either direction could trigger a wave of Treasury selling. He warned that if the yen continues to fall, it would put pressure on Japan to sell Treasuries and buy yen, while a rising yen would blow up the carry trade.

Schiff addressed the political fantasy of growing out of debt by citing decades of failed promises. He noted that Washington's newest hope rests on artificial intelligence delivering an economic miracle, but this is unlikely to succeed in reducing the debt burden.