Everyone Are Selling U.S. Debt as Everyone Keeps Dumping USD For Gold

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The U.S. Needs More Debt Buyers

The economic outlook for the world’s largest economy is becoming increasingly grim. Since the onset of the trade war, projections have steadily worsened, and now, even the Federal Reserve’s own estimates suggest that the U.S. economy is contracting by 1.8%, a sharp reversal from the 2.3% growth recorded the previous year. This decline was inevitable—when government spending is cut amid a trade war, domestic consumption suffers. Americans are becoming increasingly concerned about their financial future, and consumer sentiment is plummeting back to its 2022 lows.

The effects of this shift are being felt across the economy. As people tighten their belts, corporate earnings are at risk, because a lack of consumer confidence means fewer purchases. Why is this happening? The long-term inflation outlook has skyrocketed, reaching 3.9%—the highest level since 1993. People understand that tariffs drive up costs, and they are bracing for higher prices by spending less today. This decline in consumer activity has a ripple effect, impacting businesses, investments, and ultimately, the stock market.

The Stock Market’s Critical Role

Stock prices are crucial to the stability of the U.S. economy, particularly for American households. Never before have U.S. citizens been so exposed to the stock market—over 60% of household assets are tied up in financial instruments. Cash holdings have fallen below 30%, while bonds make up less than 10% of assets. This creates a precarious situation: if the stock market crashes, millions of Americans will be left financially vulnerable.

This is why the strength of the U.S. economy is increasingly tied to stock market performance. If stock prices fall, the reverse wealth effect kicks in—people feel poorer, they spend less, and economic growth slows further. This is a major concern for policymakers because a prolonged market downturn could trigger a broader economic collapse.

A Risky Shift in Government Strategy

In response, the U.S. Treasury is taking a bold but dangerous gamble by attempting to shift economic responsibility from the government to the private sector. As Scott Bessent, a key financial strategist, explained, this transition must happen gradually to avoid shocking the system.

However, this strategy has a major flaw: the U.S. still needs foreign investors to buy its debt at low interest rates, and right now, they’re not buying. Instead, foreign investors are selling off U.S. Treasuries at an alarming rate.

• In January alone, $13 billion worth of U.S. bonds were dumped.

• Since Trump took office, nearly $100 billion in long-term U.S. bonds have been sold.

• Foreign investors have been net sellers for three consecutive months, signaling a serious loss of confidence in the U.S. economy.

The Problem with Rising Debt

The U.S. national debt is spiraling out of control, and the need for new bond issuance is greater than ever. Over the last 80 years, government spending has become a critical driver of economic growth, now accounting for 34% of GDP, up from just 20% in the 1940s. Despite calls for fiscal responsibility, the reality is that the U.S. will continue issuing massive amounts of debt in the years ahead.

• The Congressional Budget Office (CBO) projects a $1.9 trillion deficit for 2025, equivalent to 6.5% of GDP.

• This level of borrowing is unsustainable, yet necessary to keep the government functioning.

• The only way to make this work is to keep bond yields as low as possible—but without buyers, yields will rise, making borrowing more expensive.

Trade War Fallout: A Global Rejection of U.S. Debt

Trump’s aggressive trade policies are compounding the issue. On April 2nd, new reciprocal tariffs will be imposed, further straining U.S. trade relations. These tariffs could trigger another round of inflation, making everyday goods more expensive for American consumers.

At the same time, foreign investors—including G7 allies—are turning away from U.S. debt:

• In January, Canada dumped nearly $30 billion in U.S. Treasuries—the highest outflow among G7 nations.

• This shift occurred before the trade war escalated, suggesting that countries are already diversifying away from the U.S..

• If this trend continues, the U.S. Treasury will face even greater difficulties funding its deficits.

The Bigger Picture: A Dangerous Economic Spiral

The global economy is deeply interconnected, and as the U.S. turns inward to focus on domestic production, international trade dynamics will shift. If countries retaliate against U.S. tariffs, they will also begin to diversify their trade relationships, reducing their reliance on U.S. imports and exports.

• Global trade is still largely denominated in U.S. dollars, but as economic alliances change, this could weaken the dollar’s dominance.

• If demand for U.S. bonds continues to decline, interest rates will remain elevated, making borrowing even more expensive for businesses and consumers.

• Higher borrowing costs could stifle economic growth, triggering a debt crisis that extends beyond the U.S. and into global markets.

The Uncertain Future

The U.S. is walking a dangerous tightrope. Without enough debt buyers, the entire economic system is at risk. The trade war, rising inflation, and foreign divestment from U.S. assets could set off a chain reaction that leads to a financial crisis.

The question is: Can the U.S. continue funding its deficits at low interest rates? Or will we see a tipping point where borrowing becomes unsustainable?

What do you think? Are we headed for a debt crisis? Let me know your thoughts in the comments below, and don’t forget to like and subscribe as we navigate these uncertain times!

Global Trade Shifts Away from the U.S.

International trade dynamics are undergoing a major transformation, and the shift is accelerating. Cross-border trade surged by nearly 15%, surpassing $14 billion, with over half of these transactions settled in Chinese yuan (RMB). This is a significant change with huge implications—the more trade is conducted in currencies other than the U.S. dollar, the less incentive countries have to hold U.S. dollar reserves, including U.S. Treasury bonds.

This shift is one of the biggest but least discussed consequences of Trump’s trade war. While much attention is focused on tariffs and supply chains, the real story is unfolding in the global financial markets, where demand for U.S. assets is quietly eroding.

Europe’s Response: Borrowing to Compete

China isn’t the only player contributing to this financial upheaval. Trump’s withdrawal from EU agreements and threats to leave NATO have forced Europe—especially Germany—to take decisive action. The EU is now ramping up borrowing and using deficit spending to stimulate economic growth.

This has massive implications for the U.S. bond market:

• Investors now believe the European economy is poised for stronger growth, driving a surge in the euro’s value against the dollar.

• As a result, investors are selling dollars to buy euros, fueling demand for EU bonds instead of U.S. Treasuries.

• Since global investment is essentially a zero-sum game, money flowing into Europe or China means less capital for the U.S.

• To attract investors, the U.S. Treasury will be forced to offer higher yields on its bonds, driving up borrowing costs across the economy.

Corporate Debt and the Trade War’s Fallout

This shift is not just about government debt—it also affects U.S. corporations.

• When companies want to expand operations, they typically issue debt, borrowing money at 6% interest in the hope of growing at 10% or more.

• But if the U.S. economy slows, businesses will issue fewer bonds, shrinking the corporate debt market.

• The U.S. corporate bond market is the largest in the world, bigger than China and Europe combined. But as trade shifts away from the U.S., European and Chinese companies will issue more bonds in their local currencies (euros and RMB).

• This creates competition for investor money, forcing American corporations to raise yields to stay competitive—further increasing borrowing costs.

The Rise of Gold as a Safe Haven

Beyond bonds, gold is emerging as a clear winner in this shifting financial landscape.

• Investors and central banks are buying gold aggressively, even as prices hit record highs.

• China’s People’s Bank of China (PBOC) has been steadily increasing its gold reserves for four consecutive months, in a direct response to U.S. tariffs and economic tensions.

• China is now facing a 20% tariff on its exports to the U.S., and instead of buying U.S. Treasuries, it is diversifying into assets Washington cannot control—like gold.

• This strategy stems from what happened to Russia: after the invasion of Ukraine, the U.S. and its allies froze $300 billion of Russia’s foreign assets. Beijing is determined not to fall into the same trap.

A Systemic Shift in Global Finance

The numbers tell a clear story:

• In 2024 alone, global gold demand exceeded $400 billion.

• The last three major surges in gold demand occurred during:

  The 2008-09 financial crisis, when the U.S. printed massive amounts of money.

  The 2020 pandemic stimulus, when $5 trillion was injected into the U.S. economy.

  The 2022 seizure of Russian assets, which shattered trust in Western financial systems.

All three events had one thing in common—they undermined confidence in the U.S. financial system. Now, Trump’s tariffs are doing the same.

The Dollar’s Declining Role

Every move Trump makes seems to push the world further away from the U.S. financial system:

• Tariffs reduce foreign access to U.S. dollars, encouraging countries to trade in alternative currencies.

• While this could cause short-term currency crises, in the long run, it erodes the dominance of the U.S. dollar.

• For the first time in five years, retail investors in North America, Europe, and Asia are increasing gold holdings—a sign that people are losing faith in traditional assets.

The Uncertain Future

With Trump doubling down on his aggressive trade policies, the world is watching to see how long this economic war will last.

If he moves forward with his April tariff plan, it could:

• Further weaken demand for U.S. bonds, forcing interest rates higher.

• Increase global investment in gold and alternative assets, further reducing reliance on the dollar.

• Accelerate economic shifts away from U.S. dominance, as Europe and China ramp up their own financial strategies.

The big question is: how much longer can the U.S. maintain its financial grip on the world?

Let me know what you think—will countries continue to dump U.S. debt? Will China’s gold buying surge even further? Drop your thoughts in the comments below!

Disclaimer: I want to make it clear that I am not a financial advisor, and nothing I say is intended to be a recommendation to buy or sell any financial instrument. Additionally, it's important to remember that there are no guarantees or certainties in trading or investing, and you should never invest money that you can't afford to lose.

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