What will happen if the United States does not cut interest rates in 2024 and continues to raise interest rates to 6% or even 10%?
U.S. debt is now close to 35 trillion U.S. dollars. The U.S. Treasury has completed a 2-year U.S. debt auction with an auction yield of 4.898% and a total amount of 69 billion U.S. dollars. On the 25th, there was a 70 billion U.S. dollar five-year auction, and on the 26th, there was a 44 billion U.S. dollar 7-year U.S. debt auction. This week alone, the amount of U.S. debt auctions was 183 billion U.S. dollars. According to the U.S. Treasury’s U.S. debt auction plan, the total amount of auctions exceeds 300 billion U.S. dollars per month, and exceeds 1 trillion U.S. dollars per quarter, based on a 5.5% benchmark interest rate.
If the interest rate is raised again, the U.S. Treasury will go bankrupt. It can’t auction U.S. debt every day, right? Now everyone buys U.S. debt because the Federal Reserve is judged to be in a rate cut cycle from 2024 to 2025. The price of U.S. debt will rise during the rate cut cycle. Everyone buys U.S. debt based on the expectation of future increases in U.S. debt. Even if the increase in U.S. debt is huge, everyone will buy it as long as the expected price increase.
Then the Fed actually raised interest rates. As long as the expectation of rate hikes is generated, no one will buy U.S. bonds, and the market price will fall. The lower the market price, the more selling there will be. Finally, all U.S. bonds will collapse. When U.S. bonds collapse, the dollar will collapse.
Let me tell you another little news: Buffett has been buying U.S. bonds and reducing U.S. stocks. The executives of the seven sisters of Nasdaq are all reducing their holdings. The reason is that they all judge that the U.S. economy has entered a recession. According to the Merrill Lynch clock cycle, in the recession cycle, bonds are king. Now everyone understands why Buffett did this!
