6 MINS AGO! "All Hell Breaks Loose in U.S. Banks Tomorrow" – Here’s Why! | Peter Schiff

Added: 2026-05-24

[00:00:00]that eventually interest rates would soar. That was the same thing with the subprime. I knew that. I knew that subprime borrowers were relying on teaser rates and artificially low interest rates to be able to afford to make payments on mortgage balances that they really couldn't afford. But because they had this temporary uh window of low payments, they could they could swing it.

[00:00:29]The The debts are going to spiral and the markets are now uh reacting. The bond vigilantes that have been asleep for a decade or more, maybe two, are awake.

[00:00:41]And this is a big, big deal. The story is not getting anywhere near the attention it should in the mainstream media. I mean, let alone the financial media.

[00:00:53]I just found out that Congressman Thomas Massie has lost in the uh primary, the Republican primary.

[00:01:02]Uh and so he'll no longer be a congressman and that is a real sad loss for the country, for the Republican Party.

[00:01:12]And I'm going to talk about what that means. What that means for Republicans, what that says about Donald Trump.

[00:01:20]Um but that's going to be the second big story that I want to I want to talk about today.

[00:01:27]The first one I want to talk about is what's happening with bond yields around the world.

[00:01:34]Because this is something that I have been warning about for years on this podcast. And anybody who's been listening to the podcast knows exactly what I've been saying.

[00:01:46]And you know, Thomas Massie is one of the few people in Congress who actually tried to prevent this fiscal train wreck from happening.

[00:01:58]The conductor of the train is now Donald Trump.

[00:02:01]And he threw Massie off the train for trying to stop it. Trump wants to make sure that we have this wreck. And unfortunately, it's going to happen while he is president.

[00:02:14]Um but this has substantial substantial uh implications. This is so much bigger than the 2008 financial crisis, which had to do with private credit. Had to do with the ability of subprime borrowers to repay their mortgages. This goes way beyond that.

[00:02:40]This is about sovereign credit. This is the fiscal chickens finally coming home to roost. Not just in America, but all over the world. And in particular in Japan, because I have repeatedly warned on this podcast about the accident waiting to happen with Japanese government bonds. And the implications there. But you know, the only reason that the world has gotten away with all of this debt, all of this sovereign debt, in the US, in the Eurozone, in Japan, was because interest rates were very low. That's what enabled it.

[00:03:22]But I've been warning all the time that that is a temporary situation.

[00:03:28]That eventually interest rates would soar. That was the same thing with the subprime. I knew that. I knew that subprime borrowers were relying on teaser rates and artificially low interest rates to be able to afford to make payments on mortgage balances that they really couldn't afford. But because they had this temporary uh of low payments, they could they could swing it. And so they were committing to mortgages they couldn't really afford simply because they could pay the teaser rate. The bet that they were making was that by the time the teaser rate expired, they would have so much home equity that they could refinance, they could pull out extra money and use that to make the payments, they can sell the property, but it was a bet that ultimately went bad and the nation suffered the 2008 financial crisis. Well, the same thing, only bigger, is happening with sovereign credit. And it was only credit. And it was only a matter of time until this whole thing blew up. Governments finance spending by issuing bonds. But when borrowing accelerates too quickly, markets demand higher yields to compensate for growing risk. That is exactly what many economies are facing today. The United States alone continues adding trillions to its national debt, while central banks struggle to control inflation.

[00:04:54]Higher debt levels create a dangerous cycle. Rising interest rates increase the cost of servicing existing debt, forcing governments to borrow even more.

[00:05:03]Investors then demand even higher yields, creating additional pressure.

[00:05:07]This process can destabilize entire financial systems if confidence weakens.

[00:05:11]What once seemed manageable during years of cheap money now appears increasingly difficult in a world of persistent inflation and slowing growth. Because as governments took on more and more debt, by definition, they become less creditworthy. And as you become less creditworthy, lenders want to charge you higher interest rates. You know, a lot of people think that oh, we have so much debt, therefore we're going to get low interest rates so that we can service it. Doesn't work that way.

[00:05:43]The more debt you have, the higher the interest rates you have to pay because you are a worse credit risk because you've got so much debt. If you're going to loan money to somebody, if they already are loaded up with debt, you're not going to want to loan them money because there's a higher chance that you're not going to get paid. If you've got a borrower that doesn't have any debt at all and lots of assets and you're the first person making a loan, well, you're pretty secure. You don't have to charge a high interest rate for a loan that has a high likelihood of being repaid. But if the borrower comes to you and he's already got all kinds of debt and now he wants to borrow money from you, that's a riskier loan. You need to charge a higher rate of interest to cover that. Now, a lot of people will think, well, you don't have to worry about default when it comes to sovereign credit, but you have to worry about something else and that's inflation. Now, I still think default is a risk, but let's just set that aside and assume that a sovereign nation borrowing in its own currency will not take the honest road and default, but will instead print and create inflation. But that is the same risk.

[00:06:58]The real risk that you face when you loan money to a government that has a lot of debt is that instead of raising taxes on the public to honestly pay the debt, they just crank up the printing presses and print a bunch of money and say, "Here you go."

[00:07:14]But the problem with that is the money might not buy you very much. It may not buy you anything. And so, the real risk is that if you loan money to a government that has a lot of debt, that increases the chance that they are going to print money to pay that debt.

[00:07:31]Now, that's been a risk for a long time, yet the credit markets have kind of been oblivious to it. They haven't been worried about it. But now, they're getting worried and that kind of you know, overlaps with the Thomas Massie story, which I'm going to get to later. So, I don't want to spend too much time on it right now.

[00:07:50]But, basically, by getting rid of Massie, the message that the Republicans are sending to the credit markets is we are never going to cut spending.

[00:08:00]And if any Republican even tries to stop our reckless deficit spending, we will get rid of that guy. We don't want anyone to stand in the way of our goal of massive debt and massive inflation.

[00:08:14]So, if there's any signs that any Republican wants to stop this train we're going to get rid of him. So, this is a message. It doesn't just get rid of Massie. It says there is no fiscal responsibility at all in the Republican party. So, if you thought that we'd eventually get our economic house in order, we'd eventually cut spending, and tackle the deficit, you're wrong.

[00:08:37]Because the guy that wanted to do that, he's gone. And now, nobody else will dare. Nobody in Congress is going to raise their hand to object to any massive deficit spending, because that means they they're going to lose.

[00:08:51]Trump's going to kick them out of the the Democratic party, which is basically what we got. We got two Democratic parties now, and they both basically each have their own brand of socialism that they're selling to the public.

[00:09:04]But, the the debts are going to spiral, and the markets are now uh reacting. The bond vigilantes that have been asleep for a decade or more, maybe two, are awake. And this is a big, big deal. This story is not getting anywhere near the attention it should in the mainstream media. I mean, let alone the financial media. But, you know, sometimes a picture is worth a thousand words. After years of relative calm, bond markets are beginning to wake up. US Treasury yields have climbed sharply as investors question whether long-term government debt remains a safe haven. Analysts are paying close attention to technical breaks in Treasury trends because they often signal larger structural shifts underneath the economy. At the same time, the yield curve has behaved unusually reflecting growing fears about recession, inflation, and unstable monetary policy. Historically, these signals have preceded major economic turning points. Markets are beginning to realize that the era of permanently low rates may be ending. If that happens, governments, corporations, and consumers could all face a dramatically more expensive financial environment. And so I'm going to talk right now up with some charts that I got here and I want to share my screen.

[00:10:24]And and so the first chart is the 10-year bond market. And by the way, all these charts are brought to you by investing.com, right? That's one of my sponsors now. It's a website I've been using for years and so now they're a sponsor. They've got hundreds and hundreds of charts. I mean, there's you know, that on all sorts of things, but I just picked out a few that I want to focus on. But this chart is the 10-year US Treasury. And and so here we are uh at the end of the chart, you can see where we are. We're not quite at the high from uh liberation day. We're almost there. The yield on the Treasury uh the 10-year is about four 4.7 or so. All almost 4.7.

[00:11:14]Now, but the important thing is look at this trend. Look at the peak in 1981 where the yield on a 10-year Treasury was over 15%.

[00:11:25]And look at this major major bull market in bonds, which means bond prices were rising and yields were falling. And look at that. And the bottom of that was in 2000. That was during COVID. That's when the yield on a 10-year Treasury was less than 1%. And I remember on my podcast at that time I said that was a blow-off a top in the bond market, that it was going to be a generational top and that yields were going to be heading higher from there. And that is exactly what has happened. But if you look at where we are right now on this chart, this downtrend has been decisively broken.

[00:12:08]So, we have gone from a huge bull market in bonds that went from 1980 to the year 2020, a 40-year bull market. That is what was responsible for rising stock prices, making rising debt possible. We were riding that wave of low interest rates.

[00:12:28]And that was also made possible because you know, we we were able to pretend that inflation was was falling.

[00:12:35]Uh but all of that has changed. We are going to reverse the entirety of that decline. We are now in a major bear market in bonds, and we're going to have a huge rise in in interest rates.

[00:12:50]This little period right here, I'm moving my cursor around, this is a little consolidation.

[00:12:56]Once we break out and get into this level, we're just going straight up.

[00:13:01]And these yields represent falling bond prices.

[00:13:06]Bond prices are going to fall a lot quicker than they rose. In fact, if you go back to the chart, look at 1970 8, 1977 over here up to 1980. Look at how sharp that rise was from 7% to almost 16%. Look at that huge rise right at the tail end of the 1970s, right? We are going into something like that now, but this was way worse than the 1970s.

[00:13:35]The The US was still solvent. The debt-to-GDP in 1980 uh was just 35%. Now it's 125%.

[00:13:46]Um The Here Here's a chart of the 30-year bond. This actually looks worse. The 30-year bond yield has already taken out the liberation day high over here. We are at a 19-year high. You got to go back to 2000 and what? Five, six to see a 10-year yield. We're at now uh 5.18 on the 10-year. But again, look at this huge downtrend in in the 30-year. And you know, the 30-year never got as high as the 10-year in 19 in 1980 uh because, you know, people assumed that rates would come down in those next 20 years. But look at this downtrend. This has been broken decisively. But the fact that the 30-year bond is breaking down more than the 10-year bond is a bad sign because it shows a greater loss of confidence in the Fed and a a lack of desire on the part of lenders to take that extra 20 years of risk.

[00:14:50]That they're get they're asking for a greater uh risk premium because of what's happening. In fact, if you look now at the yield curve in the US, finally we have a normal yield curve where it's it's positively sloped for every duration in the spectrum. Meaning the the the the um 90-day yield is higher than the 30-day yield. And the 6-month is higher than the 90-day. And the 1-year is higher than the 6-month.

[00:15:20]And the 2-year is higher than the 1-year. And the 5-year is higher than the 2-year, the 10-year is higher than the 5, and the 30-year is higher than the 10. That's the way it should be. The debt problem is no longer limited to the United States. Japan, long known for ultra-low interest rates and aggressive monetary stimulus, is now facing mounting stress in its bond market.

[00:15:39]Rising yields threaten a system that has depended on cheap borrowing for decades.

[00:15:44]Europe is experiencing similar pressure as slowing growth collides with stubborn inflation and geopolitical instability.

[00:15:51]Investors worldwide are starting to question whether central banks still have the tools needed to stabilize markets.

[00:15:57]The synchronized sell-off across global bond markets suggests something deeper may be happening. For the first time in years, investors are confronting the possibility that the world's major economies may all weaken simultaneously.

[00:16:10]But what that back to normal means is bond investors are acting more normal.

[00:16:16]They are worried and they don't want to hold bonds for longer periods of time, and to get them to do that, they need higher rates of interest. So this is a major change from having these negative sloping curves where people believed the Fed was going to be able to bring rates down. In fact, if you look at the bond curve right now, the the market is anticipating a Fed hike.

[00:16:43]The the the markets are no longer pricing in any cuts.

[00:16:47]The bond market is now pricing in that the very next move that a Kevin Walsh is going to make as Fed chairman is going to be to raise interest rates. That's what the bond market is saying. Now, if he doesn't raise interest rates, there's going to be a collapse of the dollar and gold's going to go through the roof. But the markets expect him to raise interest rates. The problem is the rate hikes they're expecting are not nearly enough to put this inflation genie back in the bottle. And I'm going to show you those charts, too. But, let me just show you some of these other charts. Look at the 10-year JGB.

[00:17:22]I was screaming about this on this podcast. I remember when the yield on the 10-year Japanese bond got up to a half a percent. And this is not long ago. 1/2 of percent. And the the Bank of Japan drew a line in the sand. We're not going to let the yields go above a half a percent. And I said they were going to go down uh with that fight that the market was going to win, that we were going to go through 5% a half a percent, we'd get to 1%, and then after we got to 1%, we'd get to 2% quickly. Nobody else was believing that or forecasting that.

[00:17:56]That thought wasn't even possible. Here now, we are at about 2.8% now on on No, that's the 30-year Yeah, 2.8. The 30-year Japanese government bond. I don't even have that chart up.

[00:18:10]The 30-year Japanese government bond today is over 4%.

[00:18:16]That's the highest it's ever been. And that's because they didn't start issuing it until I don't know, 20 years ago or 15 years ago. So, but it's never had a four handle until now. But, if you look at the uh rate in Japan, um the the the 10-year bond yield, it's 2.8%.

[00:18:35]But, the last time it's a 29-year high.

[00:18:39]Oh, here it is, right? I didn't have the whole chart. I was wondering where it was. Look at where we are. This is 2.

[00:18:43]like 2.8%. You got to go all the way back 29 years to get a yield this high. But, 29 years ago, Japan didn't have this much debt. And look at where we were. Look at where yields were. They were over 8% um back in 1990. They are going back up there.

[00:19:05]But, I did the math.

[00:19:07]If the Japanese government had to pay 3% on average to finance all of its debt.

[00:19:14]And that's not a big number.

[00:19:16]And we're heading there soon. I mean, we're already almost at 3% on a 10-year.

[00:19:22]But if the Japanese government had to pay 3% it would need 50% of all of its tax revenue just to pay the interest on its national debt, assuming the national debt stopped growing.

[00:19:35]Which is not going to happen.

[00:19:37]So this is a disaster. The only way Japan, I think, can push off this disaster is by dumping its US Treasuries, which is going to compound the problems that we have. And and, you know, look at the German 10-year. Here's the German the German government bond. Look where this is.

[00:19:57]This is the highest it's been since 2011.

[00:20:00]But look at that chart. Look at the again. We broke this downtrend.

[00:20:03]Yields are going higher. They're going higher for everybody.

[00:20:08]And that means all governments that have debt are in trouble because all governments with debt are going to have to pay more in interest to service that debt. Now, since the US government really is the biggest debtor of them all, we're in more trouble than everybody else. And we're also the world's biggest debtor nation. We're not a creditor nation like Germany, like Japan.

[00:20:31]And we have coasted on artificially low interest rates, which are rapidly becoming a thing of the past. And here's a couple of commodity charts.

[00:20:42]Uh here's the oil chart. Look where we are right now in oil. We're about $108 a barrel.

[00:20:48]As financial uncertainty grows, commodities and precious metals are once again attracting global attention.

[00:20:53]Energy prices, industrial materials, and food costs remain vulnerable to geopolitical conflict and supply chain disruptions. At the center of this shift is gold, which many investors increasingly view as protection against currency devaluation and sovereign debt risk. Unlike paper assets, gold cannot be printed or manipulated through monetary expansion. Some analysts believe the modern financial system is entering a phase where hard assets outperform traditional investments.

[00:21:17]Recent central bank gold purchases have reached historic highs, reinforcing the idea that governments themselves are preparing for a more unstable and inflation-driven economic environment.

[00:21:27]We are going to break. There's a little bit of a downtrend. Here's like 140.

[00:21:31]This was the high in 2008. And here's the high over here in 2022. That high coincided with Russia invading Ukraine. But once we take out that high, which we're going to take out, we're off to the races in oil prices. This is going to be a major, major oil shock.

[00:21:52]Prices are going to surge. Look at this CRB index. This is the last of the chart I'm going to show you. Look at this CRB index. Look at this move right here. You can see I have the cursor down here.

[00:22:03]This is the low from COVID, 2020. 100, like 112, 118.

[00:22:11]We're at 405.

[00:22:13]Look at this surge in commodity prices.

[00:22:16]This is all commodities. This is not just oil.

[00:22:19]Agriculture, industrial metals. Look at what is going on. We're going to take out this high, which was the 2008 high, before the financial crisis lowered commodity prices back down. But this is massive, and it's not a coincidence that commodity prices and bond yields are rising at the same time because they're both being driven by inflation. So we're going from low interest rates, low inflation, and of course, it wasn't even low, but, you know, what we had was low relative to what we're going to. So we're going from officially low inflation and ridiculously low interest rates to high interest rates and high inflation.

[00:23:00]That is a terrible environment for financial markets, for the stock market, right? For the bond market. It's going to be horrible for the US economy. This is a major, major sovereign debt crisis.

[00:23:13]It's going to impact the dollar. See, right now investors still don't get it.

[00:23:17]They're still focused on rising nominal yields and the algorithms are trading.

[00:23:24]They're buying dollars even though they're not rallying much. They're buying dollars. They're selling gold.

[00:23:29]Gold's back below 4,500. Uh silver's down down around $74.

[00:23:34]Uh because they're reacting to these nominal stories about rates, missing the bigger picture that real rates are imploding because inflation is skyrocketing. And one of the reasons that you have all of this complacency now is the war.

[00:23:53]See, a lot of traders think that we don't have to worry about rising bond yields. We don't have to worry about rising energy prices or rising, you know, food prices because it's all the war.

[00:24:05]And all we have to do is end this war and prices are going to crash, bond yields are going to crash.

[00:24:13]And and therefore people are not worried. They're completely wrong.

[00:24:18]It's not the war. The war may have been the catalyst for a breakout that was going to happen anyway. And if it wasn't the war, it would have been something else. But bond yields were going to rise, inflation was going to rise with or without the war.

[00:24:34]And if the war ends, bond prices aren't going to stop rising.

[00:24:40]During the 1980s, Federal Reserve Chairman Paul Volcker crushed inflation by raising interest rates aggressively.

[00:24:46]But many experts argue that strategy may no longer be possible today.

[00:24:50]Modern economies carry far more debt than they did decades ago, meaning extremely high rates could trigger widespread defaults, banking stress, and severe recession. Governments now depend heavily on low borrowing costs to sustain spending and economic growth.

[00:25:04]This creates a difficult dilemma for policy makers. Raise rates too much and the financial system suffers. Keep rates too low and inflation may continue eroding purchasing power. The world may now be trapped between inflation risk and debt instability with no easy escape route.