The Federal Reserve is now “monetizing the debt.” It’s straight up money printing. Here’s what’s up:

00:02 Everyone, the Federal Reserve is now 00:04 doing what's called monetizing the debt 00:06 for the US government. Uh monetizing the 00:09 debt is where the Federal Reserve steps 00:11 in and buys US government debt straight 00:15 up without even bothering to go through 00:18 uh a bank or an investment bank or 00:21 something like that. Uh what normally 00:23 happens is the Federal Reserve uh they 00:25 if they want to manipulate interest 00:27 rates they buy or sell government debt 00:31 uh in the open market from companies 00:33 like Goldman Sachs or JP Morgan or 00:35 whoever. Uh but I've been saying for a 00:39 long time look at some point the US 00:40 government's going to want people to buy 00:42 their debt and people are not going to 00:44 be willing to buy their debt. So slowly 00:46 slowly over the last uh decade or so, c 00:50 countries have been dropping out. So 00:52 Japan and China and other countries that 00:56 have historically owned a lot of US 00:59 government debt, meaning they've loaned 01:00 the US government a lot of money. those 01:03 countries are starting to drop out, 01:05 meaning they're, you know, pairing back 01:07 and saying, "Hey, instead of uh um 01:10 instead of buying additional new 01:12 government debt and sort of ramping up 01:13 how much government debt we own, we're 01:16 going to slowly pair that back." And 01:18 part of the way they do that is they 01:19 just start buying less and less. And 01:22 then as the debt they already own comes 01:24 to maturity, they just uh take the 01:27 proceeds and rather than sell the debt, 01:29 they take the proceeds and just, you 01:31 know, sit on them or convert them back 01:33 to their local currency or whatever it 01:34 is they decide to do. So, as of the last 01:37 uh week or two, the Federal Reserve, 01:40 there's been a couple one or more, I 01:43 can't remember how many, one or more 01:44 failed Treasury auctions. So, what is a 01:47 failed Treasury auction? Well, that is 01:49 when the government says, "Hey, we're 01:52 going to auction off uh, you know, $20 01:55 billion of, you know, uh, 5year 01:58 government debt and another $30 billion 02:01 of 10year government debt and whatever 02:03 $40 billion of, you know, 30-year 02:06 government debt." And of course, each 02:08 different um each different uh duration 02:11 has a different interest rate. So, those 02:14 interest rates have been creeping up. 02:15 The government is trying to put push 02:17 them down um because they have to 02:20 refinance about $9 trillion this year, 02:23 which is absolutely insane. About one 02:25 quarter of all of the US government debt 02:28 comes due this year, which means they 02:29 have to because they're not going to cut 02:31 back spending. Clearly, there's zero 02:33 appetite in Washington DC to cut 02:35 spending. Even after Elon Musk and all 02:37 the, you know, the Doge, you know, 02:39 finding of all the waste and fraud and 02:42 abuse and all that sort of stuff, 02:43 they're not cutting any of that. Um the 02:46 big, you know, the so-called big 02:48 beautiful bill in Washington DC, which 02:50 is a load of crap, uh is is not a big 02:53 beautiful bill. It's a continuation of 02:55 every stupid thing the government has 02:57 ever done, and then it adds more 02:59 spending. I mean, it's absolutely insane 03:01 that Republicans have zero appetite to 03:05 cut the deficit, cut the debt, balance 03:08 the budget. Like, nobody they act like 03:10 it's all free money. It's just I mean 03:12 it's free money so why would you bother 03:15 you know why would you bother balancing 03:16 your budget you know they act like the 03:18 debt doesn't matter. It's ridiculous. 03:20 Well anyway the uh the Treasury the US 03:23 Treasury who uh does the bond issuances 03:25 they had announced that they were going 03:27 to auction off a certain amount of US 03:29 government debt. And the problem is that 03:32 there were not enough buyers. And there 03:34 were not enough buyers because too many 03:37 people had decided that the US 03:38 government was now not a great credit 03:41 risk. You know, obviously I don't know 03:44 why it took them so long. But um I mean 03:47 it's not that you're not going to get 03:48 paid off. You're just going to get paid 03:50 off with printed money out of thin air 03:51 that's worth less than you know the 03:53 value of the money you gave the 03:55 government. So, uh, you know, if the if 03:57 the government takes your money at a 5% 03:60 interest rate and then turns around and 04:01 prints 7% more money to pay your 04:03 interest, well, then your go your money 04:05 ultimately is going to be worth, you 04:07 know, 7% less, then you get your 5% 04:09 interest and you're still 2% worse off. 04:12 Well, that's what's happening. Um, and 04:14 the only reason they're still getting 04:15 away with it at all is most people are 04:17 still just asleep and they're not paying 04:19 attention and they don't know what's 04:20 going on and all of that. But uh anyway, 04:22 so the Treasury had a failed bond 04:24 auction which was they ran out of buyers 04:28 and they don't ever want to do that. The 04:30 Treasury never never never wants to 04:33 announce that they are going to auction 04:35 off a certain amount of government debt. 04:38 Uh and then have it not enough buyers. 04:41 Uh so what happens in that situation is 04:44 the Federal Reserve steps in because 04:46 they have unlimited money because they 04:47 are the ones that print money out of 04:49 thin air. the Federal Reserve uh steps 04:52 in and starts bidding uh for the that 04:55 government debt and then it buys that 04:57 government debt straight up onto its own 04:59 balance sheet. Um so it would be the 05:02 equivalent of let's assume you know one 05:04 of my kids started a lemonade 05:06 stand, you know, every time they make, 05:09 you know, a gallon of lemonade and then 05:11 they go try to sell it, you know, 05:13 wherever. And let's assume that usually 05:17 there is uh you know there's enough 05:20 buyers so they sell their gallon of 05:22 lemonade. They announce they're going to 05:23 make a gallon of lemonade. They make it. 05:24 They go sell it. They come back. They've 05:26 got 20 bucks or whatever. And then uh 05:29 and then eventually uh they you know 05:31 let's say the the lemonade gets watered 05:33 down, right? That's the equivalent of 05:34 the US government debt. Nobody wants it 05:36 because it's becoming less and less 05:38 quality. So, you know, the kids go out 05:40 and they decide they're going to do, you 05:42 know, half lemonade, half water or 05:44 something like that. So, they're just 05:45 going to water it down. People stop 05:47 buying the lemonade because it's all 05:49 watered down. But I always noticed that 05:51 somehow they always sell out of 05:53 lemonade. And so, I ask them, you know, 05:55 well, hey kids, you know, I I know 05:57 you're sort of, you know, mixing the 05:59 lemonade with water. Uh, you know, how 06:02 do you keep selling the entire gallon? 06:03 And they're like, "Well, after we sell 06:05 the first $10, we just use the $10 we 06:08 got to buy the the other $10 of lemonade 06:11 from ourselves. That way, we always sell 06:13 $20 of lemonade." It's like, uh, 06:17 okay, let's think about this. So, you're 06:20 you're taking money and then you're 06:23 basically buying the lemonade from 06:25 yourself because the market doesn't want 06:28 your lemonade. And then you say, "Well, 06:30 the great thing about our lemonade is 06:31 there's always enough demand to buy a 06:34 whole gallon of lemonade." And the truth 06:36 is, no, there's not. There's enough 06:38 money to buy half of your lemonade, your 06:40 watered down lemonade, because enough 06:41 people like lemonade enough that they're 06:43 willing to buy, you know, half a gallon 06:46 of water down lemonade, but then you run 06:48 out of buyers and you'd have to, you 06:49 know, lug the other half gallon back in, 06:51 you know, you know, back home and, you 06:54 know, tell me how you failed. Um, but 06:56 instead you just use the first $10 to 06:58 buy the second $10 of lemonade from 07:00 yourselves. And if that doesn't work, 07:02 you just take some monopoly money out 07:05 um, you know, to the lemonade stand and 07:07 however much money you know you can't 07:09 sell of lemonade, you just use the 07:11 monopoly money to buy the rest of it 07:13 from yourself. So that's basically 07:14 what's happening right now with the US 07:17 government debt auctions is when the 07:20 marketplace runs out of real people with 07:23 real money that that want to buy US 07:25 government debt, the Federal Reserve 07:27 steps in and just buys it with madeup 07:30 money out of thin air. Now the Federal 07:33 Reserve has been doing this the last 07:35 couple weeks. I mean tens of billions of 07:38 dollars. We're not talking small small 07:39 amounts of money here. The Federal 07:41 Reserve has been buying government debt, 07:43 which is called monetizing the debt. Uh 07:45 they've been doing that with tens of 07:47 billions of dollars, which indicates 07:50 that people just are not willing to 07:51 trust the US government anymore. Now, 07:54 this is not a problem unique to the US 07:55 government. Uh bond yields, which is the 07:57 amount of money the government has to 07:59 pay for people to buy their long-term 08:01 debt, are getting higher and higher and 08:04 higher. So, in Japan, which is notorious 08:06 for having borrowed just ridiculous 08:08 amounts of money, uh their debt to GDP 08:11 is much higher than the United States, 08:13 um in Japan, uh they've got, uh their 08:17 interest rate for 30-year and 40-year uh 08:20 bonds just hit the highest it's ever 08:22 been in history, uh as of the last 08:24 couple days, meaning Japan now has to 08:27 pay people more interest in order to be 08:30 willing to buy their debt than they've 08:32 ever had to pay in the history of Japan. 08:35 Um, and bond uh bond yields around the 08:38 world are high because again it's not 08:41 unique to the United States. Just people 08:43 are increasingly concerned that go that 08:46 all governments are not going to be able 08:48 to pay their debts and so they're 08:50 demanding higher and higher interest 08:51 rates. So where does this go? Well, it 08:53 just keeps I mean it keeps going where 08:56 eventually you get the central bank just 08:58 starts buying more and more of the debt 09:01 issuance and that's how you get 09:03 hyperinflation. Uh you get 09:05 hyperinflation because as soon as 09:06 nobody's buying the debt anymore, the 09:08 Federal Reserve is buying the debt. So 09:10 instead of the government being funded 09:13 partially by taxes, partially by um uh 09:17 by borrowed money, which pulls money out 09:19 of the economy, and partially by printed 09:22 money, which is the three ways they fund 09:23 the federal government, which is it's 09:25 ridiculous that you know, tax money, 09:27 even when they take, you know, 40% of 09:29 all of our money is still not enough. 09:31 So, uh, the way the government works is 09:33 they tax as much of the of your money 09:35 off of you as they possibly can get away 09:37 with, and then they borrow as much money 09:41 out of the economy as they could 09:43 possibly get away with. And when that 09:45 fails, they print the rest of the money 09:46 just out of thin air. So, that's three 09:48 ways the government gets money. Uh, all 09:50 of which are bad for 09:52 you because when they borrow money out 09:54 of the economy, it makes it harder for 09:56 you to borrow money in the economy 09:57 because you're competing with the 09:58 government to borrow money. And the 10:01 government can print money out of thin 10:02 air. So people are more likely, you 10:04 know, initially to give money to the 10:06 government because they're like, well, 10:07 you know, at least I know I'll get the 10:09 dollars back. They may not be worth as 10:10 much, but at least I know I'll give them 10:11 back because the government can just 10:12 make them out of thin air. Uh so anyway, 10:15 uh you know, things are bad when the 10:17 government has resorted, you know, 10:19 increasingly to the third category, 10:21 which is, hey, nobody even wants our 10:23 debt anymore. We're just going to make 10:24 the money up out of thin air. So, as of 10:26 the last couple weeks, that's been 10:28 happening more and more with the US uh 10:30 the Federal Reserve monetizing the debt 10:32 by just straight up printing money and 10:34 buying the debt with it. So, why is that 10:36 inflationary? Well, uh they're loaning 10:39 money to, you know, they're buying 10:40 government debt, which is the equivalent 10:42 of loaning money, and then the US 10:44 government, which is completely out of 10:46 control what they're spending, no 10:47 discipline whatsoever, uh they go spend 10:50 that into the economy. So as the US 10:53 government dumps money into the economy 10:55 by spending and spending and spending 10:56 and spending that those dollars are then 10:59 increasing the money supply which means 11:02 there are more dollars facing the same 11:04 amount of goods and services which means 11:06 the price of those goods and services 11:08 goes up. So now you're competing with 11:10 the government not just to borrow money. 11:12 You're also competing with the 11:13 government to just buy stuff because 11:15 everything you want to buy, someone in 11:17 the government wants to buy and they 11:18 they're buying it with madeup money and 11:20 you're buying it with money you worked 11:22 hard for. And so it's harder and harder 11:24 to buy the things you want to afford 11:27 because you're having to compete with 11:28 people who didn't do any work to to 11:31 create the money that they're using. 11:33 Their their money was made up out of 11:34 thin air. yours you had to work for. But 11:37 both of those dollars are now chasing 11:40 for the things you want to buy. So the 11:42 things you want to buy, the prices of 11:44 what you want to buy are now going up 11:47 because of supply and demand. Now, uh 11:49 you may not notice that in the near 11:51 term, but long term you will because 11:53 when money is printed out of thin air, 11:55 it always eventually shows up as 11:57 inflation. Uh sometimes there's a time 11:59 lag. Usually there's like a 12 or 12:01 18month time lag. Um because that's how 12:04 long it takes for the uh you know the 12:06 money to sort of filter through the 12:08 economy and to start bidding up prices. 12:10 But anyway, all of that is bad news for 12:12 governments and all of that is bad news 12:14 for you unless you have Bitcoin. If you 12:16 have Bitcoin, at some point you can sit 12:19 in a Zen state and not worry about the 12:22 fact that a bunch of people are doing 12:24 stupid stuff that Washington, you know, 12:27 is going to pass or has passed, I don't 12:29 know, this big beautiful bill, which is 12:31 garbage that is full of just ridiculous 12:34 spending. It doesn't make any spending 12:36 cuts and it spends way more money. So, 12:39 not only are they not cutting anything 12:41 that Doge found, they're adding more 12:43 money on top of it, which is just 12:45 absolutely insane, absolutely 12:47 ridiculous. So, at some point, if you 12:49 got Bitcoin, you can sit back in a Zen 12:51 state and say, "Well, they're screwing 12:52 everybody, but they're not screwing me." 12:54 Uh, because they're printing money that 12:56 everyone else is using, but I'm using 12:58 money that they can't print more of. So 13:00 as they print more money, the p the 13:03 value of my money goes up because more 13:05 people switch from the money that's 13:07 getting printed out of thin air to the 13:08 money that cannot be printed out of thin 13:10 air. So uh monetizing the debt is you 13:14 know typically something governments do 13:16 in the late stage of their life as in 13:19 it's something they do when a government 13:21 is in decline because they've gotten so 13:24 proflegate, so fat, so dumb, so happy 13:27 that um you know they just don't have 13:29 any discipline whatsoever at all left 13:32 anymore. And we have clearly arrived at 13:34 that place in Washington DC. So they are 13:36 monetizing the debt. the Federal Reserve 13:38 is straight up printing money out of 13:40 thin air and buying government debt with 13:42 it. Um, and that's a very bad sign. And 13:46 the same is happening in other countries 13:47 because the debt is u the bond, you 13:51 know, the the the price of money that 13:53 the government borrows is going up is 13:55 really really high in all countries 13:58 right now, which tells you all countries 14:00 are in a bad way with fewer people 14:03 trusting them. And that is part of the 14:05 reason Bitcoin is sitting at $105,000 14:07 per coin is because more and more of the 14:10 money um is has decided that they do not 14:13 want to buy government debt and instead 14:15 they're going to buy something else and 14:18 you know a percentage of that's going 14:19 into Bitcoin. Over time it will be more 14:21 and more. So good luck out there and I'm 14:24 here for anything you need on any front 14:26 as always. Thanks everyone.