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.