This is the new Federal Reserve Chairman, Kevin Warsh… He’s an incredibly successful investor and business man…

And he’s crying (via AI) because no matter what he does, he’s completely screwed…

See… There are three massive alarm bells going off in the global financial system right now, and they're all ringing at once for the first time in modern history...

Unfortunately most people have no idea what’s really happening behind the new all-time highs in the stock market…

And it’s not because the warning signals are hard to see…

It's because the language used to explain them is so dense that the average person tunes out before they even understand what's happening…

So over the next three emails, I'm going to walk you through all three of these MASSIVE warning signals in plain English so you can actually understand what’s happening…

And because investing in the right assets during the years ahead will be absolutely critical to your financial survival…

Ready to rock? Let’s dive in…

While the stock market is “cool”, the bond market is the only market that really matters…

And right now the bond market is signaling that the global economy is headed towards a massive crash…

Let’s start at the beginning… When the US government needs to borrow money, they sell IOUs called "bonds…"

You loan them money today, and they pay you back later with a little interest on top. The "yield" is just a fancy word for the interest rate on that loan.

A 30-year Treasury bond means you're loaning the US government money for 30 years.

Simple enough.

Well for the last 17 years, the interest rate on a 30-year US government bond has been below 5%. That's been the normal range our entire modern economy is built on…

But on May 13th this year, that rate broke above 5% for the first time since 2007... Six days later, it climbed even higher.

Think of the Federal Reserve as the drive behind the country's financial steering wheel…

When the economy is in trouble, they cut interest rates to make borrowing cheaper, which gets people spending and businesses hiring again… It's the most powerful economic tool we have.

But here's the problem…

Between September of 2024 and December of 2025, the Fed cut rates six times to try to stimulate the economy…

But the cost of long-term borrowing did the opposite of what it was supposed to do…

It actually went UP instead of down...

The previous seven times the Fed did this going back to the 1980s, long-term rates went down 100% of the time. Not most of the time. Every single time.

This is the first cycle in over 40 years where the steering wheel stopped working, and it's not just here…

The same thing is happening in Japan, the UK, and Germany.

Every major economy on earth is showing the same warning signs at the same time, which has never happened before...

This is the part nobody explains…

Long-term rates (like the 30-year Treasury) are not set by the Fed… They're set by something called the "global bond market," which is just a fancy name for the giant pool of buyers around the world who actually purchase US government debt.

That pool includes pension funds, insurance companies, foreign central banks, sovereign wealth funds, and big banks. Collectively, they decide how much interest they need to be paid to lend the US government money for 30 years…

Normally when the Fed cut short-term rates, those buyers assumed the economy was being stabilized and inflation would stay tame, so they accepted lower long-term yields in return...

Well that mechanism just broke, and here's why…

This is the big one…

The US national debt just crossed $39 trillion, and it’s growing by almost $3 trillion per year, and neither political party has a credible plan to fix it…

Bond buyers are looking at this situation and are asking themselves one simple question…

"Am I really going to get paid back in dollars that are actually worth something 30 years from now?"

And their answer is, "probably not at these low rates…" So they're demanding a higher interest rate to compensate for the risk.

That's what a yield spike actually is... It's the global bond market quietly downgrading the United States without saying so out loud…

For the last 50 years, the US has relied on foreign central banks (countries like China, Japan, and Saudi Arabia) to buy a huge chunk of our debt…

They did it because the dollar was the world's reserve currency and US Treasuries were considered the safest asset on earth.

But that’s no longer happening…

In 2022, the US froze Russia's dollar reserves as part of the sanctions over Ukraine. Every non-Western central bank around the world got the same memo on the same day…

"Holding US debt is no longer politically safe. They can freeze us next."

So China has been quietly reducing its Treasury holdings for three years. Saudi Arabia is now accepting Chinese yuan for oil. And the BRICS bloc (Brazil, Russia, India, China, South Africa) is actively building dollar alternatives.

When the biggest, most reliable buyers of US debt start stepping back, the remaining buyers have leverage. They demand higher rates.

The Fed cannot fix this. It's a geopolitical problem, not a monetary one.

Bond buyers don't care about today's inflation number, they care about average inflation over the next 30 years...

After what happened from 2020 to 2023, when inflation peaked at 9.1%, bond buyers no longer believe the Fed's "2% target" is realistic.

They're now pricing in 3 to 4% average inflation for the next several decades which means they need a 5%+ yield just to break even in real terms…

The Fed lost its steering wheel because the bond market figured out that the US (and every other major government on earth) is fiscally trapped, and no amount of short-term rate cutting can paper over that…

The steering wheel only worked when the world trusted the driver, and the world has lost trust in the United States…

And no, this is not a problem that Trump created… If you’ve been a reader here or a member of the Inner Circle, we’ve been talking/warning about this before he was even elected.

This is a structural problem that’s created when you give the government the ability to print unlimited amounts of fiat currency over decades.

Now the implications of this situation are massive…

For the last 15 years, every time the stock market crashed, the Fed rode in to the rescue...

They lowered interest rates, printed money, and backstopped the banks

Investors have gotten so used to it that we’ve been trained to "buy the dip" with absolute confidence, because we know the Fed would always come save us…

Well that era is over because they’re caught between a rock and a hard place…

The Fed can't cut rates anymore without making inflation worse and crushing the dollar…

And they can't raise rates either, because the interest payments on the national debt would explode and break the Treasury…

For the first time in modern history, there's no good move left to make… Something is going to break no matter what they do…

We’ll dive into the specific in Part 2 tomorrow… And in Part 3, we’ll dive into the most important investments to own during this crisis…

Sincerely,

Mike Dillard ✞
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