As of May 29th, the total U.S. federal debt has surged from $22.9 trillion at the onset of the pandemic to $30.48 trillion, an increase of nearly $8 trillion. Each American citizen (men, women, and children) is burdened with a debt of $91,530, and each U.S. taxpayer's debt has reached a record $242,985. All of these figures have reached historical highs.

The ratio of the total U.S. federal debt to GDP has now exceeded a record high of 129%, which is an increase of about 72% from 57.79% in 2000 and an increase of about 95% from 34.59% in 1980. This serves as a constant reminder to Americans that the prosperity of the U.S. economy over the past decades has been a product of the accumulation of massive debt.

This is just the tip of the iceberg of the U.S. economy's heavy dependence on debt. In fact, the habits of complacency, indulgence, and living beyond one's means that Americans have developed over the years are the result of indulging in the advantages of the U.S. dollar as the world's reserve currency and relying on debt. Jim Rogers, the most visionary Wall Street commodities king and billionaire, has warned more than once that the United States is the world's largest debtor nation, with debt everywhere and at all times, and this will eventually come at a cost. As expected, there has been the latest development.

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The Federal Reserve released its latest quarterly financial report on May 27th, showing that the U.S. Treasury bonds and mortgage-backed securities (MBS) held by the Federal Reserve resulted in an unrealized loss (paper loss) of $330 billion. Bill Nelson, the chief economist at the Bank Policy Institute, stated that adjusting for the Federal Reserve's asset situation as of the end of last year, its unrealized loss is even larger, reaching as high as $458 billion. This indicates that the Federal Reserve seems to be paying the price for the crazy dollar printing press that started in 2020 during the pandemic.

The latest report shows that in the first quarter, the Federal Reserve, holding nearly $9 trillion in assets, remitted $32.2 billion in profits to the U.S. Treasury. With the Federal Reserve about to start shrinking its balance sheet, unrealized losses could turn into actual losses. The New York Fed stated that as the Federal Reserve raises interest rates, it needs to pay more interest to compensate for the reserves that major commercial banks have at the Federal Reserve, which could push the Federal Reserve into operating losses. Given that the U.S. benchmark interest rate is expected to continue to rise, the Federal Reserve's investment portfolio could incur substantial losses.

Federal Reserve Chairman Jerome Powell

It is worth noting that, according to the Federal Reserve's latest weekly report, the market value of the $2.77 trillion in MBS held by the Federal Reserve has decreased by $164 billion, falling to $2.606 trillion as of March 31st. This indicates that the surplus that the Federal Reserve, which is about to shrink its balance sheet in June, will remit to the U.S. Treasury will also decrease significantly. It is expected that the Federal Reserve's balance sheet will be reduced from the current nearly $9 trillion to about $5.9 trillion by mid-2025. The Federal Reserve may ultimately reduce liquidity by about $4 trillion.

At the same time, the Federal Reserve may be in a dilemma. Bloomberg cited a report from Bank of America on May 27th, stating that the Federal Reserve may slow down or even stop raising interest rates in September. Analyst Kyle Bass stated that even though the Federal Reserve has started the interest rate hike cycle, it cannot change the global energy supply issue, nor can it change the high food prices in the United States. The Federal Reserve may have to admit defeat for its aggressive monetary measures and may even face the mode of restarting the dollar printing press. In other words, the Federal Reserve, facing losses, still finds it difficult to curb the precarious high inflation in the U.S. market.

The U.S. CPI for March and April consecutively exceeded an increase of 8%, and once reached a 40-year high of 8.5%. The U.S. Commerce Department announced on May 27th that the April PCE price index increased by 6.3% year-on-year, and the core PCE price index (excluding food and energy prices with large fluctuations) increased by 4.9% year-on-year. The preliminary deficit in the U.S. goods trade balance in April was $105.9 billion.

This all means that as the dollar continues to lose purchasing power, more and more Americans will pay the price for being heavily indebted and high inflation. Because when U.S. prices rise and interest rates increase, consumers will have to take more money out of their wallets for consumption and debt repayment.Chief Economist Nancy Lazar of investment bank Piper Sandler stated that an increasing number of U.S. companies are facing a wave of layoffs. It is anticipated that the United States may witness millions or more job cuts. Data released by the U.S. Department of Commerce on May 27th showed that consumer spending increased by 0.9% in April, while income grew by 0.4%. However, after adjusting for inflation, disposable income remained flat for the month, indicating that wage growth is struggling to keep pace with rising prices. Additionally, in April, the U.S. savings rate dropped to 4.4%, the lowest level in 14 years, suggesting that many Americans are dipping into their savings to offset the impact of rising costs.

The purchasing power of the U.S. dollar has significantly decreased. According to data from Revelio Labs, a U.S. workforce intelligence analytics company, the total number of job postings in the United States has fallen from its peak, marking the largest recorded change. These phenomena are overwhelming U.S. consumers. The latest data released by the Federal Reserve on May 11th shows that U.S. consumer debt is approaching a record $16 trillion. In the first quarter of this year, the United States also added 229 million new credit card accounts, higher than the previous quarter and also above previous levels.

Matt Schulz, Chief Credit Analyst at LendingTree, said that as U.S. inflation rages and interest rates rise, the situation will get worse before it gets better. The burden of debt on U.S. consumers will become heavier. Combining the above data with Morgan Stanley's report, it is evident that the savings held by the currently impoverished population in the United States are less than before the 2008 financial crisis. The poorest 20% of the population are now poorer than before the last round of quantitative easing. With the pace of interest rate hikes and inflation, more Americans will be dragged into the abyss of poverty.

It is unimaginable that, according to a report by the Associated Press, high inflation has even forced some Americans to go to "food banks" to collect food. Currently, about 60 million Americans are seeking help from "food banks." Additionally, according to the latest 2021 Annual Homelessness Assessment Report released by the U.S. Department of Housing and Urban Development (HUD), over 326,000 people in the United States are homeless every night. This number represents one homeless person for every 1,000 people in the United States.

Citing a telephone survey conducted by Bankrate on more than 1,000 adults, CNBC reported that about 56% of Americans cannot use their savings to pay for an unexpected $1,000 bill. This means that 56% of Americans cannot come up with $1,000. These signs indicate that an increasing number of Americans have already and will continue to pay a high price for the U.S. economy's addiction to debt.

Not only that, but the U.S. financial website ZeroHedge, in its ongoing follow-up reports, mentioned that the U.S. economy has a huge pension fund Ponzi scheme. According to the latest report released by the U.S. Social Security and Medicare Trustees, by 2035, the U.S. social pension insurance will be exhausted, affected by the dollar debt bubble and public pension fund debt deficits.

As of May 25th, more than 11,000 millionaires in the United States are staging a real-life exodus. For example, many people in Illinois have left the state due to the unbearable burden of high debt for each taxpayer caused by the state's debt trap. This butterfly effect continues to spread to Mississippi, Alaska, Connecticut, West Virginia, Louisiana, and Wyoming, with more people choosing to leave due to the unbearable average debt burden. This indicates that the U.S. economy is paying the price for over-reliance on debt in all aspects.

However, the U.S. economy is even more dependent on debt than before. Since 2020, the U.S. Treasury has continuously hinted that it may consider issuing 100-year U.S. Treasury bonds. Goldman Sachs analysts have even suggested considering issuing 1,000-year U.S. Treasury bonds.

According to the latest TIC data released by the U.S. Treasury on May 16th, following the two-month statistical reporting惯例, global buyers sold a total of $97.3 billion worth of U.S. Treasury bonds in March. Among them, at least 19 countries, including China, Japan, Luxembourg, Switzerland, Brazil, Singapore, South Korea, Norway, Saudi Arabia, the Netherlands, Israel, Australia, the Philippines, Kuwait, Sweden, the United Arab Emirates, Italy, Vietnam, and Poland, sold U.S. Treasury bonds in March.Among the traditional economic allies of the United States, Japan sold an unprecedented $73.9 billion worth of U.S. Treasury bonds in March. Israel sold $6.5 billion worth of U.S. Treasury bonds, with a reduction scale of about 10%. Saudi Arabia reduced its holdings by $1.2 billion in March, and since February of last year, Saudi Arabia has started to reduce its holdings from the previous $132.9 billion, with a cumulative reduction of $17.4 billion, and the total reduction scale has exceeded 13%. At the same time, Australia sold $1.5 billion worth of U.S. Treasury bonds in March.

It is worth mentioning that the latest data from TIC shows that China sold $15.2 billion worth of U.S. Treasury bonds in March, which is equivalent to about 101.8 billion yuan. Since December last year, China has reduced its holdings of U.S. Treasury bonds for four consecutive months, with a total reduction scale of $41.3 billion, which is equivalent to about 276.6 billion yuan. The current total holding has been reduced to 103.96 billion U.S. dollars, and the holding volume of U.S. Treasury bonds has been reduced to the lowest level since 2010, still being the second-largest overseas holder of U.S. Treasury bonds.

Coincidentally, in Rogers' view, the sustainability of the U.S. debt model is in the hands of a few major buyers around the world. The U.S. financial website Zerohedge mentioned that as the U.S. debt burden intensifies, and inflation remains high, including the increased risk of potential defaults, some major buyers may even sell up to $800 billion worth of U.S. Treasury bonds, or even clear their holdings. The impact on the U.S. economy may be "nuclear" level.