The U.S. economy now stands on the edge of a historic reckoning with reality.
The signs are everywhere, in the massive swelling of debt, the disintegration of the middle class, and the absurd valuations of assets priced at inflated levels despite worsening fundamentals.
The analysis of the impending economic crisis is not the product of emotional overreaction or fearmongering, it is based on undeniable data and historical precedents.
This is not an exaggeration.
The numbers simply don’t add up.
The debt spiral and the bubble through leverage
Let’s start with debt.
Total U.S. non-financial debt has skyrocketed to $77.9 trillion, that is 256% of GDP.
This is not merely unsustainable, it equals an enormous economic quagmire.
For comparison, debt stood at $19.3 trillion (189% of GDP) during the NASDAQ bubble in 2000, and $33.7 trillion (234% of GDP) at the onset of the Global Financial Crisis.
We have far surpassed those levels.
Note that non-financial debt is the total debt (public and private) issued by all entities outside the financial sector.
In other words, it includes all loans and obligations owed by:
1) The federal government and state governments (public debt)
2) Non-financial corporations (corporate debt)
3) Households (mortgages, consumer loans, student loans, credit cards, etc.)
In addition, margin debt has reached a historic record of $1.06 trillion, up 33% year over year.
Margin debt is the amount of money investors borrow from their brokers to purchase stocks or other securities.
Simply put: it’s borrowed money used to buy more stocks than one could afford with their own capital.
Leverage disguised as prosperity
Leveraged loans rose to $400 billion in the third quarter of 2025, pushing the total market above $2 trillion.
Private credit, once a marginal segment of the markets, has exploded from $100 billion in 2007 to $1.7 trillion today.
This is not growth.
It is leverage disguised as prosperity.
The bond market is now a ticking time bomb.
Public debt interest payments have exceeded $1 trillion per year.
The debt-to-GDP ratio stands at 123%, projected to reach 140% by 2029.
National debt is 720% larger than annual tax revenues.
These numbers do not signal a “soft landing”, but a prolonged stagflationary crisis.
The disintegration of the middle class
According to a Goldman Sachs study, 40% of Americans now live paycheck to paycheck, up from 31% in 1997, with no ability to save.
The top 0.01% of the population now controls five times more national wealth than in 1989.
Credit card debt has surpassed $1.3 trillion, with delinquencies rising sharply.
The middle class is being sacrificed to maintain the illusion of prosperity.
Inflation has obliterated purchasing power, which is why socialism is gaining ground among a disillusioned population.
There can be no sustainable nation without a sustainable middle class.
Asset price inflation and the elite consumers
The stock market is now priced in the stratosphere...
The Wilshire 5000/GDP ratio hovers near 200%, far above the historical average of ~73%.
Total equity capitalization now equals more than 250% of GDP, whereas the normal level is about 55%.
The seven giants, Apple, Microsoft, Amazon, Alphabet, Meta, Nvidia, and Tesla, represent over one-third of the S&P 500’s capitalization, up from 12% a decade ago.
Artificial Intelligence (AI) investments accounted for 40% of GDP growth and 80% of stock market gains in 2025.
This is the largest market concentration in history.
The housing market fares no better.
The home price-to-income ratio has surpassed 5.0x, reaching new bubble peaks.
The average American can no longer afford to buy a home, and prices are already beginning to decline.
Monetary mismanagement: The root of the problem
The real Fed Funds Rate has shown wild fluctuations, dipping into negative territory during inflationary surges and remaining barely neutral today.
Despite nominal rate hikes, real interest rates remain historically low and trending downward.
The Federal Reserve is trapped in a vicious policy loop where every rate cut further erodes purchasing power, inflates asset bubbles, and deepens the debt spiral.
Bank reserves have soared to historic highs, while M2 money supply has reached $22.2 trillion, double its 2010 level.
The Fed’s balance sheet remains above $6.5 trillion and is rising again.
This is not monetary policy.
It is monetary mismanagement.
The Fed is no longer a “guardian of stability”, it is a hostage of its own balance sheet.
Every rate cut now accelerates inflation.
This is not policy, it is panic in action.
The monetary endgame
This new cycle may be the most destructive in history for American purchasing power.
The Fed has embarked on yet another dangerous rate-cutting cycle, with potentially catastrophic consequences.
When the next recession comes, it will slash rates to zero, accelerate QE (Quantitative Easing), and flood the system with liquidity.
But this time, it might not work.
Why?
Because the bond market may revolt.
Long-term rates will skyrocket as investors flee the dollar and demand real compensation for risk.
That’s when the house of cards collapses.
Just look at what happened the last two times the Fed cut rates:
At the end of 2024, Powell cut the policy rate by 100 basis points, and long-term rates rose by 1%.
The Fed has cut rates in its last two meetings, and long-term rates are rising again.
Markets do not remain irrationally calm forever.
They simply remain irrational longer than most can stay solvent.
And when the trend reverses, it will be violent.
Recently, gold surpassed $4,230 before retreating slightly.
This is not a normal asset move, it is the market’s condemnation of central bank deception and mismanagement.
Gold and silver are not merely commodities.
They are “monetary truth” in a world of fiscal lies.
China and India are accumulating gold as they did in 1933.
India’s gold reserves have exceeded $100 billion, while China is building four new gold hubs to move its reserves outside Western jurisdictions.
This is not diversification, it is preparation.
Foreign investors, once the main source of demand for U.S. Treasuries, are leaving.
Japan, China, and the Gulf States are reallocating reserves into gold.
They are not diversifying away from the dollar, they are abandoning it.
The entire world, starting with the United States, is preparing for a collision with the hell of the real.
www.bankingnews.gr
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