The Crisis Everyone's Ignoring (Again)

This all went south last summer. Then we ignored it. Now it's back. And there's really only one remedy here because it can't be ignored any longer...

Dear Fellow Reader,

Remember 2020? COVID crashed everything.

Remember 2021? Inflation surprised everyone.

Remember 2022? The Fed broke the bond market.

Remember 2023? The Silicon Valley Banking Crisis?

And who could forget August 2024?

That’s when Japan's Nikkei had its worst single-day crash since Black Monday 1987, a four-sigma event that vanished from headlines faster than a politician's campaign promise.

But here we are in May 2025 (coming off the back of a massive collapse in March and April)… and the elephant is back in the room.

Japan's long-term bonds are in an absolute free fall.

Their 40-year bond yields have increased by 100 basis points since April to 3.56%, while 30-year yields have jumped to 3.09%, both experiencing dramatic spikes in a matter of weeks.

Yet somehow, the financial media is treating this like background noise.

It’s like watching a house catch fire while discussing the weather.

This remains the risk that you need to understand…

What's Wrong? (Spoiler: Everything)

Japan's predicament is pretty simple

It’s not some distant economic theory. This is what a debt bomb with a lit fuse looks like… and there’s not much of a pathway to stability in the long term.

There are four major issues at play simultaneously.

First, the debt issue. Japan's government debt accounts for 260% of its GDP.

For context, Greece's debt crisis happened at 180% of GDP. Japan makes Greece look fiscally responsible.

For comparison, make a small campfire. Look at it… That’s Greece, the 50th largest economy in the world.

Now, burn the entire forest… that’s Japan, the world’s third-largest economy.

Next… there’s the problem with inflation.

Believe it or not, Japan’s official inflation level is higher than what’s happening in the United States. It’s 3.6% for Japan, and 3.2% in America (but that doesn’t account for all the debasement that has hammered the paper currencies in both nations).

Source: TradingEconomics.com

After decades of fighting deflation, Japan’s Central Bank finally got its wish.

Now they're trapped. They have a terrifying decision ahead. They can either let inflation run and destroy savers’ money, or raise rates and detonate their debt bomb.

Then there’s the currency, which is also in free fall.

The yen has collapsed by over 30% against the dollar in recent years. Every percentage point drop makes imports more expensive, fueling further inflation and creating more pressure to raise rates that they can't afford to raise.

And then, there’s the insane Fiscal Repression run by the Bank of Japan - all part of their continued effort to fight deflation and spur economic growth. The Bank of Japan owns 52% of all Japanese government bonds.

They've completely broken price discovery.

Here’s How This Ends

Here's how this movie ends, and we've seen this script before:

Act I: The Squeeze Intensifies

Bond yields continue to spike as the BOJ tries to normalize its policy. The 40-year bond, which becomes uninvestable at a 3.56% yield (it’s still below their 3.6% inflation rate, by the way), is just the opening scene.

Act II: The Carry Trade Unwinds

Japan has been the world's piggy bank for carry trades, borrowing cheap yen and buying higher-yielding assets elsewhere. When Japanese rates rise or the yen strengthens, this trade reverses violently. Think margin calls across every primary market simultaneously.

Act III: Global Contagion

Japanese institutions hold over $1 trillion in U.S. Treasuries alone.

They also own trillions more in global assets. When they're forced to sell foreign assets to deal with domestic chaos, global yields spike and liquidity evaporates.

Act IV: The Fed Rides to the Rescue (Again)

Just as in 2008 and 2020, and in every other crisis, the Federal Reserve will be compelled to intervene, including through currency swap lines, emergency lending, and direct purchases of foreign bonds. American taxpayers and savers will ultimately bear the cost of Japan's decades of monetary recklessness.

Why Gold Is the Primary Lifeboat

When this crisis hits—not if, when—there will be precisely one asset that doesn't depend on central bank promises, government solvency, or currency stability: gold.

Here's the playbook:

Phase 1: The Dollar Spikes

Initially, as Japan implodes and carry trades unwind, the dollar will surge.

Gold might pause or even dip as everything gets sold for dollars to meet margin calls.

So too would other commodity prices.

Phase 2: The Fed Intervenes

A surging dollar will break emerging markets and threaten the global financial system.

The Fed will be forced to intervene with massive liquidity injections, rate cuts, and international rescue packages. Hello dollar swaps. Hello, saving Japanese banks before helping Americans deal with any domestic fallout.

It's a good thing the Fed is spending $2.5 billion on its headquarters…

Phase 3: Gold Takes Its Next Leg Higher (Then Bitcoin Too)

The moment central banks start bailing out other central banks with freshly printed money, gold becomes the only asset that can't be debased, manipulated, or printed into oblivion. Tech stocks will surge as well… so would high-beta stocks.

However, it’s physical gold that lacks a counterparty risk, and continues its march toward acting as a shadow currency.

The Bottom Line

Japan's crisis isn't some theoretical risk.

It's been happening for 18 months, and it’s visible to anyone who isn’t blind to the reality.

Bond yields spiking, the yen collapsing, inflation running hot, and debt service costs exploding.

The math doesn't work, the politics don't work, and the monetary policy doesn't work.

You know who will receive the blame.

However, this has been decades in the making… All roads lead to more bailouts and increased monetary inflation. Plan accordingly.

This has gotten out of hand… and it still feels like people don’t see just how insane our financial system is - because there’s something on TikTok (and did you know that Taylor and Blake are fighting?)

We're all supposed to pretend this is fine.

The pattern is always the same: ignore the warning signs, act surprised when a crisis hits, then stick American taxpayers with the bailout bill.

We’ve had the housing crisis, the European debt crisis, the COVID-19 crisis, and now we're preparing for the Japanese debt crisis. Everyone, everywhere, will soon be an expert in it. But it’s important not to get bogged down by headlines.

This is getting a little too absurd - but I’m fast turning into some Crisis Cowboy - constantly helping the herd get through the storm and choppy waters.

The only question isn't whether this will happen.

It's whether you'll be positioned correctly when it does. Yesterday, I issued my first warning about the challenges in this upcoming cycle.

I remind you that gold doesn't care about central bank promises, government debt ratios, or carry trade unwinds.

It just sits there, shiny and immune to monetary madness, waiting for the next time everyone remembers why it's been money for 5,000 years.

Because some lessons need to be learned repeatedly.

Stay positive,

Garrett Baldwin