Monday, March 16, 2026
Our government has been on an insane spending spree ever since the pandemic, borrowing $22 trillion and doubling the national debt in six years. Even after Republicans gained control of Congress and the presidency, the deficits continued.
We’re losing credibility and the dollar is at risk of being debased as the world’s reserve currency.
U.S. Treasury bonds are the basis of the world’s financial system because of our big economy and ability to generate revenue through taxes. These bonds are said to be “risk free” because it’s “inconceivable” we’d ever default.
But we defaulted in 1933 and 1971. To be clear, we didn’t default by not paying. We defaulted by paying claims backed by gold with paper backed by nothing.
That’s a technical default. Today, what exactly constitutes a technical default is debatable.
Last December, the Federal Reserve bought $40 billion of bonds per month. If you think a technical default is printing money to refinance debt, we’re there.
I think it’s creating money to buy long-term debt to hold interest rates below the inflation rate when investors aren’t interested. Investors are still involved, for now, though heavy inflation could mean long-term rates easily surpassing 6%.
A good proxy for estimating long-term interest rates is adding nominal gross domestic product growth to the inflation rate. Nominal GDP might be 4%-5% this year due to government spending. The consumer price index inflation is around 3%-4%.
So, we could see 10-year yields north of 7%.
That would crush banks, wiping out capital with withdrawal demands high. To prevent this, Treasury would likely instruct the Fed to buy enough bonds to prevent yields from rising.
That’s the kind of technical default that could occur over the next several months. If so, stocks could suffer, like in the 1930s and 1970s.
Daniel A. White is an investment advisory representative of and provides advisory services through CoreCap Advisors, LLC. Daniel A. White & Associates and CoreCap Advisors are separate and unaffiliated entities.