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2025’s dollar depreciation actually started in the 2010s…

When the Federal Reserve started quantitative easing(QE), and took on a zero interest rate policy, the inflationary bubble pumped the world high on optimism and near free money.

For over a decade, the dollar has been propped up by massive money printing supported by the exportation of debt in the form of treasury bonds.

Now, the export of US debt could well be coming to a close.

But first, let’s start here.

The Central Banks of the world started buying up US debt earlier than the 2010s – all in good faith.

Then as QE started, many central banks started to turn away from from holding US treasury bonds.

They knew the money printer was a deception. It is the main tool deceiving many of the dollar’s real value.

You can see how central banks bought, bought, and bought some more until about 2011.

But US bonds found, and still find buyers around the world.

Internally, too.

Especially, in 2020.

Everyone and almost their taxi driver went for it.

Because interest rates were pushed so low for so long, it made sense for everyone – businesses, governments, and the average joe to borrow more, and it also encouraged hedge funds and other speculators on Wall Street to make big bets.

They bet on mortgage rates, foreign exchange prices, treasury bonds, and more…

It all seems to work in an inflationary environment – when you know prices can only go up.

But the boom cycle eventually leads to the bust.

Prices for things get over inflated, and no matter how much money gets printed, the market no longer believes the value it provides.

That seems to be happening in the US treasury bond market.

The Wall Street Journal reports:

After Another Bad Year for Bonds, Investors Lose Faith in a Turnaround

“Wall Street investors entered each of the past two years brimming with optimism about U.S. Treasurys and other types of high-quality debt. Each time, they were disappointed.

Now, they are far more guarded. In recent weeks, money managers have been dumping Treasurys, while savers have been rushing out of longer-term bond funds.

All that selling has pushed Treasury yields to the upper end of their two-year range. Still, investors remain worried that a tough environment for bonds could get even worse if President-elect Donald Trump pursues inflationary policies such as new tariffs.”

And the result is a rising yield curve when yields should be lowering as interest rates lower.

Instead, the 10Y Treasury yield has been rising for the past three months.

And that means, as we see more inflation from the Trump Administration, more money printing at the Fed, and rising Treasury yields…

We are going to see more dollar depreciation in 2025 and beyond.

2025’s biggest dollar depreciation sign are rising treasury yields when they should be going down.

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