That is it, they cant pay the interest on those rates. Recognise this and there is only one direction then. This shouldnt be on a trading thread but its relevant to DXY and every price. USA financed themselves short term where as UK having in effect gone broke in the 1970's has a long term average to our debt near 13 years if Im remembering right. I dont know the exact facts & now my reference data is outdated but these things cant be changed easily, USA doesnt even want to be sensible in any way.
Volcker was the peak of that kind of thinking, was it over 15% he set rates to. I've saved cash savings at 10% and they offered 5 year fixes too so this is very recent historically and it can happen I wont disagree with you. Maybe it must happen, but higher rates means default because the interest will become 100% of government fiscal budget, no military nothing else can be paid. Thats not feasible, very likely is increasingly easy money look at Japan for the longest QE history.
The sum total is this downturn is turbulence, its volatility, scary but it shakes us down and it rises back up. Nasty because some are going to sell at the bottom.
I shouldnt compare it to crypto with zero physical product but anyone who traded that, lost or sold only for it to rise or was surprised at the volatility and impossible moves, thats relevant experience to main markets imo.
Yea, there is a couple of factors at play here that make it a different situation i think. First is the long term debt cycle, that's clearly near the top and become untenable, repo markets are going insane due to lack of liquidity, its also the end of a business cycle, that convergence does sort of give off the impression that America will have to perform a "beautiful deleveraging"
Second, there is the invention of these cryptocurrencies, CB's are talking very seriously about creating CBDC's.
https://cointelegraph.com/news/coin...resigns-to-oversee-us-national-banking-system
And Mark Carney at Jackson Hole last year said that the US dollar will have to make way as the worlds reserve currency, the US dollar drags too much on the wider world, if we want true level playing field economics, where emerging markets are not controlled by US policy, then a neutral digital world reserve currency could take up that role. This process could serve as a perfect platform for America to repatriate US dollars from the wider system, whilst increasing interest rates.
https://www.ig.com/uk/news-and-trade-ideas/mark-carney--is-usd-dominance-drawing-to-a-close--190826
I'm not completely sure of it all obviously, i'm still reading and trying to figure out the angle, but i certainly believe there is a monumental shift coming in the next few years.