The One Passage That Controls A Chunk of The Global Oil Supply

Do you see this little passage in the map above? This is called the Strait of Hormuz.

Located between Iran to the north and Oman to the south, it’s the only maritime exit from the Persian Gulf. At its narrowest, the shipping lanes are just two miles wide in each direction — yet it handles roughly 20-21 million barrels of oil and petroleum products per day. That’s about 20% of global oil consumption and around a quarter of all oil traded by sea. Qatar also exports nearly 20% of the world’s liquefied natural gas (LNG) through the same choke point.

This is exactly where Middle Eastern oil and LNG travel through, with a super majority exported to Asia. China alone takes nearly 38% of the flows, followed by India, Japan, and South Korea. Together, these four countries account for roughly 75% of the oil moving through the strait.

All of them are heavily reliant on energy from this region so they can continue to sell things to the world as export-driven economies.

Right now, in the ongoing US-Israel war with Iran (Operation Epic Fury), the strait has become ground zero for escalation. Iran has effectively closed it to most commercial traffic by laying mines, threatening to attack or set ablaze any non-Iranian-linked vessels attempting passage, and launching drone/missile strikes on ships. Tanker traffic has dropped dramatically — often to near zero — trapping dozens of vessels and halting flows of about one-fifth of the world’s oil and significant LNG volumes.

In the winners-and-losers game of global energy, this tiny passage is the ultimate kingmaker.

Gulf exporters (Saudi Arabia, UAE, Iraq, Kuwait, Iran) normally win big from secure access and pricing power. But whoever controls (or can threaten) the strait holds massive leverage — especially Iran on the northern shore.

The clear losers? The Asian importers whose factories, economies, and global trade machines run on this lifeline. Disrupt it, and energy prices spike worldwide, hitting consumers everywhere while alternative suppliers (think U.S. shale or non-Middle East producers) suddenly become big winners.

So now, we will list the winners and losers from countries that isn’t involved!

The Winners and Losers when the Iran War is over

Well the moment you are waiting for! Now, because I am a personal bearer of bad news, I have to first out the losers of this war so let us begin!

THE LOSERS:

Loser #1: Japan (!!!)

Now there’s a reason why there’s 3 exclamation marks next to Japan, because it is the biggest loser of them all.

Why?

Well, 95% of oil Japan imports comes from the Middle East. Energy is one of the 2 volatile items in the CPI calculations with the other being food.

And if the oil they import is blocked at the Strait of Hormuz, what does this mean for the Tokyo CPI (The inflation rate in the metropolitan area of Tokyo) and the national CPI?

Well these 2 inflation metrics soar, and that puts pressure on the BOJ to raise their interest rates, which leads to the Yen Carry trade collapsing (I talked about this in depth in an article below!)

This will cause a massive global margin call, and Japan’s economy in general will implode due to the raise in interest rates. That’s why it is unquestionably number 1 on the loser’s list.

Loser #2: South Korea

In case you didn’t know, South Korea is the largest memory chip manufacture in the world and the 2 firms that are in that industry are SK Hynix and Samsung who both combined control 69% of the DRAM market and 49% of the NAND market.

What’s DRAM? It’s volatile memory used in computers and other devices to store data temporarily. Where is it used? Well other than computers, Your mobile device uses it, and game consoles (PlayStation, Xbox, Nintendo) uses this.

NAND memory is a type of non-volatile storage that retains data even when powered off. This is found in USB drives, memory cards, and a very popular item amongst people who loves building computers: Solid state drives.

Before the war, there’s already a memory chip shortage thanks to AI’s demands for it, and it has caused prices of flagship consoles like PS5, Xbox Series X/S and Nintendo Switch 2 to raise their prices.

Now what is the most important element memory chips need? Helium! Who provides it?

QATAR!

South Korea imports 35% of helium from Qatar, not just that, but in general, they import 20% of LNG and 72% oil from the Middle East.

Since the Strait is blocked off, Not only will South Korea get their oil and LNG, they won’t get their Helium!

So not only will inflation kill them, effectively weakening their currency, the Korean Won, their huge money maker (South Korea, like Japan is an export-driven economy) which is selling memory chips will stop making money, and that means their economy will collapse like origami. Talk about a double whammy!

Loser #3: Western Europe

Western Europe isn’t as hooked directly to the Strait of Hormuz as Asia, but don’t let that fool you — a prolonged disruption still destroys them.

No major innovation in the last 2 decades. Reliant on Russian oil now AFTER lifting sanctions (and they may not get the oil because the Strait of Hormuz is shut down). Can’t be reliant on China… OR the US.

When global prices lock above $100–$120, Germany’s chemical, steel, and auto industries get crushed by energy costs. Inflation reignites, the ECB is forced into higher rates longer, consumer spending collapses, and the slow deindustrialization we’ve already been watching goes into overdrive. Their entire export machine grinds to a halt.

Loser #4: China

China is the 800-pound gorilla of oil importers — and it gets absolutely crushed. A huge slice of their Middle East crude flows straight through the Strait of Hormuz. With the US seizing control of the chokepoint (and blocking Iranian oil exports to China), factory costs explode, supply chains fracture, and their entire export economy takes a body blow.

Even with discounted Russian barrels, the broader energy shock slams manufacturing margins, weakens the yuan, and makes hitting growth targets almost impossible.


Well, that’s the losers for you! Now let’s move to the people that will benefit when this war is over.

THE WINNERS:

Winner #1: India

India played this perfectly. They’ve locked in massive volumes of discounted Russian crude over the last few years. While Japan, South Korea, and China panic over Middle East supply, India’s giant refining industry keeps running on cheap Russian oil and exports high-value products at premium prices. This gives them a clear competitive edge and turns a global crisis into market-share gains.

Winner #2: Russia

Russia is the undisputed champion of this conflict. How? They are the number 3 exporter of oil in the world. Every $10 jump in oil price pours billions straight into the Kremlin’s coffers. With Middle East supply choked at the Strait of Hormuz, the world scrambles for Russian crude and LNG. Higher global prices supercharge their revenues, weaken sanctions impact, and give them massive geopolitical leverage.


Winner #3: Eastern Europe

Eastern Europe already survived the 2022 energy crisis and came out tougher. New LNG terminals, diversified pipelines, and closer US energy ties make them far more resilient. While Western Europe gets dragged down by sky-high costs, Eastern manufacturers (Poland especially) keep running cheaper and pick up market share inside Europe.

Higher energy prices actually accelerate their move into nuclear and local resources — leaving them stronger in the post-war world.


People likes to say “take every opportunity available to you” that is true. How do you do that?

You just ask yourself “Who benefits?”.

You list the winners, and the losers.

And in both sides, there’s always….

AN OPPORTUNITY.

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• Real Estate

• Municipal budgets

• the entire higher-educational industrial complex

• Economic growth and corporations
  

This belt has been working for generation after generation. Today, that belt has coming down into a screeching halt.

How come? Single young men and women as well as young families are being drowned in debt, getting destroyed with household cost rising, and all thanks to soaring cost of living, people has been simply priced out of parenthood.

Ever since 2008 in the US, the birth rate significantly declined, including in 2024 where it has made all time lows.

Governments on all 3 levels: federal, state and local governments with their reckless fiscal policy and corporations who has resorted to financial engineering to keep making profits has just made birthing a liability in people’s balance sheets.

The result is quite simple: Birth rates are collapsing, not just here in the US, but in Europe, in Japan, hell, Even China!

If there’s no families that is going to buy houses, no students to fill in classrooms in public schools and borrow money just to enroll in college, and there’s no workers to hire and tax, what happens?

Well, the answer is quite simple: The country faces an existential crisis and the worst part is that this isn’t even a distant problem:

It’s already here.

Chapter 1: The Real Estate Decline

What is the number 1 reason that a young couple buys single-family home?

To start a family.

It really is that simple.

Today, the basic life step has now become a financially impossible for millions of people.

During the global financial crisis in 2008 and then again between 2020 to 2022, the Federal Reserve brought massive amounts of long dated bonds (This practice is known as quantitative easing) that caused yields to go down. and as a result, massive liquidity is now in the system, meaning people can use the money in the system to purchase assets and included in the assets is real estate.

Thanks to the temporary suspension of credit reporting, and massive stimulus payments from the federal government during covid, this has fueled historical speculation in real estate from 2020 all the way to 2022 with the result shown in the data below:

Young families, already facing auto and student loan burdens, is priced out, and the prices exploded so much, it has outpaced wages by a wide margin.

When the credit reporting has resumed, along with a huge wave of inflation due to money velocity (The rate at which money changes hands) increasing, the pain compounded: huge soar in home insurance, utilities and healthcare costs. Add that on top of the minimum payments that they have been making, and what you get is costs that is so high, the young families can not even afford to make babies.

Young families aren’t just delaying home purchases, many have flat out given up on having children all together, which results in even fewer buyers for homes.

As a result, real estate faces a double whammy:

- Buyers refusing to pay for the inflated prices
- Sellers who were chasing the boom find themselves underwater in equity or massive losses.

To make matters worse, the ongoing commercial real estate collapse (documented here on The Market Sentinel) has caused revenues of municipal governments to take massive hits.

With the values of office, multifamily and retail properties collapsing, counties and cities passes the burden to single-family homeowners through sharply higher residential property tax rates.

For renters, it’s a bleaker outlook: landlords passing on rising costs in the form of rent increases.

This movie was played out once in 2008 when the bubble busted from speculation and easy money.

Now, it is the bubble even larger, and the coming demand collapse all due to a decline in birth rates would make what happen in 2008 a joke.

Real estate doesn’t just need lower prices and rates, it needs babies, and today’s home prices are pricing them out of existence.

Chapter 2: The Educational Crisis

Public schools and colleges are built on one simple assumption: a steady stream of children born to young families today.

That assumption is now collapsing.

The timeline is merciless:

In just 5 years, today’s missing babies will leave kindergarten classrooms noticeably emptier.

In 14 years, high schools will run at a fraction of current capacity.

In 18 years, freshman classes in colleges will shrink dramatically.

And today, the decline is already here.

According to the National Center for Education Statistics, as of fall of 2019, national K-12 enrollment peaked at 50.6 million students. In 2023, it dropped by to 49.6 students, and the NCES projects in 2031, 46.9 students would be enrolled.

This is not a small dip — it is the leading edge of a demographic cliff.

Most school funding is tied directly to enrollment (per-pupil formulas). Fixed costs — buildings, administrators, utilities, pensions, and debt — do not disappear when students do. The result is immediate budget pressure on municipalities and school districts.

Hundreds of schools have already closed or merged in states like California, Illinois, New York, and West Virginia. Hundreds more will follow. Struggling districts will be forced to raise property taxes on the remaining homeowners just to keep the lights on — the exact same homeowners already crushed by housing costs.

Public education is often the single largest line item in local government budgets. When that revenue collapses, cities and towns face structural fiscal crises.

But the pain doesn’t just stop there, it intensifies to colleges, both private and public.

According to the Western Interstate Commission for Higher Education 2024 “Knocking at the College Door” report, the number of high school graduates is set to peak as of 2025 and from there on, that number of high school school graduates it is projected to drop by 13% in 2041.

This “enrollment cliff” will hammer colleges — especially small private schools and regional public universities that depend on tuition revenue. Expect budget shortfalls, faculty layoffs, program cuts, campus consolidations, and a wave of closures.

The education system that was designed for endless growth is now facing long-term contraction — because the babies stopped coming. Empty classrooms and struggling colleges are not just an “education problem.”

They are a municipal finance problem, a local tax problem, and a vicious feedback loop that makes raising children even more expensive.

The systems that once profited from population growth are now being starved by the very fertility collapse they helped create.

Chapter 3: Putting It All Together

You’ve now seen the full picture.

Municipal governments, real estate developers, public schools, colleges, and American companies all run on the same fuel: babies born to young families.

Those systems have spent decades extracting maximum profit from every child — through bigger homes, per-pupil funding, tuition loans, and future workers — while reckless fiscal and monetary policy, exploding student debt, and skyrocketing property taxes have made having those children financially suicidal for most young Americans.

The result? A fertility collapse that is already dismantling the economic foundations these institutions depend on.

Fewer babies today means a shrinking labor force tomorrow. The Congressional Budget Office now projects U.S. labor-force growth will average just 0.5% per year from 2025 to 2035 — almost entirely from immigration. The native-born working-age population is forecast to shrink every single year for the next decade. Companies are already feeling it: slower revenue growth, tighter margins, and chronic labor shortages that no amount of AI or wage hikes can fully fix.

Fewer young families also means slower credit creation. Banks lend to people with rising incomes and growing households. Without them, consumer credit, mortgages, and overall money velocity stagnate — exactly what we’re beginning to see.

Real estate needs buyers. Schools and municipalities need students and taxpayers. Colleges need tuition revenue. Corporations need workers and customers. All four pipelines need one thing above all: babies.

America is no longer producing enough of them.

The consequences — collapsing municipal budgets, crashing home values in family-heavy suburbs, waves of college closures, and a permanently slower-growing economy — are something nobody in power is utterly prepared for.

This isn’t a distant forecast unfortunately, It’s the new reality.

And the those in power will learn in the hardest way possible why this situation should not be ignored one bit.

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When he announced the increase in all of those tariffs, you’re confused, and then every economist on mainstream media is telling you that the tariffs would cause long term inflation, prices will go up, blah blah blah.

Now here you are UTTERLY confused about what the hell a tariff is! I don’t blame you, so I’m just going to lay it out:

Tariffs is simply a tax a government puts on goods that is coming into the country (aka imports).

It’s not a tax on products that your country produces, it is simply things that was made from elsewhere!

Okay now that you know, it is time we breakdown an example in the next section!

Tariff 101: The Process Behind The Tariff

Okay, we got 2 people here: Timmy Turner’s Father…. which he’s named… Mr. Turner… And we have his neighbor, Dinkleberg, these 2 get along well right?

Well that’s a bit awkward… okay, let’s move on!

So these 2 gentlemen are selling lemonades on the street to their neighbors

For Mr. Turner’s side, his lemonade costs only $1 to make, and he sells it for $2.

Dinkleberg’s lemonade quality was better and cheaper, as he made it for $0.50, sells it for $1.50.

So the people in the neighborhood flock to Dinkleberg’s lemonade stand instead of Dad’s. Well, that just pissed of Mr. Turner…. so much so he heads to the HOA President, and he complained that Dinkleberg is getting cheap stuff from somewhere.

”Mr. President!” Said Mr. Turner “Dinkleberg got his cheap lemonade from another neighborhood! You can’t allow this- THIS MALPRACTICE!* he exclaimed.

Then the president of the HOA told Mr. Turner “You are right! The lemonades should be grown in OUR neighborhood and not be sourced from anywhere else!*

And so HOA president declared that any lemonade truck coming to Dinkleberg’s side will have to pay an entry free of $1 per case.

So now the $0.50 that it cost Dinkleberg to make the lemonade jumped to $1.50, and to make a profit, Dinkleberg will have to sell his lemonade for $2.50 or more.

That means for Mr. Turner, his $2 becomes very attractive and people buy from him! Mr. Turner can finally rub in to Dinkleberg’s face he beat him…

Now who wins? Well there’s 2 winners?

First, The HOA! Now they collect revenue from the importers and before income taxes it was a major way for governments to raise money.

Second, the domestic producer! Thanks to the tariff, they get protection, meaning they can charge a higher price or keep more market share without having to compete hard on either price of quality.

”IN YOUR FACE DINKLEBERG! MY LEMONADE SELLS BETTER THAN YOURS!” Exclaimed Mr. Turner.

Wait hold on Mr. Turner before you celebrate, we need to share the losers and bad news!

Who loses in this situation? Well….

The Importer! When the shipment arrives in the country (in this example the neighborhood) they pay the tax upfront to the government.

And the biggest loser of them all:

THE CONSUMER! Because the importer now has to raise prices to cover the tax, and it cost more for everyone to buy it.

The bad news through the entire is situation is that a higher price would lead to consumers to have less money to spend on (More on this point in the next subsection) on top of that, the industries that get protection get lazy because there’s less competition, and finally, the other neighborhood (in this case another country) could retaliate with their own tariffs, which would hurt the exporter (People who sells this to other countries)


Congratulations you just passed the Tariff 101 course! Now let’s move on deeper as to why people really doesn’t know what they are talking about when it comes to tariffs!

The Actual Problem: Tariffs Are More Deflationary Than Inflationary

For those that may not known, the United States of America is a consumer-driven economy. What does this mean?

This means that consumers in the US likes to spend, spend and SPEND. The US imports a TON of goods, all around the world, do a 10x mark up for the cost of the goods and make an insane profit.

As they import goods, what they export in exchange is dollars which provides global liquidity for the world, and therefore, the dollar weakens (which means exports becomes expensive while imports get cheaper), while the stock market in the US rises, treasury yields grow because of inflation and prices of goods for the consumer goes up.

So the US’s trade deficit (The Difference between Exports and imports) has to widen as a result of this in order for companies to make money.

Now if tariffs increased as we saw in April 2nd, what would happen?

Well… imports gets more expensive…. (as we covered in the last section) as now companies who imports material from other countries will have to raise its prices to cover the tariff they pay to the US government.

This also means that the trade deficit will narrow meaning that people imports less goods from countries.

Now context matters a whole lot.

On The Market Vigil, through the articles made, you can clearly see the clear deflationary patters that are made, especially one on the consumer itself.

Consumers are facing soaring delinquencies, and that means banks will lend less money, which means consumers will by less.

And for companies that rose prices, they won’t see the demand because of that, even the domestic producers will suffer, not because of their laziness facing no competition, but there is less money available in the system for people to purchase goods.

Globally, that means dollars are exports less, and the law of supply and demand states that if you cut your supply, you will have an increase demand.

This lead to global liquidity drying up since there’s less dollars in the system, and now, what happens? Treasury yields goes down (People buying bonds), equities undergoes a very deep correction, gold and silver starts rising as a way to protect wealth and that means for you, the consumer, prices goes down which is good news, but the bad news is that it will come at the expense of your job! Ouch….

And here’s what many many economist get this wrong: Tariffs long term are not inflationary, when in reality, they are deflationary, and when the CPI, PPI and PCE numbers drop they will say “It was unexpected.”

So the next time you go to wherever you get your financial news from and there’s someone that says the tariffs are inflationary you shout at your tv screen:

THAT’S BULLSHIT!

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What Are People Being > 27 Weeks Unemployed Represent?

This is a statistic that you can find in the Bureau of Labor Statistics website. This measures the people that has been out of work for 189 days or more, which is a little over 6 months. Those are the people that is still continuously looking for a job, but that has not yet been successful, a statistic that will never show up on main stream media! here’s a jaw dropper:

In January 2024, 1,279,000 people was unemployed for 27 weeks or greater.

As of the latest BLS report, in December 2025 that number increased to 1,948,000 people.

That is a WHOPPING 52.3% INCREASE.

This means that more and more people are being unemployed for more than 27 weeks and they are struggling HARD to find a job in an economy where there has been layoffs all of 2024 and 2025.

This is a MAJOR red flag, because this means there is piles of unpaid bills, especially credit, auto and student loans. Remember in one of my last articles I said the delinquencies for the 3 of these are soaring? If not, that’s okay, below is the people who has transition to serious delinquency from the New York Fed.

THIS IS THE ROOT CAUSE OF WHY THERE’S BEEN SUCH SOARING DELINQUENCIES.

And with more and more layoffs that is incoming in 2026, more people will be out of work, which will lead to more people being unemployed for 6 months or greater, and means more incoming delinquencies, and well this all eventually leads to deflation. This is what the economist on mainstream media will never tell you. You have to watch this metric the next time they talk about the jobs report.

Discouraged Workers: Where People Feel Marginally Attached

See, this is another story that mainstream media is not covering. This is the people that are not actively seeking employment because of the belief there isn’t a job available for them.

Now this connects with the layoff situation we are seeing. Because the amount of layoffs that has happened in both 2024, and 2025 there’s fewer and fewer job openings, and this is especially true especially for the younger people that has graduated college as their has been widespread reports from multiple outlets of those who graduate college struggling to find a job.

To add insult to this injury, take look at the table in terms of discourage workers.

On average the Year of year change for disgruntled workers from 2024 to 2025 is up 27% meaning that more and more people are believing there isn’t a job available to them.

And as a bonus, the job openings has also been trending to the downside, which is a reason why disgruntled workers is going up!

Will they ever show you the truth? No! Remember, the people you see in financial media is being paid to promote the company! ;)

What does this mean for you?

What if you are one of the people that lost a job, and you can’t even find the job, you aren’t the only one, there’s millions out there that is struggling to find a job.

If you are one these people that is under stress because you don’t have the income source to cover your bills, there are millions out there that’s seeing the same thing.

Honestly, I really, really wish I could give the best advice possible if you find yourself in a situation like this.

Unfortunately, this trend is going to get much worse as this year, there’ll more than likely be more layoffs that’ll incoming, and with the job openings trending downward, disgruntled workers going up, and people being over 27 weeks unemployed going up, things will get much more worse.

And that is why I’ve been hammering home throughout my post the US is going into a deflationary state.

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For those that aren’t wrestling fans, think about this as 3 people fighting for one prize that is sought after: Silver!

So with that being said let us break down the three #1 contenders that is driving the demand for the richest metal in the financial markets.

The First Contender: The Masked Industrial’s Booming Demand

For our first contender, The Masked Industrial has shown a lot of versatility in his moves that makes him utterly dominate against the competition!

What stands him out is his irreplaceable conductivity and properties. Silver is the highest electrical and thermal conductor of any metal in the periodic table. He’s been super kicking his competition with ~60% of the the total global demand for the metal over the last couple of years according to the Silver Institute. In fact, in 2024, the industrial offtake hit record highs of around 680.5 million ounces of silver, which was the fourth consecutive annual record, talk about having a dominate run!

Next, he’s been powerslamming his opponents with solar panels, and electric vehicles, and with advanced batteries.

- Solar PV’s has been remained a monster driver as global installations hit records in 2025, consuming hundreds of millions of ounces.

- Each EV uses 67-79% more silver than traditional cars, which is around 25-50 grams per vehicle. The Silver Institute also forecasted continued demand for automotive silver at a compound annual growth rate of 3.4% in the next 5 years, with EV’s being the top source by 2027.


Finally, he’s been clotheslining the data centers and electronic sectors with such utter force that people has been talking about him being the Silver Heavyweight Champion! In 2025, the boom of AI added tens of millions of ounces of silver demand according to Financial Magnates.

Furthermore, because of its unbelievable electrical and thermal conductor performance, Semiconductor chips, laptops, phones, tablets all rely on silver for exceptional performance.

With no slow down in sight from green transition, to electrification and continued AI demand despite the ongoing market concentration, The Masked Industrial’s signature package piledriver could be the one move that will crown him as the reason silver continues to move higher this year.

BUT, despite his unstoppable momentum, he really isn’t that invincible….

Firstly, the ongoing tariffs, trade tensions or even economic slowdowns may heavily weigh in on manufacturing in EV adoption starting this year.

Secondly, the high silver prices caused something called “Thrifting” which is using less silver per component. This has caused the growth of raw ounce of silver to be tempered, even with all record installations.

If there were to be any dip and flattening in industrial demand, the other contenders could strike back with force….

On to our next contender!

The Second Contender: The Supply Man’s Dangerous Chokehold On The Silver Market

For many, many years, The Supply Man has been making the silver market tap out with it’s vicious sleep holder. How come? It’s because the output of mining simply can not keep up with and on top of that recycling hits limits that has lead to ongoing deficits. Talking about a backbreaker for supply strains!

Despite silver’s position as a top metal for electrical and thermal conductivity, it’s mostly a by product of 4 metals that are mined out:

1. Copper

2. Lead

3. Zinc

4. Gold

All 4 of these metals represent 70-80% of silver’s supply, meaning the output of the metal relies on these 4 particular markets rather than just the price of silver alone.

That means for Silver’s prices to continue to trend higher, Demand for 4 of these metals must rise, otherwise, the price of silver taps out! Talk about a vicious guillotine hold, OUCH!

On top of that, top silver producers in countries like China, Mexico, Peru, Bolivia and Chile has faced serious challenges such as geopolitics, issues with operations, and low ore grade.

And speaking of Geopolitics, China, the second largest silver producer as of January 1st, has restricted the export of silver! What does this mean?

That means that there’s going to be:

A. An immediate Supply Shock and global shortage.

Prior to the restriction, the global supply, was already tight, as there was a deficit of 95 million ounces of silver, which is the 5th consecutive year that there has been a deficit, and the shortfalls over all since 2021 has reached nearly 820 million ounces of silver.

With the restriction, China could lock away ~400 million ounces of silver annually, which represents 60-70% of globally traded refined silver.

To make matters worse, new silver mining projects take anywhere between 10-15 years to develop! Does anyone got time for that!? No!

B. Upward Pressure on Spot Silver

Like all other metals, silver follows the fundamental laws of supply of demand meaning:

Prices goes up if there’s more demand and less supply, prices goes down if there’s more supply and less demand.

Thanks to China’s export restriction, silver will start to become more and more scarce, leading to shortage of material. This will cause a strong demand for silver, meaning that The Supply Man’s vicious grip might be the reason he could be the next Silver Heavyweight Champion!

Now on to the final contender of the triple threat

The Final Contender: Safe Haven’s Powerbomb on Risk-On Assets

Well ladies and gentleman, if you read the last article about Gold’s rise on the Market Sentinel, you can apply everything you have learned here!

Silver is Gold’s brother, and as Gold has been Utterly dominating the markets lately, who said silver can’t too!?

Safe Haven, cuts a mean promo explaining why he wants the Silver Championship:

”You see credit growth in the US has declined, people are defaulting and being delinquent on their loans! Economies that has less credit means they halt, and the industrial man can’t acknowledge that!” Safe Haven said as he paces back and forward with the mic, “You got market concentration in AI, Real Estate, and Crypto! Why is Insiders selling like the house is on fire?! Why has liquidity distress continue to pile up!?” He questions.

Basically, if Silver and Gold goes up, it spells bad news for risk-on assets because these 4 things that Safe Haven are saying is playing out in real time!

Silver, like gold, has been also used as a means of exchange for thousands of years. If you have silver on you and you wish to obtain gold, you can trade in ounces of silver, and to determine that, you use the gold silver ratio. This will tell you how many ounces of silver (that number is always fluctuating) you’ll need to trade in to get an ounce of gold.

Gold and silver follows each other almost to a T as you can see in the chart below.

So you can name the 2 reasons why silver’s going up: industrial demand for the metal and shortage of it. They are both true in this case.

But if silver is following gold (which it is), then it is much MUCH more than just the industrial demand and shortage of silver.

It’s the fact the US financial system is under a significant amount of distress, and it will continue to be under financial distress.

And if you honestly ask me who will be the next Silver Heavyweight Champion, it’s Safe Haven.

No amount of Industrial Demand and shortages can compare to the demand for silver needs because it is much cheaper than gold and you can trade it in to get gold anyway.

And the biggest reason why silver’s next leg is gonna go higher won’t be because of the industrial demand or the shortages, it will be because of one thing and one thing only:

PROTECTION.

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Tariq then puts the rock inside the bag, and he immediately ran out the cave back to where his friends gathered.

”By the gods!” exclaimed Tariq, “I went back on an exploration, and there was one particular rock that I’ve never seen with such a buttery substance before!”

”What exactly are you talking about Tariq?” questioned Mohammad as his eyebrow raised, “Show us this rock your talking about.”

Tariq shows the rock to his friends, and they all gasp as their eyes widen in fascination.

”Dear gods! I have never seen this in my life before!” Abdul said, “We have to show this to the council!”

Tariq and his friends went to the council, they saw the rock, they gasped never seeing it before. Immediately, the council demands an exploration for this buttery substance that they called:

GOLD.

Gold was exchanged based on the quantity and weight of it. For thousands of years, people used gold as a way to protect their purchasing power, to store their wealth. But when is starts to rise it means something bad is coming, let’s explore further…

Gold Always Sniffs Some Things Out Ahead of Time

You see, there’s 2 assets that people flock to when the economy goes to the downturn: One of them is bonds (which I have covered here on The Market Sentinel.)

The other is gold.

Of these 2 assets, gold rises first. Some would say It’s a hedge against inflation.

In reality, it’s a gauge of future money velocity, the rate at which money changes hands.

But how is it possible gold can detect this?

Well there’s 4 Gold always “sees” before its move:

1. Credit Expansion.

2. Market Concentration

3. Insider Selling

4. Liquidity Strain
   

For gold to rise, all 4 of these must be in tango, otherwise, gold would either be relatively stable, or in some cases, drop!

Now let’s go further in detail about each Criteria.

Golden Criteria One: Is Credit Expanding or Dropping?

As you know, money is created when commercial banks, not central banks makes a loan.

(If you wanna know more about Credit Growth, you can click the link here.)

When banks lend in the economy, that means people borrow money to purchases goods and services. They also borrow money to start businesses, invest in the stock market or, invest in real estate.

In 2001, the only reason the recession mild after the dot com bubble was because during that time, people were getting into Real Estate (as the fed was cutting rates to basically encourage continue cheap borrowing) and more importantly they were still spending in the economy and starting business. That’s why gold remained relatively stable

In order for gold to rise rapidly, Credit growth has to be declining! Was that the case during the GFC in 2008? YES!

In 2007, heading into 2008, there was soaring delinquencies in mortgages, because people weren’t paying the loans on them. Therefore, this causes banks to lend less, causing a collapse of credit growth.

And what was the BS everyone was fed in the media? Everything was fine! But while they were feeding the masses utter BS, the institutions that knew what was going on started to buy gold.

Now what about to the lead up to Covid 2 years prior? Did gold rose?

Yes!

After the 2008 crisis, there was credit expansion again as people borrowed money to buy goods and services, but when covid hit in March 2020 and people quarantined, money velocity collapsed. When the first case of the Covid was recorded in late 2019, Gold rose in anticipation of money velocity collapsing.

Today in 2025, credit growth is declining because people are delinquent and defaulting on their loans and that has caused gold to trend higher.


So now you know! When there’s delinquencies in Auto, Credit Cards, Student Loans, Office CRE, Multifamily, Etc., gold is saying deflation is on the way because what happens to money velocity? It’ll collapse due to credit growth declining.

If credit growth is expanding, then gold would remain relatively stable.

Golden Criteria Two: Is there Market Concentration?

In 1920’s, the biggest new tech was radio. It was something at that time nobody has ever seen before, just like how people today in 2025 saw artificial intelligence as a revolutionary tech. What do people need to hear the radio? Utilities! On top of that, Automobiles were a new thing in the block! Together, these 3 accounted for 30 to 40% of the gains in the Dow Jones.

In 2000, it was a website that ended in dot com. The tech sector account for 33 to 35% of the S&P 500.

in 2008, It was housing, all though not revolutionary, the financial sector accounted for between 20 to 22% of the S&P 500.

What are the common dominators between the 3?

They all had market concentration.

The reason why 1929 and 2008 was much worse than what happened in 2000, was because on both of these times there was credit decline as millions were delinquent on their loans. in 2000, there was credit expansion, making the recission that followed in 2001 mild as credit was expanding despite the concentration

Basically this means in order for gold to rise, there must be credit growth declining and there has to be a market concertation DURING the credit decline. If none of these all occur at the same time, then gold remains relatively stable.

Why is gold rising in 2025?

There is both a credit decline (Which I have explicitly mentioned in my article where you can find the line by clicking here)

And there is market concentration in these areas: AI, Real Estate (Both Commercial and Residential) and Crypto. Mag 7 accounts for 35% of the S&P 500

Surely this will end well….. right?

Golden Criteria 3: Does The Corporate Insider Know What’s Happening?

Whenever Executives at major corporative firms goes onto mainstream media and talk about the health of their business, they always use jargon but they say that “Hey there’s no need to worry, everything is totally fine, our companies is doing okay, our fundamentals are sound!”

But the Rockefellers, and other wealthy families, as well as insiders back in 1929 before October in closed door meetings said otherwise…

”This is extremely troubling,” said James Erics, a CEO of a company that produces radios, “People aren’t paying their loans back! Mortgage Delinquencies are going up, Auto Delinquencies are going up, and there’s a massive concertation in investments with radio, utilities, and auto. We’re going to be liquidating our positions massively.”

“I agree with Mr. Erics,” Said a member of the Rockefellers, “These citizens won’t have the capital needed to pay of their debts. Furthermore, if any one of these companies that is seeing a concentrated investment collapses, it would spread out through the entire Dow Jones. We can’t get caught in the fire.”

So the group liquidated, held on to their cash and brought gold.

in 2000, a similar conversation was had in companies that had dot comb on it.

2008, Hedge fund started to short the CDO (Collateralized Debt Obligations, a pool of mortgages)

The same play is playing out today. Last August, a report from Barchart on Twitter/X said that insiders were dumping as the stock market was at all time highs.

And an August 4th report from Bloomberg stated that insiders at 151 companies brought their own stock.

This means that insiders at 349 of the 500 companies listed of the S&P500, which is 69.8%, WERE SELLING THEIR OWN STOCK.

So what’s the move in the S&P 500 since those reports?

S&P 500 went up 8%….

And Gold’s move?

It gained 30% Since that move.

If that isn’t a red flag to you, I honestly don’t know what is!

So far, what we are seeing is credit growth collapsing, markets being concentrated and Insiders selling stock at the same time.

Now we need to go over the final golden criteria, something that the insiders look at: liquidity stress.

Golden Criteria 4: Is there Liquidity Stress In the System?

Now Golden Criteria 1 and 4 has a super strong relationship, so strong that they can not separate themselves! They really took ‘till death do us apart very seriously!

The flow of logic is simple, if banks are lending aggressively in the economy, there’s liquidity in the system.

If the banks aren’t lending aggressively in the economy, there’s LESS liquidity, and that causes massive problems.

Now this is where we go into advance concepts like Repurchase agreements, or REPO for short. Basically this a market where if you’re short on cash, but you’ll know you will have the money tomorrow. and who’s in this market? The commercial banks!

It goes like this:

- A Commercial banks would sell US treasuries or Mortgage Backed Securities as colleterial to the Federal Reserve (the Lender)

- The Fed gets the treasuries, hold them for a temporary time, then they give the cash to the commercial bank via reserve deposits.

- At the end of the deal, which is overnight, the commercial bank would buy the treasuries or the mortgage backed security at a higher price, effectively paying off the principal plus the interest.

Now, this has been happening frequently, every since September 17th of this year, when the fed cut basis points. This means that the dollars are getting more and more scarce because banks are lending less in an economy that is seeing people being delinquent in all kinds of loans.

You can view this at the New York Fed website where they post the REPO operations.

Now REPO opened back in 2001, after the dot com bubble. In 2008, there was heavy usage of this facility. Same thing back happened back in 2019 and 2020.

Now before 2025, there was ZERO usage of REPO! Meaning that there was liquidity in the system. Now, there’s REPO usage, especially event since September meaning that there’s strains in liquidity.

So there you have it! When you combine credit decline with market concentration, insider selling and liquidity strains, all 4 of them will cause gold to rip higher.

The golden tears may fall for those who hold it, but for those that doesn’t hold it, it’s screaming that an event is coming that will trigger a global….

DEFLATION.

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Institutional investors and big money folks looks at this chart very carefully. It tells them if they should be COKED UP (meaning that they leverage debt to trade or invest in stocks) …or go to rehab (As in deleveraging and quickly hiding their cash because they are overexposed AF)

Well, get your notes ready, your popcorn, and maybe your mask ready because it is time to go inside the factory that makes the coke all happen….

Inside The Coke Factory: The Process of Risk Making

Welcome inside! Now, let’s first establish what a credit spread is!

A credit spread is where you take a risky Bond (Ex: Corporate bond, emerging debt market, etc.) and you subtract that from a risk-free bond which is the US treasury bond yield. Now both of these are at the same maturity date. Here’s an example!

We got one worker, Martin here, who lends money to his good buddy, Benny! Benny always pays his bills back on time, and Martin trusts him, so, he charges him a 2% interest.

Now, Martin also lends money to this dude named Eric, Eric doesn’t know when to stop spending money like a drunken idiot, and most of the time he goes broke like a stupid son of a bitch! Knowing this, Martin charges Eric 9% interest. That means Martin would demand that he gets 7% compensation for taking on the risk!

Credit Spreads are basically the extra yield that market demands because they are taking on the risk of companies being hella high on coke, which is basically, borrowing too much money and risking a horrible crash!

Now, those risk are judged by 3 big wardens that are in the factory that determines how coked companies are and they are: Moody’s, S&P and Fitch. These are what the pros pay attention too. Just like school, they grade companies and governments on how likely they are to repay their debt. The better the grade, that means the risks gets to go out for sale, let’s take a look the grading scale from the Big 3!


Tier 1: investment grade. This is an honor roll student! This student has a low chance of defaulting. (This is where Martin’s good buddy Benny is at)

• AAA/Aaa = Perfect! Only a very VERY few have earned this grade…

• AA/Aa = Beautiful

• A = Good

• BBB/Baa = Barely made it to the honor student, but their grade still looks good

Tier 2: high yield or Junk. This is the student who has a high chance at failing to repay their loan, but they pay more interest! (This is where Eric is at)

• BB/B = Speculative

• B = Very Speculative

• CCC/Caa and below = BIG TROUBLE ALERT (Default is likely, they’ll have to go to rehab)

• D = Already Defaulted

Now, the 3 big wardens uses slight variations of the grading scale. S&P and Fitch uses +/- like A+, Moody’s uses numbers like BB2.

Now that you know what the 3 big wardens and pros are looking at,, keep this in the back of your minds, because now we need to actually go to the part that gets people Hella high on cocaine, and it’s everyone favorite word in the word of finance:

LEVERAGE.

Leverage: The Coke Substance That Makes People Addictive

Ah yes, everyone’s favorite l word after love, leverage! Now, what the hell is leverage?

Basically, leverage is simply borrowing money to really amp up the returns you have. Now it is time to revisit our dear friend, Martin!

Remember how Jane was worried that Martin would kill himself for being very coked up, and Martin found a company that yield 7% in interest? Well time to break it down.

Let’s say Martin had $100,000 on his hand, Martin goes out and buys a B rated corporate bonds that yielded 7%.

Now on the article I did on bond yields, the formula is this:

So, given the yield of 7%, and you have $100,000 to spend, Martin earns $7,000 a year in interest! Not too bad right?

Well here’s the problem…..

Martin wants to get the coke that he desperately needs. He doesn’t want a lousy 7% return! He wants more!

So let’s say he goes to the bank and he borrows $400,000 at a cheap 3% interest rate from the bank.

Now he has $500,000 on his hand that he can use to invest in the same B rate corporate bond yields that generated 7%.

When you do the math, 7% of $500,000 is $35,000 — that’s how much he has earned from the bonds.

Now Martin needs to pay interest on his $400,000 loan, so 3% of $400,000 is $12,000.

Finally, when you take the $35,000 subtract that from $12,000, and you get $23,000. That’s Martin’s net profit on his original $100,000 he had. The yield?!

23%!!!!!

NOW THAT’S THE TYPE OF COKE THAT HE NEEDS!

But is Martin the only degenerate coke head? HELL NO! Do you wanna know who else is a degenerate?

-Hedge funds and Banks, they borrow billions of dollars at cheap rates to buy high-yielding bonds and stocks. Hi Ken Griffin, how are ya today?

-Margin traders that borrow from brokers to buy stocks and options

-Homeowners that puts 20% down on a house, praying that home values go up

-Private equity as the borrow a whole lot to purchase companies and juice returns. Looking you Blackrock…. Vanguard…. yeah all you giant degenerate firms!


Yep, from wall street to your next door neighbor, everyone is HIGH on leverage.


It all works…. until it doesn’t. When it doesn’t work….. financial crises… happen.

The Dark Side of Leveraging: The Causes of Financial Crisis

Now let’s revisit Martin one more time. Remember the 23% yield he gain? Now…. what happens if his 7% bonds loses value?

His $500,000 position would lose 23%, which is a $115,000 loss.

Martin would still owe the Bank $400,000 + interest.

And his original $100,000 becomes -$15,000.

THAT MAN BLEW HIS ACCOUNT.

So now, the bank is going have to call the loan (known as margin call) to force the sale of the bond.

Basically, it confirms Jane’s fear: He killed himself by being too coked up, and now he gotta go to rehab (Filing for bankruptcy).

”MARTIN!!!!! YOU SOLD OUR HOUSE AS COLLATERAL?!?!?!” Jane screamed, then she- OH WHOA WHOA WHOA!!! THAT’S NOT IN THE SCRIPT!! GOT TO MOVE ON! D-DID SHE JUST BROKE A BOTTLE OVER HIS HEAD!? DEAR GOD!

AHHHHHHEEEEMMMM

Okay, now I want you to think about the years, 1929, 1990, 1997, 2000, 2008. What was the common theme in those years?

OVERLEVERAGING.

-1929: People in the US was overleveraged on Stocks and Real Estate. Result? Great Depression.

-1990: People in Japan was overleveraged in stocks in real estate, this was the largest bubble in WORLD history. Result? Caused what is known as the lost decade: Stagnant growth for 10 years, and they have not recovered SINCE.

-1997: Asian Financial Crisis. People were borrowing money cheaply to invest in Thailand and South Korea. Result? Massive Margin Calls that caused a recession in both countries, and the IMF (International Money Fund) had to bail them out.

-2000: People were overleveraged on companies with dot.com on it. Result? Caused a mild recession due to massive margin calls.

-2008: People were overleveraged in Real Estate: Result? A deep, global recession. Massive bailouts for investment banks.

And now today, in 2025, we are seeing it AGAIN, but this time, it is WAY worse: overleverage on stocks, overleverage on real estate (both commercial and residential), overleverage on crypto.

I’ll let y’all figure out how bad this will end, because it is time to talk about the 3 main types of credit spreads pros and the 3 big warders checks out!

The 3 Main Credit Spreads People Watches Over

Now, before we dive in, credit spreads are measure in basis points. 1 basis point is equaled to 0.01%. If the spread blows out, whole lotta people overdosed and they need to go to rehab. If it tightens, people are high on coke. Cool? Alright! let’s dive in! We have:

A. Investment-Grade Corporate Spread. This is a spread for safe companies whose rating that is higher than a BBB, meaning they are the companies that always pays the bills on time!

Now, the symbol for this is BAMLC0A0CM. You can find this in TradingView.

In this picture, the Investment Grade Corporate Spread is sitting at 81 basis points or 0.81%. Now this chart updates between 5 pm and 6 pm after markets close, so if you have time, check it out!

Now here’s the scale you should probably save:

Below 80bp = Calm.

80-150 bps = Normal

150-300 bps = Elevated

> 300 bps = Crisis level

Example: March 18th-20th, 2020. People went into rehab as it the spread went above 300 basis points.

B. BBB Corporate. This is the lowest of the Investment grade, as it focuses on companies on those rated BBB. The symbol for this is BAMLC0A4CBBB and you can also find this on trading view.

Just like the IG corporate, this chart also updates daily, during after market hours here’s the scale to look out for:

Below 150 bps = Calm.

150-250 bps = Normal

250-400 bps = Elevated

> 400 bps = Crisis level


C. High Yield. This is spread for companies that are risker to go into rehab (Rated BB and lower) but they have a higher yield!

The symbol on TradingView is BAMLH0A0HYM2, and just like the other 2 main spreads, this chart also updates daily.

And the scale goes as follows:

Below 300 bps = Calm

300-500 bps = Normal

500 to 800 bps = Elevated

> 800 bps = Crisis mode

Always remember folks, if the spread goes tight, people cokes up in leverage.

If the spread blows out, people goes into rehab.

To be or not be a cokehead is up to you to decide.

A Crude Oil 101 Lesson For You Part 1: The Basics

Crude oil a very sticky and smelly raw liquid that gets pumped out the ground, before it is refined into various things such as jet fuel (For planes) Diesel (for trucks) Gas (For your everyday car), and everything else that powers what we know as life today.

Now thanks to fracking, the US is the number 1 oil producer as of this year and overall, they are the 3rd highest exporter in terms of gross crude oil exports, behind Russia and Saudi Araba.

Oil follows the classical supply and demand meaning:

If there’s too much supply and weak demand, prices goes south of heaven.

If there’s strong demand with weak supply, prices goes north of heaven.


Now there’s a place where the “official” price of oil gets determined, it’s a place called NYMEX.

Ralph, what’s an NYMEX?

Well NYMEX stands for New York Mercantile Exchange and it’s the world’s largest marketplace for trading in oil futures (That means you place bets on the future price of oil, wither it may got up or down). In simple terms, it’s a stock market exchange for oil. The contract is equaled to 1,000 barrels.

What future contracts do they exactly trade? The NYMEX WTI (West Texas Intermediate) Crude oil future contract, and it is the main type of oil in the US.

How does it work? For 24 hours a day, 6 days a week (From Sunday at 6:00 PM EST to Friday at 5:00 PM EST) you get traders that buy and sell the contracts on the PC, not on the trading floor, WE AIN’T IN THE 80’S ANYMORE!

Anyway, the quoted price comes from the front-month WTI futures contract. This is what airlines, gas stations, shippers, military industrial complex, literally everyone that cares about oil watches it like a hawk.

If you want to know what the ticket symbol is, it’s CL, on charts, is CL1!

To view this chart, you can go on to tradingview.com, head over to products, click on super charts, and type the symbol, CL1! to check it out.

Note: there’s a 15 minute delay with price updates (indicated by the letter D), you’ll need to get an upgrade to get a live price on oil

Basically, as you can see, oil price has been dropping down the last 3 years, because of of collapse of demand. That’s a textbook sign of deflation!

But WTI isn’t the only king around here, there’s a global version of WTI, and it’s called Brent!

Brent is the global benchmark as it prices approximately two thirds of the world’s oil. It’s slightly heavier than WTI, and also very easy to ship around. Brent trades anywhere between $2-5 higher than WTI due to it’s reach globally.

The ticket symbol is UKOIL, and it is also available on trading view. below is the comparison between Brent and WTI.

As you can see they follow each other almost to a T! Who leads? Well Brent Leads. Wherever they go, so does WTI. But why do people follow Brent? Well this is where OPEC comes in…..

A Crude Oil Lesson For You Part 2: The Nations That Produces Oil

Alright, so we need to turn the clock back to 1960! Once upon a time, there was 5 countries, 4 in the middle east (Iran, Iraq, Kuwait and Saudi Araba) and one in South America (Venezuela) that got together in some little club in Saudi Araba. The Big boss man, King Saud, who was the King of Saudi Araba at the time in his thick Arabic accent, asked: “Hey, do you guys wish to coordinate production so that we can keep prices stable for our pockets?”

Everyone said replied “Hell yeah! Let’s do it!”

And so the Organization of Petroleum Exporting Countries (OPEC for short) was born!

After their foundation, OPEC got 12 other countries to join them in their cause to coordinate production to keep the prices stable.

In 2016, they expanded to include the 17 countries in OPEC plus 10 non-OPEC allies, and those non-OPEC allies are lead by….

RUSSIA!

And they went from OPEC to OPEC+, what we know today.

OPEC+ today controls anywhere between 30-40% of the global oil production and about 80% of the oil still in the ground (known as proven reserves)

Now every few months, the 27 countries comes together, and they discuss the production target for oil (This is known as a quota).

Now if they decide to cut the output, that means that there’s less supply, leading to higher prices. If they decide to pump a lot well that means lower prices, and that’s never a good sign because it signals weak demand.

So, OPEC+’s oil is priced off Brent and their power ties straight to the benchmarks, among with the fact Brent is easier to ship, OPEC’s decision hit Brent not just the first, but also the hardest as well.

On top of that, if there’s a global event that goes on, it ripples to Brent first, then after that, WTI follows.

Congratulations you just learned oil faster than it took you to brush your teeth, give your self a pat on the back!

Bringing Everything Together To Create The Big Picture

So, in the last 4 Articles what have I talked about?

-CRE dropping causing local governments to raise residential property taxes

-The Yen Carry Trade amplifying the systematic risk

-People being delinquent on their loans causing banks to lend less

-People panic buy bonds because it’s the most liquid, and they don’t trust that Japan or Europe would pay their current debt back

And the reason oil has dropped significantly is because banks have been lending LESS money. That means there’s less demand for goods, meaning that:

A. less cargo for trains and ships
B. trucks hall less goods
C. planes carry less packages

That means that there’s no need for the US to export oil, causing a huge increase in supply, and that means for people with jobs in oil states, they’ve been getting laid off.

Globally, that means that there gonna have to pump MORE oil because of the collapse in demand.

So while you may get cheap gas in your gas station, and you may feel good about it, that comes at a cost of everything else in the economy, including….

YOUR JOB.

Carry Trading 101: Peeling Back The Entire Process

Alright folks, pull up a chair and take notes, it’s time to explain what a carry trade is!

So, we have our friend here Mr. Masumoto and he’s from Tokyo, Japan! He has an asset management business where he basically acquires and manages assets all around the world.

Mr. Masumoto one day goes to a commercial Bank in Japan. He would like to borrow 100 billion Yen. The Annual Interest rate there is 0.5%, which is virtually free! Now 0.5% of 100 billion is 10 billion, meaning that Mr. Masumoto will have to pay back 110 billion yen.

Now the thing is in order to get the 100 billion yen, Masumoto will have to pledge his collateral, meaning he’ll have to put up assets worth 110 billion yen in value as collateral should he default on his loan.

Let’s say it’s a pool of bonds he has from Japan ranging from the 10 year to 40 year bond worth 110 billion yen, he gives it to the bank, the bank accepts, he gets the 100 billion yen!

Next, Masumoto than walks into the foreign exchange market some where in Japan. he would like to convert the yen to dollars, because he wishes to invest in the stock market in the US.

So to convert the Yen to dollars, you take the yen amount, and you multiply it by 0.0064, that’s how much 1 yen cost in the US. so when you do the math, it comes out to be $640 Million.

Finally, Masumoto uses the $640 million to purchase stocks, and other performing assets.

The net yield that Masumoto makes is his average yield from his preforming assets in the US market minus the interest rate on the yen that he borrowed.

Let’s say Masumoto’s average yield in the US markets is 8%. If you subtract out 8% from 0.1%, the interest rate he must pay from borrowing the 100 billion yen, Masumoto’s Net Yield is 7.9%!

And that’s a carry trade in a nut shell:

-A person from their home country goes to a commercial bank of their home country, borrows there, puts up colleterial.

-Goes to the Foreign Exchange, convert’s their home countries currency, to a currency of a country that they would like to invest in, uses that currency to purchase preforming assets in that country.

Congratulations! You are now a carry trade expert!

Why You (Should) Actually Care About The Yen Carry Trade

Globally, the value of the Yen Carry Trade is at $1.5 trillion, but some are saying it is more than that.

You see, in the example I showed above…… Mr. Masumoto isn’t the only one who’s doing the yen carry trade, oh no, it’s other investors like him, and also institutional traders that does this! And that 7.9% yield is very attractive! So what do they do to get a better yield like the greedy bastards they are? Well they leverage up so much by borrowing even bigger amounts of yen! ….. they are simply on a perk with the way they are leveraged…. it’s insane!

However, they don’t just invest in the US, they also invest in countries in Europe, Countries in Australia, New Zealand, Taiwan, and so much more.

Why?

Because Japan has the LOWEST interest rate of any country in the WORLD.

Yes, Japan has been doing zero interest rate policies way before the US and Europe. Now what does that mean?

This means for banks in Japan, they borrow money from the Central bank or each other via the short-term markets for FREE! They only have to worry about the principal amount.

Now the reason why Central banks in general puts the interest rate at 0 is because the thinking for central banks is that:

A. If the banks gets free money, then they will have no problem lending out to the economy.

B. Thanks to the cheap money, Businesses gets to hire people, grow their business or invest.

C. You, the reader, gets to get cheaper loans to get a house, a car, or even start a small business.

D. And because of the expansion of the money velocity (Remember the rate money changes hands), with the broad money supply expanding, this would give the economy the boost it needs to go to the boom and create the jobs.

Now Japan did this to desperately stimulate the economy after what happened in the 80’s with the stock market and real estate market crashing, leading to a massive deflationary event that caused slow growth of for a decade (known as the lost decade) but Japan has never recovered from it since.

It’s not just they were the first major country to do this, they were also the first country to implement Quantitative Easing, a process where a central bank prints money and purchases a pool of bonds in a large amount from commercial banks. The money then gets put into the reserve accounts of banks. They were also the first country to implement yield curve control, where they print money, and buy majority of the bonds that is present, regardless of duration, ensuring yields would remain stable. This causes their currency to weaken. On top of that they did negative interest rate (From 2016 all the way up to last year) meaning the BOJ was charging a fee to banks for parking their extra money! They want them to LEND in the economy BADLY.

The biggest risks of them all is rates rising in Japan. If the BOJ decided to hike, it would cause the Yen to be more expensive, yields starting to quickly blow out, and everyone that did the carry trade would have to sell their preforming assets in the country they’re invested in and pay their loan back in yen.


If you live in the US and you are invested in Tech and Crypto, it becomes very volatile, and because of this the VIX will spike due to this. Prime Example is July 11th to August 4th of last year. Have a look at the 3 pictures below!

Yen Carry Trade Significantly Amplifies The Risks Already In Play

Now, this is where we connect the dots, building on the previous 3 articles

-Banks are holding the CRE debt and values of Office buildings has been tumbling in cities across the US

-Consumers are seeing soaring delinquencies in Credit Cards, Auto loans and Student loans

-Major countries are facing potential insolvency

-The west during COVID was in a ZIRP (Zero Interest Rate Policy) + QE environment

-Countries around the globe passed STIMULUS packages for people to spend in the economy

-In the US, student loan reports were suspended meaning that everyday people got to borrow money to buy a car or a house.

When you connect the dots, you’ll realize that everyone borrowed VERY cheap money to not only just buy goods and services, but they use the money to buy Stocks, Real Estate, and even Crypto! That’s why there was such a big rise in inflation from 2022-2023 in the US, it was due to money velocity increasing. The Yen Carry Trade saw an explosion since the BOJ went NEGATIVE on interest rates, 4 years before COVID!

And because of how EXTREMELY overleveraged everybody and they momma is, it only takes ONE shock event to set the entire global financial system on fire.

And the one of the MANY shock events that could do that?

The financial system in Japan collapsing.

And given what is going on in their Bond Market with Yields exploding higher, and the yen currently deprecating, the one question everyone has on their minds is:

Can the BOJ save their financial system?

If I were to be a betting man, my answer to that question given their debt-to GDP ratio along with a steep decline in birth rate is an emphatic….

HELL. NO.

A Bonding 101 Moment….. But Not In a Way You Think!

A bond is where you lend money to either a government entity (doesn’t matter on what level) OR a corporation.

The component of the bond, is just like the loan, there’s 3 parts:

- The Principal (the amount you lend)

- The Interest Rate (this is where instead of you paying interest, you EARN interest)

-The maturity date (the date when you get your money back)

Bonds, like stocks, are traded every single day. There’s 2 things that always changes: The bond price and bond yield.

The bond price is what you pay for the bond today, The bond yield is what you would earn if you were to buy the bond today.

The yield formula is simple:

Yield = The Annual Interest payment (The payment given to you from a government or corporate entity) / The current price of the bond

Okay time to run an example:

Let’s say the US Treasury issues a new bond that costs $1,000 and they will pay you $50 a year, and the bond expires in 10 years. So, when you do the math, you get a 5% yield, not too bad!

Now, let’s say somebody brought the bond for $1,500, because they’re panicking and they don’t trust anyone. Now the problem is, the bond they brought only pays $50 a year. So when you do the math…. The yield went from 5% to 3.3%.

Would you look at that, you know bonding better than some couples all around the world! Call me a relationship expert, because I solved your relationship problem with bonds!

What the Bond market Is Truly Saying

Okay, so the investors, institutional traders all follow the US 10 year treasury. Why?

Well of 2 things:

A. Your mortgage rate, as well as your auto rate, follows the 10 year treasury almost to a T!

B. The 10 year treasury yield serves as growth and inflation expectations.

This means the traders prices in growth and inflation expectations over the next 10 years.

A higher 10 year yield means there’s going to be growth and inflation, by growth, I mean CREDIT GROWTH, and the outlook on credit growth is absolutely DOGSHIT.

In my last article, I mentioned about how consumers has been delinquent in their auto loans, credit cards and student loans.

And guess what? Being delinquent means banks won’t lend to you, because they don’t trust that you can pay the loan back!

What happens if 50 million people are delinquent on their loans!? The economy DIES. Why!?

Banks lending less means there’s less money in the system, meaning that money moves slow which leads to asset prices as well as prices of everyday goods and services going down. THAT’S DEFLATION!

So if credit growth collapses, that means inflation expectations significantly decrease, which will lead to a panic buying bonds because banks are not willing to lend money out to people that are delinquent!

But what about globally? Is it looking good?

To quote the famous Randy Jackson:

IT’S A NO FOR ME DAWG.

Globally, Everyone is flocking to Safety Part 1: The Land of The Rising Sun Full of Debt

We need to go West in the Pacific Ocean, to a land that always seeing a rising sun: JAPAN!

Let’s take a look at their 10 year yield……

Yields are BLOWING out in Japan, what the hell is going on?!

We need to talk about Debt-to-GDP (Gross Domestic Product) Ratio.

Firstly, Gross Domestic Product is the total value of goods and services that was produced within a timeframe, wither it is a quarterly or yearly.

Now Debt to GDP is comparing a government’s national debt to its GDP, showing their ability of paying their money back, express as a percentage. A High Debt-to GDP ratio means a country is at high risk of declining their economic growth and potentially default on their current debt.

Now according to World population Review, Japan’s Debt to GDP is….

DRUMROLL PLEASE….

255%!!

How?

Well, Japan back in 1980’s had a stock market and real estate bubble as people borrowed hella cheap money and speculated on them. Now in 1991, the bubble burst and the growth collapsed to near zero, that caused as many calls it, The Lost Decade, and ever since then, Japan never recovered!

Why?

Because the government borrowed money like a person on crack just to stimulate the economy, and their GDP barely moved, all the while the BOJ has been artificially keeping rates low by buying every bond in their sight. This is called Yield Curve Control, and the goal is to make sure the yields don’t go bananas.

But now that they let the yields rise just a tiny bit, their bond market has been screaming on top of their longs for all kinds of help. So what has the BOJ done? They print a shit ton of yen just to buy the bonds to calm them down which causes the value of the yen to weaken.

As a bonus, Japan just pass a stimulus package to stimulate their economy last month! Things will end well…. right? RIGHT!? Wait, why do I hear Mount Fuji erupting…..

WELP TIME TO MOVE ON TO EUROPE BEFORE I GET CAUGHT IN THE FINANCIAL VOLCANO!

Globally, Everyone is flocking to Safety Part 2: The Return of a European Debt Crisis

A Return? Yeah! We need to rewind the clock back to 2010, where the original European Debt Crisis happened…

This story took place in the PIIGS countries (Portugal, Italy, Ireland, Greece and Spain) these countries along with the rest of the countries was united under one currency: THE EURO!

Before the GFC in 2008, The 2000’s in Europe was full of countries borrowing money with low interest rates, and economies in those countries was doing pretty well, and the banks in Europe was more than happy to lend to a booming union!

One day in late 2009, Greece broke the news to the union: “Uh you know how we
have borrowed billions to spend in our economy? Turns out the real amount is way more than we thought, and we actually may not have the funds to pay our debt back.”

Within months after the announcement, Greece’s 10 year yield went from about 5% and went at high as almost 40% within a span of a year in a half…

And what happened next, it spread like a raging super wildfire

Ireland’s bank melted down because of all thanks to the real estate crashing (There were banks in Ireland that invested in the US real estate market and their real estate market crashed in 2008, but there was some who had invested real estate at home at the time of the European Debt Crisis)

Portugal also had too much debt like Greece, and like Japan, they too had weak growth..

Spain was in the same situation with Ireland…

Finally, Italy was in a political grid like as debt was raining down on them like a waterfall.

Their respective 10 year yields went coco for bananas, meaning there was no demand for their bonds meaning Bond Prices CRASHES.

And as PIIGS was getting cooked harder than Brazil against Germany in the world cup back in 2014, there was some severe fallouts that came:

The Euro Stocks Crashed, High levels of unemployment all across Europe, and there was banks in Europe that were becoming insolvent since they were holding the junky bag of bonds.

So who saved the day like a good little superhero?

The European Central Bank, The International Money Fund, and Finally Rich European countries like France, UK and Germany. ECB brought a large amount of bonds (This is called Quantitative Easing), IMF wanted countries to implement Austerity measures (Such as Tax hikes as well as cutting spending). The total amount that pumped into the European Financial System: Over €700 billion!

After the yields finally stop going coco for coco puffs, the damage was done: There is slower growth, even more debt being piled up, and a growing recement towards governments by Europeans.

Today in 2025 here’s the latest Debt to GDP Numbers (From Highest To Lowest) according to World Population Review in the PIIGS countries:

Greece: 162% of GDP
Italy: 135% of GDP
Spain: 108% of GDP
Portugal: 99.1% of GDP
Ireland: 43.7% of GDP

France, who was involved in the bailout process now has a Debt to GDP ratio of 111% While England is sitting at 97.6% and Germany at 62.9%.

Thanks to the ongoing Ukraine war, there has been Energy Shocks, there’s been continuing slow growth, and inflation has never hit ECB’s goal.

The ECB all of last year, and the first half of the year has been cutting rates to stimulate the European economy, and despite that, yields are still rising in some weak European countries as investors are literally afraid of getting the junk bond touch. So what will ECB have to do again? Yep….. they’re gonna have to buy those bonds at a LARGE amount… again! But this time around, will they have enough ammo? Only time will tell….

When a Land of the Rising Sun, And the Europeans Can’t Pay Their Bonds, You Run to the Land of the Free As a Safety Flight

At the end of the day, if Europeans can’t pay their current debt, if Japan can’t pay their current debt, where’s the only place that investors are gonna go that is the most liquid?

The US Bond Market.

The US is a global reserve currency, ever since the end of World War 2.

The investors will be panic buying the bonds, driving the yields down and Bond Prices up.

That isn’t a sign of inflation, it’s a sign of deflation.

And to avoid deflations what have countries have been doing?

STIMULUS. PACKAGES.

All you got to do is ask China, ask Japan, ask the US, and ask Europe.

They are all trying to avoid the globe from going into DEFLATION.

But at what cost? The answer is obvious:

YOUR COST OF LIVING.

The Money System That Was Hidden From Your Eyes

First things first, we must first establish the Monetary system in place. The United States, along with everyone else around the world has a debt-based monetary system, meaning that in this system, money is created when commercial banks, not central banks, create a loan. The process goes like this:

1. The Bank writes up a loan.

The loan has 4 components:

A. The principal: The amount of money given to YOU the borrower.

B. The Annual Interest Rate: How much you pay in interest on a YEARLY basis.

C. The Maturity Date: This is the day of your final payment

D. Late fee: The fee you got to pay should you be late on any of your loans.

2. You the borrower signs the loan agreement

Now that you agreed to the loan, you have a grace period until your first payment is due. You can use the cash to buy an asset (something that you owe) or whatever.

But what is hidden from you is the main driver behind the entire thing:

THE BALANCE SHEET.

So we have to go in super slow motion beginning with the bank’s balance sheet…

Okay so the bank’s asset is the loan they made to the borrower, why?

Well reader, that’s simply because the bank is has a preforming asset (an asset that generates income) and the borrower is going to repay the loan to the bank.

Now the liability (What you or someone owes) is the deposit they made to the borrower’s account. The deposit is the new money that was created. In plain English, the bank simultaneously created both an asset (the loan) and a liability (depositing the money into the borrower’s account) at the same time. And on top of that, thanks to the principal and INTEREST the borrower has to pay, they get Interest Margin (aka their potential profit through interest receivable). So you basically get the Formula Asset = Liability + Equity, and the sheet balances out. BOOM.

BUT WAIT THERE’S MORE!

Now we must view the borrower’s balance sheet:

Now for the borrower, they get the the cash from the bank, so that’s an asset, something they own. BUT…. it’s a non-preforming asset because they are SPENDING the money, not EARNING. Cash is NEVER a preforming asset!

The liability they have to is paying the principal back WITH interest.

While on paper, the balance sheet balances out, in reality the borrower owes $1.05 million all thanks to the money being created from thin air.

Congratulations, you have discovered how so many people ends up in a lot of debt!

Now what happens someone doesn’t pay the loan be? Well what the bank is gonna have to write off the loan, let’s say they write off 20% of the loan…. well 20% of $1 million they made the loan is now $800,000, meaning that on paper, the bank is now insolvent, they got 2 choices: Either raise bank capital (Aka their Interest Margin) OR Stop lending so that the balance sheet shrinks back to balance. What does the bank pick? OPTION NUMBER 2! The Prize!? The economy contracting! YA- I mean- BOO!

When The Bank Says No, The Economy Says No Too.

Okay, let’s apply your knowledge from the previous section here. When one bank says no to you personally, they won’t lend because you have poor credit. You were delinquent, you defaulted on your loans. Now what happens if banks says no to 50 million Americans for that same reason?

Well…. people use credit cards to purchase everyday goods and services

People gets a loan to purchase a car….

Finally, people use a loan TO GET A DEGREE IN COLLEGE!

In the case for Auto loans, if people are delinquent on their auto loans their car gets repossessed!

Speaking of repossessions, a report from Cox Automotive via Bankrate shows that almost 3.3 million vehicles was repo’d last year and 2023, compared to almost 2.5 million from 2020 and 2021… which according to the calculations is….

a 32% Increase and it’s getting worse by the day even to this year.

If you are delinquent on your credit card, you can’t finance your car or your mortgage, you need good credit!

Same thing for student loans, which according to 3rd quarter report in the Household Debt and Credit Report from the Federal Reserve Bank of New York, Transition to serious delinquency, which is defined as 90 days or more past due soared to over 14% of balance, which is the highest EVER.

So, when people are delinquent, banks stop lending, money velocity, the rate at which money changes hands slows, Credit growth collapses due to banks lending less, that means there’s less spendable money in the system and all roads leads to a place that scares the living hell out of the rich:

DEFLATION.

That’s where everything is heading and there is nothing that any politician can do about it, domestically or globally, and the only way they can do to prevent deflation? By doing something that will make you, your family and your friend’s blood boil:

A MASSIVE BAILOUT.

Where Cities Across America Get Their Revenue (And How Overnight It is Disappearing)

According to the Tax Foundation 56% of the property tax revenue on average for cities comes from commercial and industrial properties. Here’s the craziest part: they are a much smaller slice of the total real estate! This leaves with 44% of the property tax revenue on average coming from homeowners. That means that cities are heavily banking on commercial properties to fund their services such as firefighters, schools, policemen, parks, libraries, mailboxes, and finally healthcare for city workers. Talk about putting your eggs in one basket! So to translate, your tax was kept artificially low due to the amount of commercial tax revenue cities were getting.

Today, in the latest report from Wolf Street in November, Office CRE delinquencies has soared to levels not seen…. EVER, sitting at a horrifying 11.8%!

For those that may not know, being delinquent means you either failed to make a loan payment 30 consecutive days past the due date OR you failed to make a payment on your maturity date (The final day of the loan being paid)

Now what happens when someone is delinquent on their Office loan? Well here’s a step by step:

1. The bank takes the keys away.
Now the building legally belongs to the bank.

2. The bank has to sell the building quickly.
Banks hate owning an empty building, so, they put the building up in an auction or they put it under a fire sale.

3. It sells for pennies on the dollar
The $100 million now sells for anywhere between $30-40 million. That’s 60 to 70 cents on the dollar or 60-70% discount. That means the market value of the building was slashed by 60 to 70%. OUCH.

4. The tax assessor then sees the sale (this is the person that asses the value of the a building in a municipal area).
The tax assessor pays attention to the value of the building that was sold last month, not last year or even 5 years ago. So the assess value gets slashed from $100 million to $35 million overnight.

5. Down goes millions in tax revenue immediately.
If that particular building was paying anywhere between $2-3 million in property taxes, now it pays $600k-$900k. So who pays the $1.4-2.1 million difference? It’s you and every homeowner that is living in your town.

They love to say one man’s loss is another man’s gain, but it turns out when it comes to CRE, the one man’s loss is the twenty thousand homeowners that saw a big tax bill.

The Warning Shot That Was Fired Months Ago Are No Longer Warnings

Well, this is where people like to say: I got receipts!

In this thread from August 9th, I said that to offset the loss of tax revenue, local governments will have to raise property taxes. A Wall Street Journal from May 5th had a bombshell report where homeowners in Boston is facing a billion dollar tax bill due to some building seeing values dropping 50%.

But that isn’t the ONLY city that is facing distress, there’s cities like Seattle, Chicago and Minneapolis are all facing the same pressures!

Do you, the reader, honestly think it stops in those cities? Nope it doesn’t because cities like Portland, New York, Philadelphia, Miami, DC, Providence, Houston, Dallas, San Antonio and much more are all going to be facing those types of pressures. To make things worse, cities aren’t the only entities feeling the heat.

It’s Not Just a Municipal Thing—It’s Also a Regional Bank Thing

This entire fiasco doesn’t stop at municipalities unfortunately. Remember earlier in the step-by-step process the banks takes they key? I didn’t specify witch type of bank up until now, and that type of bank is….

Regional Banks.

In a Setptember 2025 research paper from the University of Pennsylvania, researchers found that a third of the $4.8 trillion in CRE debt is held by regional banks, along with holding a majority of all non-owner-occupied commercial properties. The same research paper found that hidden distress in regional bank portfolios is estimated to be 4 times higher than what the official delinquency numbers are showing.

To make matters worse, banks overall in 2026 will see over $1 trillion in CRE debt maturing and who holds the significant share of it? Regional lenders! Furthermore, according to Reuters, 20% of the maturing loans this year has all been from Office CRE, and this is the hardest hit sector all year.

In plain English, it means that these regional banks over the next 2 years are going to have to a massive amount of provisions (money set aside for potential loan defaults), and that means they’re will have to seize the non-preforming buildings, put them on a fire sale which means more tax revenue loses for cities, which means an even bigger tax hike for your house.

Here’s the scariest part: This isn’t coming, it’s already here, and it’s about to get much… MUCH worse.