When we warned that America was closing in on $40 trillion in national debt, the point wasn’t that some magic number would suddenly cause the economy to implode. The warning was that the United States is piling enormous amounts of new debt onto a financial system that is already showing signs of strain.
Those signs are becoming harder to ignore.
Home sellers are cutting prices. Long-term Treasury yields are pushing into territory we haven’t seen in decades. Foreign governments are trimming Treasury holdings. Central banks are buying gold at a record pace. The United States just participated in an extraordinary currency intervention with Japan, while Treasury Secretary Scott Bessent is pushing the Federal Reserve to expand a facility that could help Japan avoid dumping hundreds of billions of dollars in U.S. government debt onto the market.
At the same time, the Vice President of the United States has previously questioned whether having the world’s reserve currency is actually good for America, JPMorgan CEO Jamie Dimon is openly warning that the dollar could eventually lose that position, and Warren Buffett spent much of the year sitting on one of the largest piles of cash ever accumulated by a private company.
None of that means the dollar disappears tomorrow or that the stock market crashes next Tuesday.
But if you are waiting for CNBC to put up a flashing red banner that says “ECONOMIC COLLAPSE HAS OFFICIALLY STARTED,” you have completely misunderstood how these things happen.
Financial systems usually crack slowly, then suddenly.
More Than 40% of Homes on the Market Have Already Taken a Price Cut
One of the clearest warning signs is coming from housing.
Mike Simonsen, founder of Altos Research, reported in early August that 41.4% of homes currently on the market had already taken a price reduction from their original asking price. That is above normal levels and increased by roughly half a percentage point in only one week. Altos also reported roughly 1.1 million active listings while pending sales had lost the stronger growth momentum seen earlier in the year.
That statistic needs a little explanation because different housing companies calculate “price cuts” differently. Realtor.com, for example, reported that 20% of listings experienced a price reduction during July. Altos is measuring the percentage of current active inventory that has taken a reduction at some point from its original asking price. They are different measurements, but they are pointing in the same direction: buyers are resisting current prices and sellers are increasingly being forced to adjust.
That matters because price reductions tend to show up before closed-sale statistics do. A seller cuts the price today. The house goes under contract weeks later. It closes after that. Then eventually the sale appears in the government and industry data everybody on television talks about.
In other words, the price cut is happening now while the official data is still looking in the rearview mirror.
Existing-home sales already dropped another 1.7% in July, while the median sale price remained at a record $434,100 and mortgage rates hovered around 6.7%. That is the ugly combination strangling this market: houses are still incredibly expensive, borrowing money is incredibly expensive, and buyers simply cannot make the numbers work.
Builders are seeing the same thing. The latest NAHB numbers show builder confidence sitting at only 35, deep in pessimistic territory, with 35% of builders cutting prices in August and nearly two-thirds using some type of incentive to move houses.
Housing doesn’t have to experience another 2008-style collapse to hurt the economy. It merely has to stop functioning normally.
Housing transactions feed mortgage companies, banks, construction firms, contractors, furniture stores, appliance companies, moving companies, real estate agents, title companies and local tax revenue. When people stop moving and builders stop building, the damage works its way through a huge section of the economy.
And this is happening while consumers are already getting squeezed everywhere else.
The Bond Market Is Sending an Even Bigger Warning
The housing numbers may be easier for normal people to understand, but the Treasury market is where I would be paying very close attention.
The United States recently sold 30-year government bonds at a yield of about 5.22%, the highest borrowing cost at a 30-year Treasury auction since 2001. Long-term yields continued climbing afterward, with the 30-year yield pushing to roughly 5.29% on August 17.
Think about what that means when you are approaching $40 trillion in national debt.
Washington isn’t borrowing at 1% anymore.
Every trillion dollars that has to be refinanced at substantially higher rates becomes another enormous interest expense that future taxpayers have to cover. And because the government never actually pays down the debt, huge amounts continually have to be refinanced.
Meanwhile, the federal government ran a staggering $432 billion deficit in July alone. The fiscal-year deficit reached roughly $1.8 trillion with two months still remaining, already exceeding the entire previous fiscal year’s deficit.
This is the part nobody wants to seriously discuss.
We are borrowing enormous sums of money at precisely the time the cost of borrowing that money is becoming more expensive.
You don’t need a degree in economics to understand why that eventually becomes a problem.
Now Look at What Foreign Treasury Holders Are Doing
Here is where the story gets even more interesting.
Treasury Department data released August 17 showed foreign holdings of U.S. Treasuries falling from $9.371 trillion in May to $9.299 trillion in June.
Japan, the largest foreign holder of U.S. government debt, reduced its holdings to approximately $1.116 trillion. China cut its holdings to about $633 billion, the lowest level since 2008.
That does not mean everybody is suddenly abandoning the dollar. Foreign Treasury holdings remain enormous, and there are still massive amounts of global capital flowing into American assets.
But direction matters.
For decades, the American financial machine has depended on the rest of the world being willing to absorb an almost limitless supply of dollar-denominated assets.
We print the currency everyone needs.
They sell us goods.
They accumulate dollars.
A significant portion of those dollars eventually gets recycled back into Treasury securities.
Washington gets another willing buyer for its debt, allowing the federal government to borrow at rates that most heavily indebted countries could only dream about.
That arrangement has been one of the greatest financial advantages any nation has ever possessed.
Which is why what is happening with Japan deserves a hell of a lot more attention than it is getting.
The Japan Story Is Real, But It’s Stranger Than the Viral Version
There are claims circulating online that the U.S. Treasury has somehow “taken control” of the Bank of Japan to prevent Japan from dumping $1.4 trillion worth of Treasury securities.
That goes too far.
But what actually happened is extraordinary enough without embellishing it.
After the Japanese yen plunged to roughly 40-year lows, Japan intervened to support its currency. The United States then joined the operation in an extremely unusual coordinated currency intervention.
Instead of selling dollars to buy yen, the New York Fed reportedly sold euros on behalf of the Treasury and used them to purchase yen. One obvious benefit of doing it that way was avoiding additional pressure on the Treasury market.
Then Treasury Secretary Scott Bessent called for expanding something called the FIMA Repo Facility.
Most Americans have never heard of FIMA, but it suddenly matters.
The Federal Reserve created the facility during the 2020 financial panic. It allows approved foreign central banks to temporarily exchange Treasury securities for dollars instead of selling those Treasuries into the open market.
The current limit is generally $60 billion per counterparty.
Bessent wants more firepower.
Why?
Because if Japan needs large amounts of dollars to defend the yen, FIMA gives Japan another way to obtain them without dumping its Treasury portfolio.
Reuters spelled out the concern rather clearly: outright Treasury sales by Japan could push American bond yields even higher.
Read that again.
The United States is considering expanding a Federal Reserve liquidity mechanism partly so the world’s largest foreign holder of Treasury debt doesn’t have to unload those Treasuries into a market where yields are already causing problems.
That should get your attention.
Jamie Dimon Is Warning of What’s to Come
JPMorgan CEO Jamie Dimon recently issued his own warning.
“If we’re not the strongest military in 25 years and the strongest economy, we won’t be the reserve currency either,” Dimon said in an interview aired this month.
Again, that isn’t a prediction that the dollar disappears tomorrow.
But it is quite a statement coming from the CEO of the largest bank in the United States.
The dollar currently represents roughly 57% of allocated global foreign-exchange reserves, according to IMF data. That is still overwhelmingly dominant, and the dollar’s share actually ticked higher during the first quarter of 2026 after accounting for currency movements.
So no, BRICS hasn’t killed the dollar.
China hasn’t killed the dollar.
Bitcoin hasn’t killed the dollar.
Gold hasn’t killed the dollar.
But the dollar’s share of global reserves is considerably lower than the roughly 70% level it held around the beginning of this century, and countries are clearly thinking harder about what else they want sitting in their vaults.
Which brings us to gold.
Central Banks Are Buying Gold Like They Know Something Is Wrong
Central-bank gold purchases exploded during the second quarter.
Central banks purchased a net 289 metric tons of gold during April through June, more than five times the first-quarter amount and a record for a second quarter, according to World Gold Council data cited by Reuters. Deutsche Bank estimates those purchases were worth roughly $45 billion.
China added another 20 tons in July.
Then South Korea made headlines by announcing plans to buy gold from domestic producers for the first time in 13 years.
Again, don’t turn that into something it isn’t.
Central banks aren’t emptying their vaults of dollars and replacing everything with gold.
But central bankers are professional risk managers. When institutions responsible for protecting national reserves start increasing their exposure to an asset that has no counterparty risk and cannot be printed by another government, it is worth asking what risk they are trying to hedge.
They don’t have to believe the dollar is going to zero.
They merely have to believe owning nothing but somebody else’s paper promises is becoming increasingly dangerous.
And Then There Is Warren Buffett’s Giant Pile of Cash
Warren Buffett has also become part of this story, although social media has exaggerated this one too.
Berkshire Hathaway’s cash and Treasury holdings reached a record $380.2 billion at the end of March. At Berkshire’s annual meeting, Buffett described today’s markets as a “church with a casino attached” and said investors had never been in more of a gambling mood.
Buffett also admitted that he understands a smaller percentage of publicly traded businesses today than he did a decade ago and said many businesses he does understand simply weren’t attractive at current prices.
But the viral claim that Buffett is refusing to invest a single dollar because he expects total economic collapse is wrong.
In fact, Berkshire became a major net buyer of stocks during the second quarter, purchasing about $23.5 billion while selling $3.7 billion. Its cash pile declined to roughly $364.7 billion by June 30.
That’s still an unbelievable amount of liquidity.
But Buffett isn’t hiding in a bunker waiting for civilization to end.
The more useful lesson is that one of history’s most successful investors has consistently placed enormous value on liquidity and patience. He doesn’t feel compelled to chase markets simply because everyone else is making money.
There is probably a lesson there for normal people as well.
America is approaching $40 trillion in national debt while running another enormous annual deficit. Long-term government borrowing costs are reaching levels not seen in roughly a quarter century. Housing affordability is wrecked. More than 40% of current active listings tracked by Altos have already undergone a price reduction. Foreign Treasury holdings declined in the latest monthly data. Japan is struggling with its currency while sitting on more than $1 trillion in American government debt. Washington is worried enough about the Treasury implications to consider expanding emergency-style liquidity plumbing originally created during the COVID financial panic.
Then central banks are quietly stacking hundreds of tons of gold in the background.
None of this guarantees a collapse.
But at some point you have to stop asking whether one indicator proves the economy is in trouble and start looking at the entire damn picture.
Economic Preparedness Means Preparing Before Everybody Agrees There’s a Problem
If you haven’t seriously looked at your economic preparedness plan, start with our complete guide to preparing for an economic collapse. We cover the warning signs, financial steps, survival supplies, self-reliance skills and preparations that can help protect your family during a prolonged economic crisis.
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