Part 7/15:
The concern is that if the Fed tightens aggressively to combat inflation, interest rates could spike sharply, causing bond prices to plunge. This could trigger a cascade effect, destabilizing pension funds, insurance companies, and sovereign debt—especially those heavily weighted in fixed income assets.
The Geopolitical and Currency Crisis
Larry discussed how the US dollar's status as the world's reserve currency creates a self-fulfilling cycle. As global debt is largely dollar-denominated, demand for dollars surges during crises, prompting the Fed to print more money via swap lines and other procedures. However, this ongoing 'Ponzi-like' system risks collapse as debt levels soar to unprecedented heights—total global debt now surpassing $900 trillion relative to GDP.