PKB USA is growing, but warnings of a financial collapse are mounting - what awaits the markets?

Key Points:

• The US GDP growth at 4.3% drives optimism, but economists see deep structural risks
• Erosion of confidence in the dollar and rising debt could trigger serious destabilization
• Cryptocurrencies position themselves as potential hedges in a currency crisis scenario

Contradictory signals from the market: Strength or illusion?

Macroeconomic data from recent quarters show unexpected resilience of the US economy. The US GDP grew at a rate of 4.3%, surpassing analyst consensus of 3.3%. Such a result is not an anomaly – it suggests sustained growth momentum despite high interest rate pressures and persistent inflation tensions.

Traditionally, periods of such economic expansion translate into rising private sector indicators, especially PMI and ISM. Historical analyses show that when the ISM index remains above 55, signaling diversified activity, stock markets and risk assets – including cryptocurrencies – typically enter appreciation phases. The two major Bitcoin bull cycles occurred in 2017 and 2021, when economic optimism was at its peak.

However, beneath this growth lies a deep structural tension that many analysts – including Peter Schiff – consistently highlight.

Warning: When confidence collapses

Peter Schiff has long maintained that macroeconomic figures mask fundamental issues in the monetary system. His argument focuses on the erosion of trust in the US dollar as a reserve currency.

Schiff points to three key signals indicating the choking of traditional dollar-denominated assets:

First, gold and silver prices are not falling despite rising yields on government bonds. This traditionally anomalous behavior suggests that global investors prefer physical protection over paper returns. In other words, the risk of nominal deposits has been priced higher than yield.

Second, the level of federal and private debt has reached extreme levels, while household savings rates are gradually declining. This dynamic is typical of monetary systems in the final phase of trust.

Third, increasing dependence on foreign capital inflows suggests that foreign central banks may be less willing to accumulate government bonds. If external demand weakens, the dollar could come under pressure.

Crisis scenario: Implications for bonds, stocks, and living standards

In Schiff’s view, if trust in the dollar collapses, a cascade of events ensues:

Treasury bonds could experience a wave of sell-offs, raising yields and lowering prices. This directly translates into higher financing costs for companies, higher mortgage rates for households, and easing credit conditions across the economy.

Stock indices might initially rise on euphoria, but as credit conditions tighten, corporate revenues will come under pressure – both due to weaker consumer spending and higher corporate debt servicing costs.

For the average American, this scenario means a noticeable decline in purchasing power. Energy, food, and service costs could rise faster than wages, reducing living standards even amid officially growing GDP.

What role for cryptocurrencies in this scenario?

Cryptocurrencies are at a crossroads between two narratives:

In the growth scenario, Bitcoin functions as a high-risk asset. When the economy is expanding and confidence in the system is high, capital flows into more speculative assets. In such an environment, short-term corrections on Bitcoin ( historically 4-5%) are seen as entry opportunities, and the medium-term trend remains upward.

In a currency crisis scenario, Bitcoin and other decentralized assets could serve as alternative stores of value. If the dollar weakens and traditional bonds are vulnerable to inflationary erosion, gold, silver, and Bitcoin may be preferred by investors seeking protection against deposits denominated in fiat currencies.

Paradoxically, Schiff’s warnings, even if critical of cryptocurrencies, strengthen the case for scarce, decentralized assets. The more a financier emphasizes risks to the traditional system, the more attractive alternatives like Bitcoin become as hedges.

Implications for credit markets and living standards

If yields on government bonds rise – whether due to fiscal policy restructuring or loss of confidence in the dollar – the consequences will be broad:

• Mortgages, auto loans, and credit cards will become more expensive, reducing disposable income for the average household
• Highly leveraged companies may be forced to cut jobs
• Slowing consumer spending could lead to decreased corporate income growth
• Globally, traders using dollar-based currencies may seek alternative settlement units

Frequently Asked Questions

How does rising Treasury yields affect Americans?

Higher yields cause increases in base interest rates for consumer and mortgage loans. The result is higher debt servicing costs for households and businesses, which reduces disposable income and slows consumption – potentially regardless of US GDP statistics.

Why do cryptocurrencies behave differently in various economic scenarios?

During periods of economic optimism, Bitcoin and altcoins act as high-risk assets attracting speculative capital. In currency devaluation scenarios, cryptocurrencies can serve as hedges against inflation or dollar depreciation, attracting investors seeking alternative stores of value. This duality makes them a unique financial product.

Who would be most vulnerable to a sudden loss of confidence in the dollar?

Institutional bondholders, international central banks, and companies with high-interest debt denominated in dollars would be the first affected. For consumers, this would translate into higher inflation, lower nominal asset values, and reduced purchasing power – leading to a noticeable decline in living standards.