The most important asset price in the world... Betting against 'the house' – twice... 1933 versus today... Paying off debt 'very rapidly'... $16,000 gold...
The U.S. 10-year Treasury yield is the most important asset price in the global economy...
The Federal Reserve sets short-term U.S. interest rates, but the market sets long-term rates, mostly via the 10-year Treasury. It's the benchmark for corporate- and sovereign-debt issuance all over the world.
Its yield is a global economic signal. You see, it trades in the U.S.'s $61 trillion debt market, the world's largest at about a 38% share of the global debt market.
Now, I'm not saying other assets don't rival the 10-year Treasury's throne.
Brent crude oil – the international oil benchmark – sets the input costs for global trade. Brent at $100 per barrel or more impacts virtually every country in the world. When folks are talking about oil prices going up due to the Iran and Ukraine wars, they're talking about Brent.
Then there's the Secured Overnight Financing Rate ("SOFR"), the benchmark interest rate for dollar-denominated loans and other financial contracts. It's an important gauge of U.S.-dollar global-banking liquidity. If SOFR spikes, it could mean a global financial crisis is imminent, if not already underway.
The U.S. Dollar Index is another serious contender. It's the U.S. dollar priced in euros, Japanese yen, British pounds, Canadian dollars, Swedish krona, and Swiss francs. The euro makes up about 58% of the index, so movements in the euro have the biggest impact.
Still, the 10-year Treasury yield is king...
The global economy is more developed than ever. And one of the most important traits of developed economies is that they rely heavily on debt financing.
Plus, among all the assets I listed above, the 10-year Treasury is arguably the most forward-looking.
Oil prices, short-term rates, and the dollar can fluctuate a lot in 10 years, and to be fair, so can the 10-year yield. But those other instruments aren't explicitly long term. Folks who own or use them aren't required to think about whether they'll get their money back in 10 years. Bottom line: when the 10-year talks, you should listen. And right now, the bond market has pushed the 10-year yield to a 24-year high.
What that tells us...
Higher yields often mean the market is worried about inflation, but the 10-year yield might also be signaling something more sudden and severe...
The timing of the 10-year Treasury's fall in value (the flip side of a rise in yield) gives us a large hint about what the bond market is thinking.
By all appearances, the move is a reaction to U.S. Treasury Secretary Scott Bessent's now-infamous comment, "I am the house now," which he made on September 8 during a fireside chat at the Southern Methodist University Cox School of Business. Here's the full context of the remark:
Whenever people say, "Oh, well, Treasury Secretary is taking a risk" — well, it's my dream. I have asymmetric information. I am the house now.
So when we intervene with the Japanese yen, I have pretty good insight into what the Japanese, what the Bank of Japan is going to do, what Japanese policymakers are going to do.
And you can bet against me if you want.
Bessent was talking about the U.S.'s ability to support the Japanese yen. On July 31, the Bank of Japan and U.S. Treasury intervened to support the value of the yen, which had fallen to more than 163 yen to the dollar, deemed a dangerously low value.
A higher number indicates a weaker yen, a lower number a stronger yen. So on the following chart, a rising line is a weakening yen, and a falling one is a strengthening yen.
As you can see, the yen strengthened after Japan and the U.S. intervened. The yen hit around 153 in the few days after Bessent's comment. But then the market faded Bessent's hubris by trading the opposite way. Since then, the yen has lost nearly 3% of its value, reaching around 158 per dollar recently. Bessent challenged the market to bet against him, and it did.
That wasn't the only bet the market placed against the 'house'...
According to data compiled by Bloomberg, the 10-year Treasury yield surged from 4.8% on September 8 to 5.31% on October 5 – its highest level since April 2002. That's despite the U.S. Treasury announcing in August that it was doubling its buybacks of Treasury securities. You can see this in the following chart of the CBOE Interest Rate 10-Year Treasury Note Yield Index (TNX), which tracks the 10-year Treasury yield.
Last week at Stansberry Research's annual conference in Las Vegas, I interviewed Ben Hunt, co-founder of research firm Perscient, about the "crowding out" effect he sees as a primary cause of higher yields. In short, Hunt says the government and AI investment are crowding out other people who want to borrow capital.
You see, total U.S. government debt has more than doubled over the past 10 years, from $19.7 trillion to more than $40 trillion today. The U.S. is running a deficit near $2 trillion, all of which must be financed with debt.
Meanwhile, companies building data centers and developing AI models are borrowing big. Bloomberg reported on Tuesday that SpaceX (SPCX) is looking to borrow $40 billion to buy Nvidia (NVDA) chips. So capital becomes less available for other industries.
I've heard that argument elsewhere and it makes sense. But it strikes me more as a symptom than the primary issue that's bothering the Treasury market, which I suspect is something potentially more devastating...
The U.S. continues to run big fiscal deficits and will certainly have to borrow more to fund them...
It's rapidly approaching the point where the U.S. will have to print money just to pay the interest on its massive and growing debt obligations.
In other words, the bond market is interpreting "I am the house now" to mean we can and will print all the money we want to manipulate global debt and currency markets however we want.
Markets don't like that kind of hubris. It reminds me somewhat of the infamous Hunt brothers' attempt to corner the silver market in 1980. Silver fell from nearly $50 per ounce to less than $11 per ounce. The Hunts faded in ignominy amid bankruptcies, fines, and permanent bans from trading commodities. The market tends to ferret out manipulation and fade it. That's what we're seeing right now.
So where do we go from here?...
There's at least one other historical precedent worth mentioning...
In April 1933, President Franklin D. Roosevelt issued an executive order making it illegal for U.S. citizens to own or trade gold. And in January 1934, Congress passed the Gold Reserve Act, allowing the president to determine the gold value of the U.S. dollar. FDR immediately repriced gold from $20.67 per ounce to $35, instantly devaluing the U.S. dollar by 41%.
The government also eliminated the gold clause in all debt agreements. Gold clauses came into widespread use after the inflationary period of the Civil War. They guaranteed creditors payment in gold dollars at the official value at the time of the debt contract.
But during the Great Depression, borrowers were paying back much more than they had borrowed, due to the huge deflation in asset prices. To prevent a massive wave of bankruptcies, Congress declared all gold clauses null and void.
You'd think all that would have thrown the bond market into a panic. It didn't. After the Gold Reserve Act was passed and gold was priced higher (meaning dollars priced lower), bonds repriced higher, meaning yields moved lower. In other words, the move was perceived as a much-needed monetary expansion, not a destructive default.
In short, the market should have hated it, but loved it instead.
Things are different today...
The government was fighting deflation back then. It's dealing with inflation today.
Back then, the market viewed eliminating the gold clause as a necessary step to get the economy moving again. Today, we're dealing with the opposite problem. The market views the constant borrowing and spending as inflationary.
If we check the Federal Reserve's favorite inflation gauge, the core personal consumption expenditures price index, we can see that since COVID-19, we've entered a new, higher-inflation era.
Inflation is now a bigger problem than it was before the pandemic. But FDR used inflation to his advantage by devaluing the dollar to fight the Great Depression.
And President Donald Trump seems to have something similar in mind...
In a Time interview published October 1, Trump said that higher rates of economic growth would help pay off the country's $40 trillion (and rising) debt burden, then noted in an almost offhand manner:
Certain levels of inflation will also pay off that debt very rapidly. Very rapidly.
If you're not quite getting what he's saying, just think of a fixed-rate home mortgage. The dollars you use to pay your mortgage are constantly falling in value because the dollar and all fiat currencies are constantly falling in value... yet your mortgage payment stays the same.
As time goes on, that payment becomes less and less of a burden as the dollar keeps falling in value. Regular Digest readers know that borrowing money and owning an appreciating asset is a time-tested way to beat inflation.
That's the same dynamic Trump is talking about, but on a much broader scale. He's talking about resetting the value of the U.S. dollar lower – essentially the definition of all inflation – to make paying off the country's debts easier.
The difference between what Trump is talking about and what happens with our mortgages is the important piece for investors to understand.
Our fixed-rate mortgages benefit us over time (provided the rate is low enough) as the dollar gradually loses value over the 30-year term of the loan.
But Trump gave us a huge hint about what he has in mind when he said inflation could pay off the debt "very rapidly... very rapidly."
The only way to do that would be to do something like what FDR did in the 1930s. Just like back then, the dollar would lose a significant amount of value overnight. And the way Trump might do it could bring gold into the equation...
A reset of gold versus dollars has been underway since at least February 2022. After Russia invaded Ukraine, the U.S. and its allies froze roughly $300 billion in Russian reserve assets. Since then, the world's central banks have been reducing U.S. Treasury holdings and increasing gold holdings.
As of the end of 2025, gold had surpassed U.S. Treasury holdings as a percentage of foreign exchange holdings at global central banks. U.S. dollar holdings still totaled 42% (20% dollars and 22% Treasurys), but gold rose to 27% of holdings.
In short, the world is replacing Treasurys with gold.
The Treasury seems to have some ideas about how it might use gold...
The Treasury recently hired economist Dr. Judy Shelton as a special adviser to the Secretary of the Treasury.
Shelton wants the government to issue what she calls "Treasury Trust Bonds." These would be 50-year zero-coupon Treasury bonds redeemable at maturity in dollars or a predetermined amount of gold – whichever the bondholder preferers. (She wanted the government to announce it on July 4, 2026... an ideal moment for the U.S. to reassert its monetary dominance in the world.)
Shelton argues that the gold backing would allow the bonds to carry a lower interest rate, which could lower interest costs for the government. Shelton has also noted the huge difference between the U.S. government's official gold price of $42.22 per ounce and the market price, which is now around $4,200.
The government's 261.5 million ounces of gold are worth about $11 billion at the official price, but more than $1 trillion at the market price.
Several folks think there's no way for the government to get out of its high debt-service burden without gold going much higher.
I interviewed Luke Gromen, founder of macro-research firm Forest for the Trees, for an upcoming episode of Stansberry Investor Hour. His argument is sophisticated, but the bottom line is that he thinks the U.S. government's fiscal position is so fragile that there's no way to fix it without gold soaring.
He suggested that if the U.S. were to try to use gold to reset the U.S. dollar to a value that would address its weak financial position, it would have to raise the official price to 3 or 4 times its current value, or roughly $12,000 to $16,000 per ounce. At those prices, the U.S. gold supply would be worth between $3.1 trillion and $4.2 trillion. I won't try to do Gromen's argument justice, so I encourage you to listen to the episode when it airs.
No matter how we look at it, it sure seems like the bond market is telling us to fade the Treasury Secretary's hubris. It might also be warning us that the government will soon have to back U.S. Treasury bonds with gold. However things work out, I urge you to own gold to preserve your wealth over the next several years.
New 52-week highs (as of 10/8/26): AbbVie (ABBV), GitLab (GTLB), Hafnia (HAFN), Hagerty (HGTY), Marathon Petroleum (MPC), Okta (OKTA), Philip Morris International (PM), Saturn Oil & Gas (SOIL.TO), and Valero Energy (VLO).
In today's mailbag, thoughts on the "Iran war risk" we wrote about yesterday... plus a question about some math in the private-equity section of yesterday's issue... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com.
"Re: the Iran war, my thought is this will be like the Iran hostage crisis that ended when President Carter left office. This Iran war ends after the next election. I hope I am wrong." – Subscriber Neil S.
"If the rumors are true that inventory munitions are really down, then it seems to reason the next time we hit Iran will be quite deadly. We don't have the ammo to waste." – Stansberry Alliance member John M.
"Could you please explain this statement:
Like BlackRock, Blue Owl capped redemptions at 5%. So folks who put in for redemptions only received about $0.13 for every dollar they requested.
"Normal math would suggest that $0.13 returned on a dollar would be... 13%, not 5%. What am I missing?" – Subscriber Mike M.
Corey McLaughlin comment: Fair question. The number you need was in yesterday's issue, but perhaps we could have been clearer connecting the dots.
The 5% is the cap on how much of the fund can be redeemed in a quarter. The $0.13 is how much of each investor's request got filled.
The link between them is the 39% we mentioned earlier in the piece. That's how much of the Blue Owl Technology Income Fund's shares investors asked to redeem.
The fund is paying out 5% of redemption requests but received requests for 39% of its shares. Divide 5 by 39 and you get about 13%. So everyone who asked out got roughly 13 cents on the dollar, or $1,300 back for every $10,000 they wanted to redeem.
Good investing,
Dan Ferris
Medford, Oregon
October 9, 2026
