At the Edge: Untangling Debt, Collapse, and Conviction in the Global Financial System

It was 2020 when a friend scoffed at my claim that the decades-old bond bull market was over. Fast-forward to today—like sitting in a dimly lit room when you realize the candle’s almost out—we are all, arguably, living through the unraveling of a system we once thought invincible. This isn’t about sensational downfall predictions; it’s about untangling the patterns and the noise. Using the sometimes formulaic, sometimes surprising world of technical analysis, let’s dive deep into what’s really at stake as the foundation of the debt-driven, fiat-based global order begins to splinter.

The Debt Convexity Slope: How Collapse Creeps Up and Then Strikes Fast

In the world of global finance, few moments are as pivotal as the end of a decades-long trend. In late 2020, technical analysts like Francis Hunt sounded the alarm: the 40-year bull market in bonds was over. At the time, this call was largely dismissed by mainstream commentators. Yet, as the dust settles years later, the warning signs—once ignored—are now impossible to overlook. The story of the debt collapse, the rise in bond yields, and the resulting market volatility has become central to the world economic outlook.

Hunt’s perspective was clear. “I don’t know a single other soul that at the tail end of 2020 said the 40-year bond market bull is over,” he reflected. The conviction behind this statement was not just bravado; it was rooted in technical analysis and a keen understanding of the debt-based funding mechanisms underpinning the global financial system. As the world grappled with the aftermath of the COVID-19 crisis, central banks unleashed unprecedented money creation. Bond valuations soared, yields plummeted to historic lows, and the sense of security among investors grew. But this, Hunt argued, was the classic setup for a reversal.

Convexity: The Slate Mountain Analogy

To understand how a debt collapse unfolds, Hunt introduced a powerful analogy: convexity. Imagine standing atop a slate mountain. At first, your descent is slow—almost manageable. But as you continue, the slope steepens, and suddenly, you’re accelerating beyond control. This is the essence of convexity in financial markets: gradual deterioration gives way to rapid, unstoppable decline. The process echoes Ernest Hemingway’s famous words:

“How did you go bankrupt? Slowly at first, and then all of a sudden.”

The convexity chart Hunt referenced captures this dynamic. It’s not a masterpiece, he admits—“I’m some way off of Picasso at the moment myself”—but it illustrates how market collapses can creep up quietly before striking with full force. The technical signals were there, but few were willing to see them.

TLT’s 50% Drop: The Canary in the Coal Mine

Nowhere was this more evident than in the performance of the TLT ETF, which tracks long-term US Treasury bonds. Between 2020 and 2022, TLT lost 50% of its value—a staggering decline for what is typically considered a safe-haven asset. This dramatic loss was not just a blip; it was a harbinger of deeper cracks in the global financial system. The inverse relationship between bond prices and yields meant that as prices fell, yields surged, signaling a fundamental shift in market sentiment.

Research shows that these shifts were not isolated. In April 2025, the introduction of sweeping US tariff policies triggered a major global stock market crash, unleashing historic volatility and panic selling. Initially, bond markets saw yields drop as investors rushed for safety. But the trend quickly reversed. Bond vigilantism took hold, yields spiked, and governments were forced into emergency responses. The world economic outlook darkened as effective tariff rates reached levels unseen in a century, amplifying unpredictability and risk.

The False Sense of Security—and Its Consequences

Why did so few see this coming? Hunt points to a “false sense of security” fostered by mainstream media and conventional wisdom. The narrative was simple: central banks had everything under control. But beneath the surface, the debt-based funding model was unraveling. The technical signals—ignored by most—were clear to those willing to look.

For the everyday investor, the lesson is sobering. Market volatility can emerge from seemingly stable conditions. Debt collapse does not announce itself with fanfare; it creeps in, masked by complacency, before striking fast and hard. The TLT’s 50% drop was not just a technical anomaly—it was a warning shot for the global financial system.

As the world faces heightened downside risks, from escalating trade tensions to unpredictable policy shifts, the need for vigilance has never been greater. The debt convexity slope is not just a theoretical concept; it’s a lived reality for investors navigating today’s turbulent markets.

Fiat Fantasies and Global Reverberations: When the World’s Not Buying What’s Being Sold

A seismic shift is underway in the global financial system. What was once considered “safe”—the unyielding demand for US treasuries—is now being quietly, but decisively, re-evaluated by major economies. Recent developments signal a move from perceived safety to calculated risk, with nations like the Philippines and China reducing their US treasury holdings and pivoting toward gold accumulation. This trend is more than a headline; it’s a warning shot across the bow of international finance, raising urgent questions about fiat devaluation, recession risk, and the future of global growth.

Francis Hunt, a market analyst, captured the sentiment succinctly:

“We had the Philippines today saying they don’t want to buy treasuries anymore. That means they’ll probably be joining China and being a massive gold accumulator.”

This move is not isolated. It’s part of a broader pattern where countries are seeking alternatives to the US dollar’s dominance. The logic is simple: as global debt levels soar and the reliability of fiat currencies comes under scrutiny, gold—long considered a hedge against uncertainty—looks increasingly attractive. The implications for international cooperation and global growth are profound, as the world’s economic architecture is built on trust in these very instruments.

Japan’s Rice Crisis: A Canary in the Coal Mine

While the US faces its own challenges, vulnerabilities are surfacing elsewhere. Japan, often seen as a model of economic stability, is now grappling with a startling 100% surge in rice prices over the past year—the largest jump since 1971. That year is etched in economic history as the moment President Nixon broke the dollar’s convertibility to gold, ushering in the modern era of fiat currencies. The parallel is hard to ignore.

Japan’s official inflation rate now sits at 3.5%, but as Hunt notes, “official stats understate generally in my view. It’s not in the government’s interest to be on the high side”. The real pain may be even greater. This inflation spike coincides with mounting stress in Japan’s debt markets, where yields on longer-term bonds are rising sharply—no longer the era of nearly zero rates. The message is clear: currency and debt vulnerabilities are not confined to the United States.

From Safe Harbor to Storm Warning

For decades, US treasuries were the world’s safe harbor. But as nations like the Philippines and China step back, the foundation of the global financial system shows cracks. This is not just a technical adjustment; it’s a signal that faith in fiat is waning. The metaphor is apt: it’s like watching neighbors board up their homes for an approaching storm, only to realize your own foundation is already flooded. The risk is not just American—it’s global.

Research shows that effective tariff rates have reached levels not seen in a century, contributing to a highly unpredictable global economic environment. These trade tensions, coupled with shifting debt demand, are amplifying recession risk worldwide. Studies indicate that weaknesses are emerging in household spending and the financial sector, with elevated asset valuations and new risk areas increasing the potential for a downturn. The IMF recently raised the likelihood of a US recession in 2025 to 40%, citing tariff-driven headwinds and financial instability.

• Fiat Devaluation: The pivot to gold and away from treasuries reflects growing skepticism about the long-term value of fiat currencies.
• Recession Risk: As global debt demand shifts and inflation bites, the risk of recession is rising—not just in the US, but across developed and emerging markets.
• Global Growth: Projections for 2025 have been revised downward, with policy shifts and market volatility undermining confidence in a robust recovery.
• International Cooperation: As nations act in their own interests, the spirit of international cooperation is under strain, threatening progress toward a more resilient global economy.

The world is at a crossroads. As the old certainties of fiat money and US debt dominance fade, new risks—and new strategies—are emerging. The reverberations are being felt from Washington to Tokyo, Manila to Beijing. And as history reminds us, when the world stops buying what’s being sold, the consequences can be both swift and severe.

Forget Template Thinking: The Psychological Quicksand of Financial Narratives

In a world gripped by policy shifts and market volatility, the narratives we cling to can be as dangerous as the risks themselves. As global financial systems face structural imbalances and mounting debt, the stories told by media and leaders often shape public perception more than the underlying economic realities. Recent events have underscored how quickly economic stability can unravel when collective biases go unchecked.

During a recent discussion, the conversation turned to the powerful role of national narratives in shaping how people interpret financial shocks. There is, as one expert noted, a sense that some countries “had this coming”—a belief that economic pain is a kind of comeuppance for past actions or rhetoric. This sentiment, fueled by frustration and anger at policy decisions, can quickly morph into a dangerous form of denial. Instead of focusing on the real drivers of instability—trade tensions, unpredictable policy environments, and financial market adjustments—public discourse often gets stuck in a loop of blame and misplaced pride.

The dangers of echo chambers are not unique to any one nation. As highlighted in the transcript, American media is sometimes accused of “maximalist” thinking, suggesting that the U.S. remains insulated from global shocks, or that other economies, like China, will always fare worse. But this kind of patriotic filter is not limited to the United States. “China gets patriotic push back,” the expert observed, noting that similar narratives play out across the globe. The risk, they warn, is that such thinking blinds entire populations to their own vulnerabilities.

A personal aside from the same discussion offers a sobering reminder. Drawing on experience as a South African during apartheid, the speaker recalled how local media could reinforce biases and create a false sense of security. “Just having a local media bouncing in your head can skew your biases very, very easily and very quickly,” they said. The lesson is clear: information echo chambers can lull societies into denial, making it harder to recognize and respond to systemic risks.

This warning is not just for Americans. As Francis Hunt put it,

‘I want to warn Americans about that…but I’m also warning the world about debt category. So it’s not like everyone else gets off scot-free.’

The debt market, particularly in the Western world and China, is deeply interconnected. A breakdown in one part of the system—such as the bond market—can trigger panic across banks, real estate, and equities. The collapse contagion does not respect borders or patriotic narratives.

Research shows that downside risks to the global economy have intensified, driven by escalating trade tensions, unpredictable policy shifts, and financial market volatility. The risk of a stagflationary recession—a toxic mix of stagnant growth and persistent inflation—is rising, with policy-induced contractions and heightened vulnerabilities in the financial system. The events of April 2025, when sweeping U.S. tariff policies triggered a global stock market crash, serve as a stark reminder of how quickly market sentiment can shift. Bond markets, initially seen as safe havens, became flashpoints for panic as yields spiked and governments scrambled to respond.

These developments underscore the importance of breaking free from template thinking. Economic stability cannot be achieved by clinging to comforting narratives or assuming that collapse is always someone else’s problem. The reality is more complex, and more dangerous. As weaknesses emerge in household spending and the financial sector, and as asset valuations remain elevated, the potential for a chain reaction grows.

In the end, the psychological quicksand of financial narratives may be one of the greatest risks facing the global economy. Media filters and national pride can distort perceptions, masking the true scale of structural imbalances and the fragility of economic stability. As the world stands at the edge, the need for clear-eyed analysis—and a willingness to confront uncomfortable truths—has never been more urgent.

TL;DR: The world’s debt-fueled financial system is facing a foundational challenge, with top experts warning of a chain reaction across markets and economies—understanding these technical and psychological shifts is crucial for anyone hoping to navigate the turbulence ahead.

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