The U.S. is facing a growing debt spiral that could force the Fed to monetize treasuries, stoking inflation. Experts warn that printing money to finance deficits can trigger a “fiscal dominance” scenario of high inflation and currency devaluation . At the same time, global markets are decoupling: Europe, Japan and China are boosting domestic demand, and bank regulations now “ring‐fence” shocks, so a U.S. bust may stay localized.
Key Trends to Watch:
👉🏻U.S. Fiscal Strain: Record debt and rising interest costs may lead to debt monetization (bond-buying) and inflation. This risks eroding the dollar’s purchasing power.
👉🏻Global Divergence: The Fed remains restrictive to fight inflation while others (e.g. ECB, China) loosen policy. Crucially, U.S. consumers no longer drive world growth – many economies are more insulated from an American slowdown.
👉🏻Toxic U.S. Assets: U.S. banks still hold ~$1.8 trillion in commercial real estate loans, a sector under strain . Foreign investors are already reducing U.S. Treasury and CRE exposure, isolating U.S. stress.
Opportunity in Diversification:
History shows markets eventually rotate out of concentrated U.S. exposure. Non-U.S. equity indices have historically outperformed after periods of high U.S. concentration. Even Bitcoin has recently decoupled from U.S. stocks, hinting at alternative diversification: Bloomberg data notes Bitcoin and the S&P 500 moved in opposite directions in 2025, opening new portfolio paths.
Crypto Investors Take Note:
Rather than being 100% “long S&P,” consider spreading risk. Diverse global assets (commodities, value stocks abroad, and crypto) may benefit if U.S. stagflation hits. As analysts advise, don’t keep all your eggs in one country’s basket. This isn’t pessimism – it’s strategic. By reallocating now, crypto holders can protect and potentially profit from the coming shift.