Economist Alasdair Macleod: Current Stock Market Bubble Larger Than 1929, S&P 500 Could Lose Over 90%, Gold and Silver Are Safe Havens

Senior macroeconomist Alasdair Macleod recently issued a stark warning: The divergence between current US stock valuations and US Treasury yields has reached historical extremes, with financial markets facing an epic bubble more severe than the eve of the Great Depression in 1929.

As core overseas buyers such as Japan accelerate their exit from the US Treasury market, a massive wave of debt financing totaling tens of trillions of dollars will force US Treasury yields out of control, completely shattering the US stock market bubble. At that point, the S&P 500 index could face a devastating correction of over 90%, while the shaking confidence in the fiat currency system will make physical gold and silver the only ultimate safe havens.

Credit is essentially a promise of performance and a debt obligation. In the modern paperless trading system, stocks held by investors do not constitute direct physical ownership of listed companies, but are rather claims held indirectly through Central Counterparties (CCPs); similarly, bank deposits involve a dual contract encompassing the commercial bank's ability to pay and the central bank's fiat currency credit.

Throughout the history of monetary evolution, only physical metals like gold and silver that can achieve "final settlement" (meaning no outstanding debts or counterparty risks remain after the transaction) are true money. The continuous selling of fiat currencies and significant accumulation of gold by global central banks in recent years is a prudent move at the central bank level to settle credit debts in exchange for physical money.

Macleod points out that the US government is currently deeply trapped in a "debt trap." With a massive debt base nearing $40 trillion, the continuous rise in bond yields has significantly increased the Treasury's interest costs on debt issuance, forcing the government into a vicious cycle of borrowing new funds to repay old debts. With political inability to cut spending, and geopolitical conflicts and energy shortages continuing to push up inflation, fiscal deficits will further spiral out of control.

Macleod observes that these major overseas buyers are quietly exiting the US Treasury and European bond markets. Coupled with the emerging pressure to unwind yen carry trades, the US will face a bond maturity refinancing and fiscal funding gap of up to $10 trillion to $11 trillion in the next 12 months. The exhaustion of buyers will force US Treasury yields higher, ultimately compelling the Federal Reserve to resume large-scale money printing to rescue the market, thereby accelerating the depreciation of fiat currency purchasing power.

Considering that overseas investors hold huge positions worth up to $22 trillion in the US stock market, soaring yields will trigger simultaneous large-scale liquidation and selling by both foreign capital and US domestic institutions. Market sentiment will instantly shift from extreme optimism to extreme pessimism. In this process of drying liquidity and valuation reshaping, the S&P 500 index could easily wipe out more than 90% of its value, bringing about the most severe asset price collapse in history.

Macleod concludes that when public confidence in the fiat currency system is completely shaken, the only way out to avoid risk is to exit all credit debt assets and fully switch to physical assets like gold and silver. In the process of the global fiat currency era reaching its endgame, only physical precious metals that do not rely on any government or institutional promises can truly serve to preserve wealth.

Alasdair Macleod: Central banks around the world have been selling fiat currencies to buy gold. They have been cashing in credit, getting rid of these debt obligations, in exchange for real money. I think we are about to see bond yields break out sharply upwards, and we are about to see stocks fall, because the stock market is already very, very expensive relative to US Treasuries. The consequence of this is that the Federal Reserve will have to start the printing presses and print money crazily. At some stage, people will shift from thinking "the risk-free approach is to sell financial assets for cash so I can hold US dollar cash that won't fall," to realizing that "the purchasing power of US dollar cash is also declining," so the only way out is to enter the gold or silver market. Broken down by holder group, the largest holders of US Treasuries are Japanese institutions, not the Japanese government—we are talking about pension funds and insurance companies. They are the largest holders, far more than China, which I think ranks second. This has a strong deflationary effect on the private sector, which can hardly be offset by strong inflation.

Alasdair Macleod: The first thing to understand or recognize is what "credit" is and what "money" is. Credit is essentially anything that involves an "obligation to deliver something." Take stocks as an example: you might be a shareholder of a company. If you are a shareholder, the company's management has an obligation to deliver a stream of earnings to you. Therefore, in this sense, your stock actually represents credit.

Alasdair Macleod: The situation is even worse than that, because in this world of paperless trading, you do not directly own your stock registration; it is all held by central counterparties. Therefore, as far as companies are concerned, their obligations are actually conveyed to you through central counterparties; the central counterparties have an obligation to pass this "credit" (which is the other end of the debt obligation) to you, and they actually hold this obligation from the company. So, you don't really own any physical assets.

Alasdair Macleod: If you have a deposit in a bank, the situation is exactly the same. There are two levels of debt obligations here: first, the bank has an obligation to deliver corresponding value to your deposit account; but at the same time, there is the obligation of the central bank, which provides the fiat currency in which the commercial bank's debt is denominated—for Americans, that is the US dollar. If you think the US dollar is real money, just look at the Federal Reserve's balance sheet to understand.

Narrator: Your safest financial assets may actually depend on whether multiple promises can survive simultaneously. As Alasdair Macleod points out here, stocks and bank deposits are layered claims, not direct ownership, exposing investors to counterparty risks that are rarely discussed. While the market celebrates rising asset prices, it ignores the underlying extending chain of counterparties. Wealth preservation begins by questioning what you truly own, rather than what your account statement shows. Next, Alasdair Macleod will reveal why the Federal Reserve's balance sheet exposes contradictions that most investors have never examined.

Alasdair Macleod: The issuer of currency is the Federal Reserve, not the US Treasury. If you look at the Federal Reserve's balance sheet, you will find that there is indeed a liability, which is "currency in circulation." There is another liability on the Federal Reserve's balance sheet, which is the so-called "bank reserves." These bank reserves are actually money owed to banks, because commercial banks have deposits at the Federal Reserve, and reserves represent these deposits. This is how you trace it back to the source.

Alasdair Macleod: Now, real money—if you trace it back to Roman times—has always been "final settlement." Final settlement means that there are no outstanding debt obligations attached to the other end. It has historically been a form of physical money (usually metal), evolving from bronze to silver and gold, and in modern times, mainly gold is considered real money. This is why global central banks have been selling fiat currencies to buy gold. They have been cashing in credit, getting rid of these debt obligations, in exchange for real money. It is still real money.

Alasdair Macleod: I know that for the past fifty-plus years, the US government has been claiming: "No, we have replaced gold, the US dollar is real money, and everything else is referenced to the US dollar." But actually, they are wrong; they are selling you a lie, and it is incorrect. You must realize that everything you own is essentially built on credit.

Narrator: Central banks continue to accumulate gold while publicly insisting that the status of fiat currency is unshakable. According to Alasdair Macleod, the Federal Reserve issues debt liabilities, not permanent stores of value, which makes gold fundamentally different from modern money. Institutional buying behavior reveals a truth that official propaganda rarely admits. Investors who ignore these actions may be believing in a narrative rather than examining balance sheets. Next, Alasdair Macleod will reveal why central banks' accumulation of gold echoes and contradicts decades of publicly promoted monetary policy.

Alasdair Macleod: As long as the risks associated with those credit debt obligations are relatively small, this is of course fine; but when these risks begin to rise—which is the current situation—you must start considering getting rid of those credit assets and holding real money instead. This is why I have been emphasizing for over a year: leave credit assets and enter real money, which is gold and, to a lesser extent, silver. This is the only defense you truly own.

Alasdair Macleod: Many people think you must diversify, so they allocate 1% or 5% to gold, and then hold other assets like stocks, bonds, real estate, etc. No, if you only have 1% in gold and silver, you are holding 99% in credit debt obligations; you have not truly diversified! The core purpose of getting rid of credit and entering gold is "risk avoidance," but you must see clearly where the risk lies. And this is exactly what we will see clarified in the next two to three months.

Alasdair Macleod: China is doing its best to sell off all US dollars. Now, Japanese institutions, which are by far the largest holders of US debt, are also exiting the market. The US is facing an accumulating debt crisis, and I do not believe that a 10-year US Treasury yield of 5% will stop it. If you ask me if a 10% yield can stop it, I would say I don't know, but I think it cannot.

Narrator: When almost every asset relies on the same credit system, asset diversification becomes an illusion. Alasdair Macleod emphasizes that holding only a tiny amount of gold in a portfolio composed mainly of financial assets still leaves the portfolio extremely exposed to counterparty risk. Foreign demand for US debt is weakening, while refinancing pressures are quietly accumulating. Investors should focus less on the quantity of assets and more on the quality of ownership. Next, Alasdair Macleod will reveal why soaring bond yields could crush traditional diversification strategies.

Alasdair Macleod: Because this is a "debt trap," which is the core of the problem. The trouble with the debt trap is that the higher bond yields rise, the worse the situation becomes for foreign investors and even US domestic institutional investors. The only solution is for the government to cut spending and balance the budget, in fact, even needing to generate a fiscal surplus so that it does not have to raise more funds from the market. But I see no possibility of this—we have a spendthrift president who is directly involved in one war and indirectly in another, which is extremely expensive in terms of ammunition expenditure, military spending, and various other aspects, and has also led to the consequence of high oil prices.

Alasdair Macleod: Another thing is that diesel fuel is running out soon, and this is crucial for all logistics and transportation. Diesel powers trucks, trains, and ships (in the form of marine fuel oil, which is very close to diesel, as diesel is very close to heating oil). So, looking at it from any angle, the situation is not optimistic. I think we are about to see bond yields break out sharply upwards, and we are about to see stocks fall, because the stock market is already very, very expensive relative to US Treasuries. And the consequence of this is that the Federal Reserve will have to start the printing presses and print money crazily.

Narrator: Governments cannot escape the debt trap by continuing to borrow without ultimately undermining confidence in their currency. Alasdair Macleod's view suggests that higher bond yields exacerbate the debt burden rather than restore stability. Despite official claims that the market remains resilient, rising energy costs and expanding deficits constitute compound pressures that policymakers cannot easily reverse. The risks faced by investors extend far beyond simple stock valuations. Next, Alasdair Macleod will dismantle why money printing may become the only politically acceptable escape route.

Alasdair Macleod: Therefore, at some stage, people will shift from thinking "the risk-free approach is to sell financial assets for cash so I can hold US dollar cash that won't fall," to realizing that "the purchasing power of US dollar cash is also declining," so the only way out is to enter the gold or silver market. We have not completely reached that point yet, but I think we are very close.

Host: You mentioned earlier in the conversation that the Bank of Japan urged domestic funds or companies to take on the major task of buying Japanese government bonds; you also mentioned that Japan is by far the largest holder of US Treasuries. Therefore, if they follow suit as the central bank's capacity to absorb Japanese government bonds is exhausted, this is not a good sign for international demand for US Treasuries. I believe this is what you were expressing just now. Do you have any additional comments on the risks this recent statement by the Bank of Japan poses to the US?

Alasdair Macleod: Yes. But actually, it was the Japanese Ministry of Finance, not the Bank of Japan, that made this statement. Yes, I mean, this is something that will have a chain reaction. We have already seen the consequences on French government bonds, because we know that Japanese institutions have been major buyers of French government bonds in recent years. Therefore, they are obviously clearing positions, and as a result, the yields on these French government bonds surged by nearly 0.5% in just the past month.

Narrator: When major creditors quietly change direction, the market usually realizes the danger long after institutions have taken action. This is where Alasdair Macleod's thesis shifts from theory to capital flows, identifying the change in Japanese behavior as an early warning signal. Bond markets often show stress before headlines admit it. Savers relying solely on cash may find that the erosion of purchasing power is much faster than expected. Next, Alasdair Macleod will reveal why foreign selling pressure could reshape US Treasury demand.

Alasdair Macleod: In these bond markets, this degree of volatility is actually a very huge move. So, I think the evidence is here, and this will not stop here; it will spread to other places. Because obviously, a large part of this is "carry trade." Currently, carry traders might feel okay as long as they see the yen weakening, but when they see yen interest rates starting to rise, they must start unwinding and reducing positions.

Alasdair Macleod: But I mean, currently, broken down by holder group, the largest holders of US Treasuries are Japanese institutions, not the Japanese government—we are talking about pension funds and insurance companies. They are the largest holders, far more than China, which I think ranks second (or perhaps now third). China is also selling off US dollars as fast as possible. Therefore, looking ahead one or two months, there is simply no way to see how the US will manage to finance not only its current fiscal deficit but also refinance the bonds coming due. I think we are facing a figure of about $10 trillion to $11 trillion in financing that must be completed in the next 12 months, which is a very, very huge problem, and it is piling up.

Alasdair Macleod: Therefore, I think bond yields will get higher and higher. I mean, speaking of the impact on prices of what is happening in the Gulf region, it will be very significant. As I said earlier, this has a strong deflationary effect on the private sector.

Narrator: The biggest shifts often begin within pension funds, not on TV news. As Alasdair Macleod points out here, Japanese institutions hold huge US Treasury exposures, making their asset allocation orientation more important than the government's official statements. If major overseas buyers continue to reduce participation, refinancing trillions of dollars in debt will become more difficult. This risk will ultimately affect retirement accounts and household wealth. Next, Alasdair Macleod will reveal why US Treasury financing pressures could spread to every financial market.

Alasdair Macleod: ...but this can hardly be offset by strong inflation, because for the government sector, it will be very inflationary—the government will create credit in an attempt to prevent the economy and financial markets from collapsing. So where will this go? This is a huge dilemma and an organic part of the end of the fiat currency era.

Alasdair Macleod: The way you treat fiat currency, or the correct way to view fiat currency, is that it is used by the government to increase its debt obligations while appearing not to disadvantage voters. Voters are taxed at certain rates, and when you exceed this limit, what you do is print the difference, which accumulates continuously, accumulating to the point where the US now has about $40 trillion in its own government debt. The question is, how much further can this go?

Alasdair Macleod: What we are describing now can be said to be a systemic problem facing the largest buyers of government debt (and everyone else), with crazy inflation now coming to an end. The consequences are: first, a plunge in financial markets; second, a plunge in currency value. This is literally the "endgame" of the US dollar as fiat currency, and you can also see how it drags down other fiat currencies simultaneously.

Host: You recently wrote an article that began with: "In the fog of war, truth is the first victim. Gold and silver prices will reflect the uncertainty of outcomes. Governments can delay consequences, but they cannot forever eliminate the arithmetic rules of economics." According to Alasdair Macleod, expanding debt through newly created credit will ultimately put pressure on both financial markets and currency purchasing power. The real danger is not just inflation, but the decline in confidence in the institutions funding the system. Long-term wealth preservation depends on identifying this distinction before market sentiment shifts.

Host: Then in the latter part of the article, you wrote: "Today's market is driven by sentiment rather than fundamentals. This is typical behavior in a credit bubble, where greed triumphs over caution." Can you provide us with an in-depth analysis: Are ordinary retail investors, who listen to the advice of retail financial planners and mainstream financial media to "everything is fine, buy and hold, ride out the downturn, buy the dip," being led into a real "harvesting of leeks" as the situation evolves in the future?

Alasdair Macleod: Yes, the system itself has problems. Stockbrokers can only survive by recommending stocks—not recommending sales, but constantly recommending buys, and they do this day after day. After watching the stock market rise year after year, and even after declines, hitting new highs again, everyone naturally thinks "the stock market will rise forever." This is roughly the current sentiment towards US stocks.

Alasdair Macleod: However, if you observe the relationship between bond market (US Treasury) yields and stocks, this tug-of-war and divergence has reached a severity unprecedented in financial history. In other words, this constitutes an extremely obvious bubble not only in market sentiment but also at the valuation level.

Narrator: Bull markets often appear strongest before confidence silently disintegrates. What Alasdair Macleod emphasizes is that investor optimism has far exceeded the reasonable range that bond market valuations can historically support. Financial incentives encourage people to ignore potential risks and buy blindly, thereby exacerbating dangerous complacency. Investors who only follow sentiment may ignore warning signals already flashing beneath the surface. Next, Alasdair Macleod will reveal why today's valuation gap is comparable to historical extreme market bubbles.

Alasdair Macleod: And this bubble may be larger—possibly larger than the bubble at the end of 1929, although we actually do not have sufficiently complete data to prove this precisely. Therefore, when this bubble bursts, in terms of the stock market, it will be the "ultimate crash of all crashes."

Alasdair Macleod: Where can you go then? I mean, you have to start thinking: what are the consequences of foreign investors selling off US dollars? Because remember, they have investments worth up to $22 trillion in US stocks! Then, US domestic investment institutions will also realize that they must reduce the positions in their own portfolios and those of their clients. This scenario could easily wipe out more than 90% of the value of the S&P 500 index! Easily! Because the market will shift directly from extreme optimism to extreme pessimism, and this is bound to happen. Therefore, it is this valuation relationship that plays the decisive role. If we see bond yields rise further from now on, as I just described, it will completely shatter the stock market. It really will.

Narrator: Extreme optimism has historically been the psychological state for which investors have paid the most expensive price. Alasdair Macleod's view suggests that if rising bond yields force institutions and foreign investors to reduce exposure simultaneously, today's stock valuations will be extremely fragile. During periods of systemic stress, market liquidity disappears much faster than confidence recovers. Protecting purchasing power is far more important than chasing the tail end of speculative rebounds. Next, Alasdair Macleod will reveal the overlooked signal that institutions monitor before major market reversals.

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