Keep pulling the thread on Felix.
The U.S. fiscal deficit is currently running at 7% of GDP, a level typically seen during a recession.
Felix predicts that other countries will increase their fiscal deficits to levels comparable to the U.S. in response to U.S. tariff policies and increased military spending requirements.
The U.S. Treasury will need to issue approximately $700 billion in Treasury bills after the debt ceiling is raised in August.
The Federal Reserve's reverse repo facility, at approximately $120 billion, is insufficient to absorb the upcoming $700 billion Treasury bill issuance.
Germany is pushing through a $500 billion fiscal spending bill, largely focused on defense and military, in reaction to U.S. tariff policies.
Germany has suspended its "debt brake" rule, which previously limited its fiscal deficit to approximately 0.5% of GDP, to allow for increased government spending.
Felix predicts the U.S. Dollar is entering a major cyclical downturn, with a potential decline of 20% being a reasonable expectation.
The U.S. Treasury, under both Janet Yellen and Scott Besson, has adopted a policy of funding the deficit primarily through short-term T-bills rather than long-term bonds.
The weaponization of the U.S. dollar via sanctions against Russia has made the dollar's global reserve status unsustainable.
The U.S. weaponization of the SWIFT system against Russia triggered a strategic shift among global central bank reserve managers to diversify away from U.S. dollar assets.
Felix believes that fiscal policy has become a more significant driver of markets than monetary policy from central banks like the Federal Reserve.
Felix predicts the U.S. will pivot its trade policy from tariffs towards implementing capital controls designed to discourage foreign ownership of U.S. assets.