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đŸ’„5 Things That Break With Rising RatesđŸ’„
The Fed being aggressive AF - what could break with interest rates skyrocketing?
October 03, 2022
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Dear Bankless Nation,

When COVID-19 hit, the Fed courageously dove into the thick of the US Treasury market and committed to buying over $1 trillion in Treasury bonds.

The plan was simple: keep rates low, print money, and stimulate the economy.

A global pandemic and a recession mashed together into one mutant blackswan event would have just been too much for the markets to bear.

Thankfully, the stimulus went as planned.

  • Treasury interest rates hit record lows at near zero

  • Global markets quickly rallied as fears of recession evaporated overnight

  • Crypto markets mooned

  • The Payroll Protection Program (PPP) reduced a spiking unemployment rate

  • We developed cures and vaccines to Covid

We did it!!!

Right?

Well
 not exactly.

Expansionary monetary policy allowed inflation to hit a 40-year-high of 8%. In response, the Fed is now scrambling to combat inflation by aggressively reversing course and raising interest rates.

But, policy doesn’t always work as intended, and things may break.

Here are the 5 things that could break if the Fed continues on its course:

  1. Inflation (in a kinda positive way)

  2. Housing Markets

  3. Financial Institution Solvency

  4. Sovereign Debt and Forex Markets

  5. Private Credit Markets

1. Inflation

Why is the Fed raising interest rates in the first place?

To fight inflation.

The Fed’s unlimited bid on the US Treasury market during COVID-19 – and to a lesser extent, US Mortgage Backed Securities (MBS) markets – increased the size of its balance sheet from $4.24 trillion to $8.96 trillion.

That is an increase of$4.72 trillion, or111%.

Where did all of that money come from?

Essentially, from thin air.

The Fed repurchased Treasuries and MBS throughOpen Market Operations, which is a fancy monetary policy term for buying and selling Treasuries and MBS.

When conducting such an operation, the Fed credits or debits a bank’s reserve accounts at the Federal Reserve. There is no need for the Treasury Department to create or destroy any money. A simple ledger adjustment at the Fed can simply create trillions of brand new dollars.

Stimulating the economy to drag ourselves from the depths of Covid requiredQuantitative Easing(QE), meaning the Fed purchased Treasuries and MBS – hence the balance sheet expansion.

And wouldn’t you know it, creating new dollars caused inflation!

Can you recall how else we created new dollars during Covid?

That’s right! Those sweet, sweet stimmies and those fatty PPP loans, which evolved into PPP grants and never had to be repaid.

Central banks claimed that inflation was only transitory. But in December 2021, people finally came to terms with the fact that the mighty United States of America is not immune to basic economic principlesafter the CPI reported its biggest annual increase in 40 years.

The Fed, however, continued to expand its balance sheet until the middle of April, at which point they became net sellers of Treasuries and MBS.

Further, the Fed failed to raise interest rates until the middle of March, despite knowing inflation would be stickier than expected afull three and a half months prior!

Raising interest rates increases the opportunity cost of money.

As cost increases, investors are less willing to pay high prices.

Increasing opportunity cost delays consumption.

As we can see in the chart below, the month-to-month change in inflation has been decreasing as of late, therefore, rate increases = successful!

We broke inflation! Probably
 Maybe?

So I guess this is a positive break. However, raising rates to reduce inflation comes at the risk ofdeflationand while inflation is not desirable, deflation is even less so, as it may create the spiral of a weakening economy.

Put elegantly by Elon:

2. Housing Markets

US home prices have been on an absolute tear since the end of the pandemic.

Over the past two years, the median home sales price has risen by 36.5%, fueled by historically low interest rates on mortgages.

In January 2021, you could take out a 30-year mortgage at 2.65%.

Today, it’s 6.70%. đŸ˜±

To examine the impact of mortgage rates on the purchasing power of consumers, let's take a hypothetical buyer, looking to put 20% down on a 30-year, fully amortizing mortgage, with a budget of $1M.

The low rate scenario uses our record low interest rate mark of 2.65%, while the high interest rate of 6.70% is the current rate offered on 30-year fixed mortgages.

The monthly payment for this hypothetical buyer in today’s high rate interest environment is $1,939 (or over 60%) greater than had they purchased the home in January, 2021.

It’s 60% more expensive to buy a home today than less than 2 years ago!

Unless you can increase your annual income by 60%, if interest rates continue to rise, buyers will be able to afford less, and home values will have to decrease (which they already have).

Initially, decreasing home prices will only impact those who purchased homes and took out high interest loans in 2022 on overvalued real estate, however,a potential housing bubble could cause cascading foreclosures, much the same as a falling token price can cause cascading liquidations.

3. Pension Funds

When rates rise, discount rates increase and the market value of existing assets decline.

Thanks to their known cash flows, fixed income instruments (bonds) are extremely easy to price, given the bond’s yield and future cash flow timing. Many large financial institutions also love fixed income securities, as it provides a known cash flow, enabling them to match assets with obligations.

For a pension, bonds provide known cash flows to match with fairly certain liabilities payments to retirees. While pensions generate income and returns through a variety of investments of varying risk profiles, a primary income generation tool is sovereign bonds, especially those originating from the country in which the pension operates.

British pensions funds have been absolutely shellacked by rising interest rates, aftertax cut plans announced by UK’s new Prime Minister Liz Truss gave rise to investor fearover Britain’s ability to service national debt.

From peak to trough, the tax cut announcement wiped out 10% of the value of British 10-Year Gilt (the UK equivalent of US Treasuries). This rapid drawdown in the market value of assets placed enormous strain on UK pensions’ solvency, and required the BOE to step into the fray, supporting the Gilt via QE (printing money).

If the Fed continues to raise rates, markets will demand higher yields on foreign paper, placing the solvency of holders (i.e. pensions) at risk!

4. Sovereign Debt and Forex Markets

In point #3, we discussed how the BOE was forced to commence QE to defend yields on the Gilt and prevent pension fund insolvency.

How did they do this?

By turning on the money printer, much like the Fed did to support US Treasury yields in the depths of Covid!

But doesn't QE and money printing just increase inflation?

And isn’t inflation what we started raising rates to fight against?

Yes. But hey
 the boomers can’t lose their retirement accounts.

It is fairly clear to see the inflationary shocks in the British Pound from the chart below:

While extremely rapid QE measures stabilized Gilts, the result was the value of the Pound temporarily falling off a cliff against the dollar.

Protection of British interest rates came at the cost of a devalued Pound!

Britain is not the only major economy affected by Fed rate increases.

The Bank of Japan (BOJ) has conformed to a policy of yield curve control for decades, the first major central bank to do so since 2016.

Rising rates in the US make Treasuries and Dollars attractive investments, causing upwards pressure on Japanese yields. To combat this pressure, the BOJ has resorted to
 you guessed it
 QE!

But the BOJ has reached the limits of QE.

The BOJ has imposed exchange rate limits of less than 145 Yen to 1 USD and a targeted yield of 25 bps on their 10-Year bonds.

Currently the Yen to Dollar exchange rate is 144.68 to 1, with 10-Year bonds yielding 24 bps!

The BOJ may soon have to choose between further devaluing the Yen or losing control of the yield curve. Such a change in monetary policy may be seen by markets as a sign of looming disaster, further hammering the Yen and rocketing Japanese yields.

5. Private Credit Markets

If the US Government is forced to pay more in interest when yields increase, I can assure you that private corporations experience the same effects.

Corporate bonds help to finance a wide range of publicly traded and private companies. MicroStrategy has used its debt issuances to finance purchases of Bitcoin while Boeing uses bonds to finance the development of new manufacturing plants in South Carolina. Real estate developers, such as Greystar, may opt to finance developments of apartments using bank loans, instead of issuing bonds.

You get the idea.

Regardless of how the company structures financing, there will be some form of interest rate attached to the note.

These notes are often interest only, or mature before being fully paid down.

New debt must be taken on to repay maturing notes.

Rising interest rates make new debt more expensive for borrowers. Low interest rates allowed for borrowers to finance projects that would be considered unfeasible in today’s high interest rate environment. When it comes time to rollover outstanding debts on unfeasible projects, corporations will resort to selling, as their cash flows from the purchase asset may no longer cover interest obligations.

High quality, two year corporate bonds yielded0.47% in August, 2020.

In August 2022, they yield3.81%, an increase of 711%.🚀

Payments on interest-only notes rolled over last month increased by seven times! While proformas often provide some amount of slack for changes in interest rates, an payment increase of that magnitude may force asset sales.

A Difficult Decision

Multiple pressure points exist in the global financial system, and with each Fed rate hike pushing us closer to the edge of the recession cliff, it may only be a matter of time until we see a true crisis, potentially caused by one of the five factors listed above.

The Fed faces a difficult decision: continue to raise interest rates, potentially destabilizing US allies attempting to stimulate and maintain low interest rates, or devalue the Dollar and exacerbate inflationary pressures in the US.

Jerome Powell and the FOMC are walking the knife’s edge.

A singular misstep and


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Dubai regulator VARA classifies RWA issuance as licensed activity
Virtual Asset Regulatory Authority (VARA) leads global regulatory framework - makes RWA issuance licensed activity in Dubai.

Real-world assets (RWAs) issuance is now licensed activity in Dubai.

~ Actual law.
~ Not a legal gray zone.
~ Not a whitepaper fantasy.

RWA issuance and listing on secondary markets is defined under binding crypto regulation.

It’s execution by Dubai.

Irina Heaver explained:

“RWA issuance is no longer theoretical. It’s now a regulatory reality.”

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- RWAs are classified as Asset-Referenced Virtual Assets (ARVAs)

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No more tokenization without venues.
No more assets without liquidity.

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Creating enforceable frameworks for RWA tokenization that actually work.

Matthew White, CEO of VARA, said it perfectly:

“Tokenization will redefine global finance in 2025.”

He’s not exaggerating.

$500B+ market predicted next year.

And the UAE just gave it legal rails.

~Real estate.
~Private credit.
~Shariah-compliant products.

Everything is in play.

This is how you turn hype into infrastructure.

What Dubai is doing now is 3 years ahead of everyone else.

Founders, investors, ecosystem builders:

You want to build real-world assets onchain.

Don’t waste another year waiting for clarity.

Come to Dubai.

It’s already here.

 

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🎬Proof the Deep State Planned This War for Years🎬
Nation First outlines how the Israeli attack on Iran was planned by the Deep State and the Military Industrial Complex over 15 years ago.

Prepare to have your mind blown

~NamastĂ© 🙏 Crypto Michael ⚡ The Dinarian

Dear friend,

What just happened in Iran wasn’t a surprise attack. It wasn’t a last-minute decision. It wasn’t even Israel acting alone.

It was a war plan written years ago — by men in suits, sitting in think tanks in Washington and New York. And yesterday, that plan was finally put into action.

Here’s the truth they don’t want you to know: this war was cooked up long before Trump ever became President — and it was designed to happen exactly this way.

Let’s start with what just happened.

Israel launched a massive, unexpected strike on Iran. They hit nuclear facilities. They killed military generals. They struck deep inside Iranian territory — and now the whole region is on edge, ready to explode into full-blown war.

The media is acting shocked. But I’m not. You shouldn’t be either.

Why?

Because we have the documents. They told us this was coming. Years ago.

Exhibit A: The Brookings Institution.

The Brooking Institution is a fancy name for what’s basically a war-planning factory dressed up as a research centre. Back in 2009, Brookings published a report called Which Path to Persia?

It laid out exactly how to get the U.S. into a war with Iran — without looking like the bad guy.

Here’s the sickest part:

“The United States would encourage — and perhaps even assist — the Israelis in conducting the strikes
 in the expectation that both international criticism and Iranian retaliation would be deflected away from the United States and onto Israel.”

Let that sink in.

They literally suggested using Israel to start the war, so America could stand back and say, “Wasn’t us!”

They even titled a chapter of this report: “Leave It to Bibi” — naming Netanyahu as the guy to light the match.

Exhibit B: The Council on Foreign Relations (CFR).

The Council on Foreign Relations is an another Deep State operation. Also in 2009, CFR published a “contingency memo” that laid out the whole military plan for an Israeli strike on Iran — step by step.

  • What routes the jets would fly (over Jordan and Iraq).

  • What bombs they’d use (the biggest bunker-busters in the U.S. arsenal).

  • Which Iranian sites to hit (Natanz, Arak, Esfahan).

  • And how Iran might respond (missiles, drones, threats to U.S. bases).

It’s like they had a time machine. Because those exact strikes just happened following the routes, likely using the bombs and hitting the sites that the CFR outlined.

Exhibit C: The Plot to Attack Iran by Dan Kovalik.

This one really blows the lid off.

US human rights lawyer and journalist Dan Kovalik, in his book The Plot to Attack Iran: How the CIA and the Deep State Have Conspired to Vilify Iran, shows how the CIA and Israel’s Mossad have been working together for decades — not just watching Iran, but actively sabotaging it. Killing scientists. Running cyberattacks. Feeding lies to the media to make Iran look like it’s always “six months away” from building a nuke.

He even reveals how they discussed false flag attacks — faking an Iranian strike to justify going to war. That’s not a conspiracy theory. That’s documented strategy.

And here’s where President Trump comes in.

Unlike the warmongers who wrote these plans, Trump wasn’t looking to bomb Iran. He wanted to talk. Negotiate. Make a deal — like he did with North Korea.

In fact, peace talks with Iran were just days away.

But someone didn’t want peace. Someone wanted war.

So Israel went in — just like the Brookings script said — and lit the fuse.

Trump didn’t authorise it. He didn’t want it. But they gazumped him. They went around him. And now, the peace he was trying to build has been blown to bits.

This was never about Iran being a threat. It was about keeping the war machine fed.

Think tanks, defence contractors, foreign lobbies — they don’t profit from peace. They thrive on tension. On fear. On war.

And now, thanks to them, the world’s one step closer to the edge.

If you’ve never trusted the mainstream media, you’re right not to.

If you’ve ever suspected there’s a shadowy agenda behind every war, you’re not paranoid.

You’re paying attention.

Because the documents are real. The war was planned. And the bombs are falling — right on schedule.

Pray for Iran’s civilians.

Pray for the Israelis caught in the crossfire.

Pray for a President who still wants peace.

And pray that we wake up before it’s too late.

Because the war has started.

But the truth has just begun to spread.

Until next time, God bless you, your family and nation.

Take care,

George Christensen

Source:

George Christensen is a former Australian politician, a Christian, freedom lover, conservative, blogger, podcaster, journalist and theologian. He has been feted by the Epoch Times as a “champion of human rights” and his writings have been praised by Infowars’ Alex Jones as “excellent and informative”.

George believes Nation First will be an essential part of the ongoing fight for freedom:

“The time is now for every proud patriot to step to the fore and fight for our freedom, sovereignty and way of life. Information is a key tool in any battle and the Nation First newsletter will be a valuable tool in the battle for the future of the West.”

— George Christensen.

Find more about George at his www.georgechristensen.com.au website.

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The Possible Impact Of USDC On The XRP Ledger And RLUSD
Key Points
  • It seems likely that USDC on the XRP Ledger (XRPL) boosts liquidity, benefiting XRP, though some see it as competition for RLUSD.
  • Research suggests both stablecoins can coexist, enhancing the XRPL ecosystem.
  • The evidence leans toward increased network activity being good for XRP, despite potential competition.

The recent launch of USDC on the XRP Ledger has sparked discussions about its impact on the ecosystem, particularly in relation to RLUSD, Ripple's own stablecoin. This response explores whether this development is more about competition for RLUSD or if it enhances liquidity on the XRPL, ultimately benefiting XRP.
 

Impact on Liquidity and XRP

The introduction of USDC, a major stablecoin with a $61 billion market cap, likely increases liquidity on the XRPL by attracting more users, developers, and institutions. This boost can enhance DeFi applications and enterprise payments, potentially driving demand for XRP, the native token used for transaction fees. While some may view it as competition for RLUSD, the overall effect seems positive for the XRPL's growth.
 

Competition vs. Coexistence with RLUSD

USDC and RLUSD cater to different needs: USDC appeals to those valuing regulatory compliance, while RLUSD, backed by Ripple, may attract users preferring ecosystem integration. Research suggests both can coexist, increasing options and fostering innovation, rather than purely competing.
 

Detailed Analysis of USDC on XRPL and Its Implications

The integration of USDC on the XRP Ledger (XRPL), announced on June 12, 2025, by Circle, has significant implications for the ecosystem, particularly in relation to RLUSD, Ripple's stablecoin launched in 2024. This section provides a comprehensive analysis, exploring whether this development is more about competition for RLUSD or if it enhances liquidity on the XRPL, ultimately benefiting XRP.
 

Understanding RLUSD and Its Role

RLUSD, Ripple's stablecoin, received approval from the New York Department of Financial Services (NYDFS) in 2024 and is designed to be fully backed by cash and cash equivalents, ensuring stability. It is available on both the Ethereum and XRP Ledger blockchains, aiming to enhance liquidity, reduce volatility, and serve cross-border payments. With a current market cap of $413 million, RLUSD is smaller than USDC's $61 billion but has regulatory credibility, particularly appealing to institutions.
 

Impact of USDC on the XRPL

The launch of USDC on the XRPL is a significant development, given its status as the second-largest stablecoin by market cap.
 
Key impacts include:
  • Liquidity Boost: USDC's integration can attract more users, developers, and institutions, increasing overall liquidity. This is crucial for DeFi applications, as Circle's announcement emphasizes its use in liquidity provisioning for token pairs and FX flows.
  • Increased Utility: USDC enhances the XRPL's utility for enterprise payments, financial infrastructure, and DeFi, potentially making it more attractive for global money movement and transparent settlements.
  • Regulatory and Institutional Appeal: As a regulated stablecoin issued by Circle, USDC can bring institutional users to the XRPL, aligning with Ripple's goals for regulated financial activities.
  • Network Growth: Supporting a widely recognized stablecoin like USDC on 22 blockchains, including the XRPL, increases the network's visibility and adoption, potentially driving more activity.

Competition vs. Complementarity with RLUSD

While USDC's launch could be seen as competition for RLUSD, the evidence suggests a more nuanced relationship:
  • Competition: Both are stablecoins on the XRPL, and USDC's larger market presence ($61 billion vs. RLUSD's $413 million) might attract users and developers away from RLUSD. However, competition can drive innovation, such as lower fees or better services, benefiting the ecosystem
  • Complementarity: Different stablecoins cater to different needs. USDC appeals to users valuing regulatory compliance and widespread adoption across multiple blockchains, while RLUSD, backed by Ripple, may attract those preferring ecosystem integration and regulatory approval from NYDFS. The XRPL can benefit from having multiple options, increasing liquidity and fostering a diverse ecosystem.
  • Coexistence Benefits: Research suggests that having multiple stablecoins enhances liquidity and provides users with more choices, potentially leading to higher network activity. For example, institutions might use USDC for global payments and RLUSD for specific XRPL-integrated applications, creating a symbiotic relationships.

Impact on XRP

The introduction of USDC, alongside RLUSD, is likely beneficial for XRP, the native token of the XRPL, for several reasons:
  • Increased Liquidity and Activity: Higher liquidity on the XRPL, driven by both stablecoins, can increase transaction volumes. XRP is used for transaction fees, with some fees burned, potentially reducing supply over time and increasing demand.
  • DeFi and Enterprise Use Cases: Both USDC and RLUSD enhance DeFi and enterprise applications, such as liquidity pools and cross-border payments, which can drive demand for XRP as a settlement token.
  • Network Growth: A more liquid and active XRPL is more attractive to developers and users, potentially leading to long-term growth for XRP, as increased utility can drive its value.
Expert analyses, such as those from u.today and ledgerinsights.com, suggest the launch is a "massive boost" for liquidity and adoption, with RLUSD also playing a significant role.
 

Comparative Analysis: USDC vs. RLUSD

To further illustrate, consider the following table comparing key attributes:
 
Given the evidence, it is more accurate to view the introduction of USDC on the XRPL as beneficial for liquidity, which is ultimately good for XRP, rather than solely as competition for RLUSD. The XRPL benefits from increased options, with both stablecoins enhancing liquidity, utility, and network growth. While some competition exists, the overall impact is positive, fostering a robust ecosystem that can drive demand for XRP. This conclusion aligns with expert analyses and community discussions, acknowledging the complexity of the stablecoin market within the XRPL.
 

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