Economist Ren Zeping has spoken out repeatedly of late, arguing that US Treasury debt is eroding ordinary people's wealth through a form of "soft default." This kind of default is not an open refusal to pay, but a steady shrinking of the real purchasing power of anyone holding dollar assets or cash through persistent inflation and money-printing - with far-reaching consequences for everyone's wallet.
In his analysis of the US debt storm, Ren has stressed that the core mechanism of this "soft default" is the monetization of debt - diluting obligations by issuing excess currency and making holders of dollars and dollar assets foot the bill. For example, if you lend 100 dollars to the United States at 2 dollars of annual interest, but inflation runs at 5%, the 102 dollars you get back buys fewer goods than what you lent. That is the most hidden aspect of a "soft default": entirely legal from start to finish, yet your wealth silently shrinks.
Rising living costs are another expression of this soft default. The yield on the 30-year US Treasury has broken above 5.2%, and the high-rate environment has pushed up prices worldwide. From imported food to daily necessities, imported inflation triggered by dollar depreciation is being passed into everyday consumption. At the same time, as corporate financing costs rise, less money is left for operations and wage increases - with the result that wage growth may fail to keep pace with prices.
The US Treasury yield is the "anchor" of global asset pricing, and once that anchor is lifted, all kinds of interest rates in daily life rise with it. Analysis by the Yale Budget Lab shows that between 2015 and 2025, federal debt growth added roughly 2,500 US dollars a year to the cost of a typical US home mortgage and about 120 dollars to a typical auto loan. As corporate funding costs climb, companies pass the burden on through higher prices or reduced spending, and ordinary consumers ultimately pay more for goods and services. Higher Treasury yields also lift rates across the whole economy, raising the cost of credit cards, consumer loans and other short-term borrowing.
Facing the steady erosion of this "soft default," ordinary people need to adjust their asset allocation to protect their wealth. Since August, spot gold has approached 4,700 US dollars an ounce and bitcoin has touched 80,000 dollars. Central banks around the world have kept buying gold - China has increased its holdings for 21 consecutive months - and gold now accounts for 27% of global official reserves, overtaking US Treasuries at 22% for the first time. The yuan's central parity rate against the dollar has climbed to a three-and-a-half-year high, and A-share valuations remain low, meaning Chinese assets could become a "safe harbor" for global capital avoiding US debt risk. For ordinary investors, diversifying across gold, different currencies and real assets is a pragmatic strategy against soft default.
