U.S. bonds hit "the worst bear market in a century," "Dr. Doom" Peter Schiff: The real crisis is just beginning.

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U.S. Treasury bonds are experiencing the longest bear market in history, and renowned pessimistic economist Peter Schiff warns that the severity and scope of this crisis far exceed the 2008 financial crisis. The systemic restructuring of sovereign debt is threatening the dollar's status as the reserve currency.

According to market data, the U.S. Treasury Total Return Index has been in a drawdown for 69 consecutive months, setting the longest record since the century-old data began. The peak decline reached 18%, and it is still down about 6% from the 2020 low. The ETF TLT, which tracks U.S. Treasuries over 20 years, has dropped more than 40% since its high in April 2020. In his latest podcast, Peter Schiff bluntly stated that the long-term bull market in bonds ended in 2020, and we are now at the starting point of a new bear cycle characterized by "significant interest rate increases."

Peter Schiff believes that as foreign investors lose confidence in U.S. credit and sovereign debt pressures spread globally, the dollar’s reserve currency status is facing a fundamental threat. He points out that gold, not the dollar, will be the ultimate safe haven in this crisis, and warns that once the dollar loses its reserve status, the entire U.S. economic model—which depends on huge trade and fiscal deficits—will be unsustainable.

A Century’s Worst: U.S. Treasury Bear Market Breaks Historical Records

The U.S. Treasury Total Return Index has been in a downward drawdown zone for 69 consecutive months, far exceeding the previous record of about 30 months that ended in 2019—the latter was already a historical extreme. In over a century of recorded data, this kind of drawdown exceeding 20 months has only occurred three times, and the current cycle is one of them.

In terms of magnitude, the index saw a maximum drop of 18% between 2020 and 2022; though it rebounded somewhat afterward, it remains down about 6% from 2020 to date. Long-term bond pressure is even more prominent: TLT has plummeted 40% from its April 2020 peak, offering the most intuitive market illustration of this bear market.

Peter Schiff examines the current situation from a longer historical cycle. He points out that in 1981, the U.S. 10-year Treasury yield exceeded 15%, and this kicked off a nearly 40-year bond bull market, with yields consistently trending downward until they hit a historic low below 1% during the COVID pandemic in 2020. "That was the bottom," he says, "We are now in a big bear market for bonds, and rates will rise sharply."

Sovereign Debt: This Time Is Completely Different From 2008

Peter Schiff emphasizes that the nature of this crisis is fundamentally different from 2008. The core of the 2008 crisis was private credit—whether subprime borrowers could repay mortgages. But this time, the main player is sovereign credit, affecting the balance sheets of governments worldwide.

"This is the fiscal reckoning finally being settled, not just in the U.S., but globally, especially in Japan," he says. In his view, the larger the debt, the higher the credit risk of governments as borrowers, and the higher the market demands for interest rates. The biggest substantive risk: heavily indebted governments tend not to raise taxes to repay debt but to run the printing press, repaying via inflation.

He cites Japan as a typical example. The Bank of Japan once tried to cap the 10-year government bond yield below 0.5%, and Peter Schiff says he publicly predicted the "defending the line" would inevitably fail. In his eyes, Japan's fiscal crisis is a preview and microcosm of the global sovereign debt crisis.

Dollar Reserve Status: Losing It Means "The Tower Collapses"

Peter Schiff defines the dollar's reserve currency status as the core pillar of the current U.S. economic model. He argues that this very status lets the U.S. maintain trillion-dollar trade deficits and fiscal deficits for a long time, supporting an economy dominated by services.

"Once this status is lost, the whole structure built upon it will collapse," he says. "We can no longer maintain trillion-dollar trade deficits, trillion-dollar fiscal deficits, or the services-dominated economy—pull out that keystone, and everything comes crashing down."

He believes that when that happens, the Fed and the Trump administration will only be able to do one thing: run the printing press, ramp up fiscal spending, and create more inflation. This will further erode the dollar's value, forming a vicious cycle.

Gold Hedge: The Market Has Not Yet Understood the Signal

On asset allocation, Peter Schiff states clearly that the trend of foreign investors reducing their holdings of Treasuries is bearish for the dollar and bullish for gold. He urges investors to "switch to gold as soon as possible," and expresses confusion about gold's pullback under these circumstances—which he believes shows that traders have not truly comprehended the far-reaching significance of the current situation.

"If you’re going to sell bonds, what are you going to buy?" he rhetorically asks. In his logic, when sovereign credit is questioned and fiat currencies face depreciation pressure, gold is the only reasonable store of value, while the dollar and Treasuries are both under pressure.

Risk Warning and DisclaimerThe market carries risks, and investments require caution. This article does not constitute personal investment advice and does not take into account individual users' unique investment goals, financial situation, or needs. Users should consider whether any opinion, viewpoint, or conclusion in this article suits their own circumstances. Invest at your own risk. ```