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*                       FIEND'S SUPERBEAR MARKET REPORT                     *

*                               February 20, 2026                           *

*                                                                           *

*                       e-mail: fiendbear@fiendbear.com                     *

*                    web address: http://www.fiendbear.com                  *

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Fiend Commentary
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If the Dollar Cracks: What a U.S. Debt Crisis Would Actually Look Like

Most people picture a “dollar crisis” like a movie: ATMs go dark, stores empty, panic in the streets.

That’s not how it would start in the United States.

A U.S. dollar/debt crisis would begin the way modern crises usually begin—quietly, inside markets that most people never watch: Treasury auctions, repo funding, and the currency tape. It would feel less like a lightning strike and more like a slow-moving bank run… except the thing being “run on” is confidence in the government’s IOUs.

What it would look like in real time

1) Treasuries stop behaving like the boring safe asset
In a normal scare, Treasuries rally and yields fall. In a confidence scare, you can get the opposite: bond prices fall and yields rise even as risk assets wobble.

That’s the first real red flag—because it means the world is no longer demanding “safety”… it’s demanding a higher price for lending to the U.S.

2) The dollar falls even as rates rise
A soft dollar can happen for many reasons. But the dangerous version is:

  • The dollar falls and
  • Treasury yields rise
    at the same time.

That combination signals foreign buyers aren’t just hedging—they’re stepping away or demanding much better terms.

3) Treasury auctions start feeling “sticky”
You don’t need a failed auction to have a crisis. You just need a series of auctions that:

  • clear at noticeably higher yields,
  • show weak demand,
  • or leave dealers holding unusually large supply.

In plain English: the government still sells the debt… it just has to pay more and more to do it.

4) Funding markets get twitchy
Repo is the plumbing. When repo gets stressed, everything gets stressed.

Warning signs would include sudden spikes in short-term funding costs, heavier reliance on central bank backstops, and “sudden” liquidity problems at institutions that were supposedly fine last week.

5) Gold keeps rising even on down days
Gold isn’t just an inflation hedge. In a credibility episode, it becomes a trust gauge.
When confidence weakens, gold tends to stay bid—even when other assets are struggling.

What happens to stocks, bonds, and metals

Treasuries / bonds

  • The front end may rally if markets smell recession.
  • But the long end can sell off if investors demand a higher “credibility premium.”
  • The yield curve can steepen for the wrong reasons: not “growth returning,” but “confidence fading.”

Stocks
A dollar/debt crisis is not bullish for stocks, even if the Dow prints impressive numbers along the way.

The usual path looks like this:

  • First: stocks wobble but try to ignore it (“it’s just another headline”).
  • Then: valuations compress as the risk-free rate and/or term premium rise.
  • Finally: earnings get hit when tighter financial conditions roll into the real economy.

In short: the stock market can’t levitate forever if the cost of capital is rising.

Gold and silver
Metals can do two things in a credibility shock:

  • In the initial “sell everything for cash” phase, metals can drop hard (liquidity event).
  • After that, they often rebound strongly as the market shifts from “raise cash” to “preserve purchasing power.”

So sharp drops don’t disprove a bull move in metals. They’re often the price of admission.

Credit markets
This is where the real damage spreads:

  • wider credit spreads,
  • refinancing stress,
  • and eventually defaults in the weakest corners.

If credit cracks, the economy follows.

Real estate
Real estate rarely crashes on headlines alone—it freezes. Transactions dry up, spreads widen between asking prices and bids, and the market becomes illiquid. That’s a slow-motion recession signal.

What would the Fed do?

This is the crux: the Fed’s first job in a genuine crisis is not “stimulus.” It’s market functioning.

If the Treasury market starts to seize, the Fed’s playbook is likely to look like:

  • aggressive repo operations and liquidity support,
  • large-scale purchases designed to restore orderly trading (even if they avoid calling it QE),
  • dollar swap lines / international coordination if the stress is global.

The nightmare scenario is when the Fed has to choose between:

  • defending the currency and inflation credibility, or
  • defending market stability.

If inflation is still sticky while the dollar is sliding, the Fed’s room to maneuver shrinks fast. That’s how a credibility episode can turn into a policy trap.

The aftermath: two paths

Path A: credibility restored
This requires some combination of:

  • fiscal seriousness (spending and revenue choices that look sustainable), and
  • policy clarity (the central bank re-anchors expectations).

It’s painful, but it’s stabilizing.

Path B: financial repression
This is the more politically convenient path:

  • keep rates “managed,”
  • accept higher inflation as a release valve,
  • and gradually pay down the debt in weakened dollars.

It doesn’t look like collapse. It looks like a long grind where real purchasing power erodes.

Bottom line

A U.S. dollar/debt crisis wouldn’t begin with a bang. It would begin when markets stop treating Treasuries as unquestionably “risk-free,” and start treating them the way they treat everything else: as a trade that requires compensation.

If you want the early warning system, don’t watch pundits. Watch:

  • the long bond,
  • the dollar,
  • Treasury auction tone, and
  • whether gold stays bid even when it “shouldn’t.”

That’s where confidence shows up first—and where it disappears first.

 

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