Japan made this choice in 1985.

That year, it accepted the appreciation of its currency and lost its export power.

To compensate for the lost growth, it kept the economy afloat for decades with public spending.

The debt we are discussing today accumulated from that.

1985 didn't just take away Japan's production power; it also created its current debt.

Japan's debt is approximately 2.5 times everything it produces in a year. In the US, this ratio is 1.2 times.

There was only one condition for it to be able to carry this debt:

Interest rates had to remain zero.

And that's where the real issue begins.

Zero interest rates made Japan the cheapest source of money in the world.

Funds borrowed from there almost for free and moved that money to a high-yielding market.

The biggest destination became the US.

In other words, the US stopped a competitor in 1985 and subsequently lived off its money.

That's the power of the established system.

The US doesn't need to exert pressure today. If Japan raises interest rates, its budget suffers; if it doesn't, its currency erodes.

Both doors are locked from the inside.

But something is changing.

Japanese money is slowly returning home. Japan is buying bonds domestically, not renewing its foreign bonds as it used to.

In other words, that money is no longer flowing in the same direction.

Moreover, the US is in one of the most intense debt renewal periods in its history, and its largest foreign creditor is not sitting at the table as before.

One of the things that kept the US's cheap borrowing afloat was Japanese money flowing out because it couldn't find yield in its own country.

That era is ending.