That second one is huge @Scoonie - the worlds largest resources company partially settling in Yuan to the worlds largest steel maker. This is further hard evidence the the US reserve dollar system is in the decline and honestly, from a high view point, quite rapidly. Now if Rio Tinto and others want to be competitive they will have no choice but to strike up a similar deal with China. Will history reflect back on Trump's isolationism as the cause or catalyst of the US reserve dollar decline? Either way it's happening. US bond yields will go up. The cost of US debt goes up, all pushing the US further to the edge of monetary catastrophe. The big one is coming no doubt and we will almost certainly see it in our life times. It makes total sense that gold should run so hard and yes bitcoin as well.

I don't think it is hyperbolic when the author writes:

The BHP-RMB deal is the most geopolitically charged trade settlement since the petrodollar era began. It is a financial fault line disguised as a “commercial negotiation.”

The other thing I would just add is it's not so much wake up Australia but wake up world. BHP is just reading the tea leaves and realising it makes commercial sense to settle in Yuan rather than US dollars.

Good luck everyone!

Thanks for sharing @Scoonie and I agree @Shapeshifter

This will take a long time to play out, and it will be via lots of seemingly small and incremental shifts that precipitates any structural change.

But yeah, the US and it's monetary hegemony certainly feels on the wane. Short of an AI and robotics revolution, that is, which perhaps isn't a negligible chance..?

I have no idea, other than the view that the status quo is not sustainable without a huge (and probably painful) course correction.

Interesting times.

Totally on board with all the comments on this post.

For me, it is as simple as asking what all of this means for the USA debt. Short answer: nothing good, and that is where the wheels will come off.

As has been mentioned, less settlements in USD means less demand for USD which, in turn, leads to less demand for USD debt. Less demand for USD debt means yields (interest rates) must rise to attract bidders, causing existing bond prices to fall. This means the total debt goes up and up until it just can't anymore. Of course, the money printers will continue to run to refinance the debt, but that just washes through with higher interest rates, leaving those without assets behind, and that wheel also can't continue forever... When all that happens, it will be very big and ugly for the globe, not just America.

When you add the growing inequality issues and displacement from AI and autonomous vehicles that are coming (we can debate the % impact and timeline, but it won't be 50 years or zero %), it is not a pretty picture. Sadly and ironically, those with assets will see an impact, but those without assets will be massively hit.

And what are our leaders doing? Well, thinking about superannuation, which won't move the dial on our debt situation... We need structural change but that won't happen!

So what am I doing about it? Well, given this could all take 20/30 years to play out, who knows, nothing specific really. I will keep holding and DCA'ing into Bitcoin and the funds that I believe are likely to do well as the financial system and broader economy continue to transition into the brave new world... well, do well until the abovementioned wheels come off.

Some good reads, @Scoonie

We are definitely at some sort of inflection point of western political economy. It does feel as though change is in the air, although this stuff will take 10 years to play out.

It's ironic that "China is gutting western automakers" and yet Germany opposed EU anti-dumping tariffs on Chinese EVs.

Milton Freidman has a quote which goes something like "only in crisis is a problem solved, and the solution will be found in whatever ideas happen to be lying around at the time".

I’m edging closer to retirement and as such am getting ever more nervous about sequencing risk. The traditional approach is to move a higher percentage of volatile assets Stocks) to non-volatile ones (cash and bonds).

As western governments get further and further into debt their ability to service this debt gets harder and harder until there is a bond market revolt. As other people have noted, this may happen tomorrow or in 20 years, but it’s not inconceivable that a large stock market correction will be the catalyst and that is potentially coming up soon.

My current thoughts are to use Australian Inflation linked bonds, Lazards infrastructure fund and some cash to mitigate this risk. Plus a small holding of BTC. Gold, seems too expensive currently but I totally understand the rationale.

Other options in the mix include Australian bank bond funds. We are lucky to have a very stable banking regulatory framework. Quality ETFs?

Does anyone else have any thoughts on how to position oneself for imminent retirement with the risk of a major correction getting bigger all the time?

from the economist

perhaps the biggest headache for any investor is that no asset offers complete safety. Inflation gnaws away at cash; gold might offer protection but its price has soared so high that it feels less like insurance than chasing a hot trade. Rich-world government bonds are supposed to be havens, and have historically done better than cash at outpacing consumer prices. Just now, though, plenty of governments are borrowing so much that it is worryingly easy to imagine them letting the money-printers whir and inflating away their debt.

These are the sorts of worries that might lead you to inflation-linked bonds (or “linkers”), which offer payments that rise along with consumer prices. Linkers were first issued by the Commonwealth of Massachusetts in 1780, during the American revolution, when they were pegged to a basket of goods featuring corn, wool and leather. They were then used to pay soldiers made mutinous in part by their paper money losing value. They are now issued by governments around the world, pegged to official inflation indices. Pension funds and insurers, with liabilities that often rise in line with these, are keen buyers. And for individual investors, linkers guarantee a future income stream with fixed purchasing power—useful for, say, planning a retirement. Though no asset is truly safe, these bonds come close.

How, then, would they fare if a debt-laden government let inflation rip? That scenario, as our special report argues this week, is more likely than often appreciated. One answer is that this is exactly the risk linkers exist to mitigate. A government that sells them, after all, cannot later stiff buyers by debasing its currency. The safety-valve has slammed shut, since the nominal value of the linkers, unlike that of other bonds, would rise with consumer prices. Take Britain, where linkers make up a quarter of the national debt. An inflationary default, by trashing the rest, would raise this quarter-share, spurring demand for new bonds to be similarly protected. The debt burden would be eased, but only up to a point.

Linker-holders should consider three other potential outcomes. One is that central banks buy their bonds, wrenching the safety-valve open, since in public hands they could be devalued. This is only imaginable in a world where central bankers have lost independence or shelved their inflation targets: it would amount to a public bet on runaway prices, and there are few worse signals they could send.

Britain’s share of inflation-linked debt is too low to warrant such a drastic measure; those of other rich countries are lower still (only 7% of American Treasuries are linkers, for example). Hence the second, more likely outcome is that linkers are left on the market and function as intended, preserving their owners’ purchasing power even as that of bog-standard bondholders falls. This is a cheery scenario if you are one such owner.

At the same time, the consequences would show how much of a migraine even the safest asset can induce. Analogously to normal bonds, the real yields promised by inflation-linked ones move inversely to prices. So they fall as demand rises, which it surely would if inflation was eating the value of other debt and linkers were protected. Retirees and insurers who had locked in the income streams they needed at previous prices would sit pretty. Yet those still saving to buy bonds to guarantee their liabilities would see that goal recede, as lower real yields raised the amount they needed to generate the same income.

The situation would partially mirror the years of near-zero (or negative) interest rates—but with the addition of unstable inflation threatening growth, employment and other asset prices. As savers struggled, even existing linker-holders sitting on windfall gains would face difficult choices. Once they had booked their gains, they would either need to commit to years of low real returns, or sell and take their chances in markets destabilised by a new, much more volatile economic regime.

In the third and most concerning potential outcome for linker-holders, the question of safety never really goes away. When developing countries restructure debts, foreign investors are loth to take losses from which local ones are exempt. Whatever their agreed terms, would investors in linkers fare any better if all other bondholders were being rinsed and lobbying furiously for the pain to be shared? It would depend on how politicians balanced immediate unpopularity with the long-term public interest. Nothing to worry about, then

And from the head of the IMF:

You’ve been given free access to this article from The Economist as a gift. You can open the link five times within seven days. After that it will expire.

Gita Gopinath on the crash that could torch $35trn of wealth

https://economist.com/by-invitation/2025/10/15/gita-gopinath-on-the-crash-that-could-torch-35trn-of-wealth?giftId=85a54fe7-94d5-4d8c-a90b-8e26c6a9c0ee&utm_campaign=gifted_article

@Chagsy have you looked into annuities? I don't know much about them but from the headline they seem like they would take out a lot of the sequencing risk.

Thanks @Slideup

I looked at them a few years ago and concluded that if you are retiring with just enough to scrape through then they are perfect to avoid sequence risk. The obvious downside is you get less income for the increased certainty.

however I believe the landscape has changed significantly since then with a number of tailored products to suit a range of scenarios. I will do some digging.

thanks for the prompt!

Hi @Chagsy Here is what I am planning to do.

I like to keep things simple and therefore apply simple frameworks. My strategy, by the time I hit 60, is to have three years of my spending needs put aside into a dedicated bucket, keep applying the same investing approach that I am now, and withdraw 5%-6% of the liquid assets per year to live on. A bit more detail follows.

Firstly, I see myself investing for my entire life. I don't subscribe to the theory of moving my entire portfolio into a more defensive position; I am hoping to live too long for anything like that to work. Secondly, though, a bit like I keep an emergency fund now, I want to put aside the bucket I mentioned above as an effective 'emergency bucket' for when the markets drop in a material and sustained way. I was initially thinking 1-2 years of money would be enough to see through a major and sustained decline, but as has been discussed in this forum, 'things' are looking pretty ugly but we have no idea of how long before that happens but it will be ugly when it does, so I am now thinking/intending to push the amount in the bucket out to 3 years.

Of course, this, by definition, will mean lower returns (more on what I will likely put this money into below), but it does mean when the music stops, I can safely know I have something sitting there. I guess we could debate how long a downturn could last and if the amount in the bucket should be 1, 2, 3, or even more years, but the more conservative you want to be, the more years you put in here. Three seems about right to me for a very conservative approach.

In terms of the bucket, I am intending to (noting the large Bitcoin holdings that I also have):

• Put around 75% into term deposits. If that amounted to more than $250K, then I'd do it across two banks to ensure the government guarantee applies. I will also hold some USD and even Yuan if/when global settlements move more towards that as well.
• Put around 25% into Gold as a store of value, although I am doing this noting my large holdings in Bitcoin.

The above also assumes the 5%-6% is sufficient for me to live on. I guess the key here is that I am not investing to avoid the impact of the music stopping; I am just making sure I can ride it out without having to eat only beans and rice.

There is more nuance and the devil is in the details as it always is, but the above approach, at least currently, gives me peace of mind (the sleep at night test) that when the music stops playing, I won't be wiped out by any major or sustained downturns.

Of course, the above reflects my plans and position, which may well be different from others'. So please take this as an example only and is certainly not advice.

EDIT: Quick clarification. When referring to "...I can ride it out..." and .."I won't be wiped out...": I mean that I have funds readily at hand to cover my living expenses without having to draw down on my portfolio, which, in this scenario, has fallen in a material way and stayed down for a reasonable period. For example, withdrawing 5%-6% of $100 is very different from withdrawing that same percentage from a portfolio that has fallen to $60; your lifestyle is impacted and you can't get back to your previous balance, so the impact becomes permanent. I guess the theory here is that my portfolio has time to recover while I sustain my lifestyle in the interim via the alternative bucket.

@Chagsy I retired about a year ago however my partner (who was/is the main breadwinner as it were) is still working and neither of us has reached our preservation ages yet so from a "retirement date" perspective I'm still treating that as in the "future" from a SoRR perspective

I've actually been doing a lot of research into Retirement Planning, SoRR, Longevity Risk, Withdrawal Strategies, Safe Withdrawal Rates, Retirement Calculators, and so forth over the past 18 months (ever since I knew I was retiring). I've also read quite a lot of good books on the topic

I made a lot of notes (about all sorts of topics) - but on the topic of SoRR and Longevity Risk a simple summary of the sort of mitigating options I've been looking at include:

1) Spend Conservatively - e.g. SWR (3.25%, 4%, 4.2/4.4/4.7%, etc) - noting that I'm factoring in a 40-45yr retirement window (not 30 as per a lot of research)

2) Spend Flexibly - e.g. adjust spending (up & down) with market performance and/or inflation (e.g. Risk Based Guardrails), or variable Amortisation Based Withdrawal (ABW) spending

3) Falling then Rising/Reverse Equity Glidepath - e.g. from 2-5yrs before retirement start moving defensive (e.g. towards 50-60:50-40) but (during 5-15 yrs) after retirement gradually move back to long term asset allocation (e.g. 75-100:25-0)

4) Buffer Assets - e.g. Cash/Safe/Liquid Bucket to spend from after market downturns (and to put into market at cheap prices)

Interestingly tho it's not discussed much - it turns out it's possible that very high inflation is a bigger concern for SoRR than a prolonged market crash/downturn