The Duran Podcast Weaponization of financial system and Debt-to-GDP. w/ Raymond Zucaro
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Dec 13, 2025 Raymond Zucaro, an expert in emerging markets and sovereign debt, joins to dissect the evolving financial landscape. He delves into Europe's risky financial decisions influenced by political emotions and the implications of China's dollar bonds trading within US treasuries. The conversation highlights concerns over the weaponization of the financial system and the potential effect on global trust. Zucaro also addresses Japan's suppressed rates, the impact on Western markets, and contrasting prospects for stagnating developed economies versus emerging markets.
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Dollar Bonds Losing Risk-Free Status
- Global investors now treat some Chinese dollar bonds as safer than US Treasuries due to fears of asset seizures and financial weaponization.
- Raymond Zucaro warns that European talk of seizing assets (e.g., via Euroclear) undermines trust in traditional safe assets.
Financial Weaponization Raises Sovereign Risk
- Weaponization of the financial system makes holders view assets as return-of-capital, not return-on-capital, raising perceived risk of Western assets.
- This dynamic pressures demand for US Treasuries and could force higher yields if confidence erodes.
Japan's Capital Return Threatens Global Yields
- Japan's ultra-high debt (around 239% of GDP) becomes dangerous as global rates rise and Japan's yields climb above zero.
- Zucaro forecasts repatriation of $1–1.5 trillion of Japanese exported capital, pressuring global bond markets and raising rates.