America's next financial crisis

For decades, a comfortable global bargain sustained the financial system: The United States ran up massive debts and Japan purchased U.S.

Treasuries to cover the bill.

This setup granted America cheap borrowing costs and allowed export-driven Japan to accumulate massive dollar reserves while keeping its own interest rates low.

Today, that bargain is cracking under the weight of severe currency depreciation.

The dramatic decline of the Japanese yen — which recently hit a four-decade low of nearly 160 yen per dollar — is far more than a domestic issue for Tokyo.

It is a symptom of deep structural imbalances that could ultimately spark a sovereign debt crisis in the United States.

The root of the yen's decline lies in the widening chasm between the U.S.

Federal Reserve's aggressive interest rate hikes and the Bank of Japan’s ultralow rate policy.

This disparity triggered a massive yen carry trade, where investors borrowed cheaply in yen to purchase higher-yielding dollar-denominated assets.

While this flooded global markets with liquidity, it placed relentless selling pressure on t ...