Bulge in tire - please help!

[miyata]

My rear tire went flat overnight and when I inflated it in the morning, a bulge formed (see photos). I removed the tire and found a slightly worn spot about the size of a dime on the inside of the tire where the bulge was. I couldn't find any debris in the tire. The tube itself is not worn in that spot.

I remounted the tire twice and the bulge formed in the same place each time. I tried inserting a folded dollar bill, but it didn't help.

The tire is about 2 years old, but hasn't had much use (just occasional city riding). The tube is about a week old.

Has anyone seen this before?
Does anyone know what might have caused it?

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[cny-man]

The cords in the tire at that point have been ruptured, and the tire will have to be replaced. The doller bill fix only works for small cord cuts. You hit some sort of obstacle - rock, etc., and possibly under too-low inflation, which caused both the flat and the cord rupture.