"The bond market is, in essence, a collection of investors so sharp that they can’t help but realize exactly how precarious the country’s financial situation has gotten,"
Were these the same sharpies who drove the 10-year yield down under 1% in 2020 when spending was to the moon? And who lost money for 4 years after they bought under 1%?
In bonds? Lost money? For years?
Oy vey.
OK, a little snarky I admit. But the herd follows itself. That seems to be the only law of markets. If you keep your job that's the payday.
There are only two elected officials in DC who are principled deficit hawks. Massie and Rand Paul. That’s it. Everyone else, both parties, will drive this runaway fiscal train right off a cliff.
The government creates money. The private sector creates value. Trump is trying to move money from government to the private sector, where value can be created. Increased value is what we really need, not more accounting tricks.
Do we have five years? Will Trump's approach work? Damned if I know. But I've become pretty knowledgeable concerning what doesn't work...
You need to broaden your horizons. Here is what keeps Chump up at night as he tries to manage the bankruptcy of the US.
“For the first time ever, China’s CIPS (Cross-Border Interbank Payment System) surpassed SWIFT in single-day transaction volume. A red banner flashed across Bank of China’s HQ at 1:30AM on April 16, 2025.
CIPS processed a jaw-dropping ¥12.8 trillion RMB in just one day—roughly $1.76 trillion USD. That volume, if verified, overtakes the greenback-dominated SWIFT system in sheer daily cross-border throughput.
No fireworks, no Western headlines. Just one quiet early morning in Beijing where the dollar’s crown slipped. The world’s financial plumbing just got a reroute—through China.”
US Treasuries are the lifeblood of the empire. When they dry up, the empire dries up. The "drying" process is in full motion right now.
We have become the financialization capital of the world. We will issue some derivative paper on everything.
For our current system it will be "fatal." I am not sure what we will get on the other side. We definitely don't have the men we had in 1776. It is liable to be uglier then than it is now.
Here's something to think about. For some reason I started thinking bout how the Roman Empire had it's conquered provinces pay tribute, and that's how the actual city of Rome sustained itself. No productivity, just tribute. Curious parallels to the USA.
For multiple reasons which I will not detail here, I think in the short term that the concerns about the trajectory of our debt relative to the size of our GDP may be close to peaking and the damage to the US brand in financial markets may be able to be somewhat reversed. Agree completely about the importance of bond rates both to the success of Trump’s goals and growth of our economy in general , and that the pessimism that comes from the lack of concern of the great majority of our politicians about anything except what actions maximize the probability of them winning their next election. That is almost always the length of their long term horizon. I also admit I am a perennial optimist, which at times has been problematic but in general has served me well during my investment career and has certainly made my life a lot more joyful. But I seriously see the possibilty that if we navigate the next six months successfully ( no recession, reasonably successful tariff negotiation, the threat of widening wars receding, the benefit of oil prices in the $50 -65 range , ending of non productive spending _ maybe waste , fraud and abuse but more importantly the immense misallocation of resources that have stemmed from climate hysteria) that we could enter into a virtuous cycle of growth which given political realities if combined with domestic spending discipline id the best realistic hope of reducing or budget deficits from the insane level of this decade.
When all of a sudden you look up and realize how deeply you've dug yourself into a hole, there is no better time to stop digging than that very moment.
I've seen no indication that Trump has any interest in cutting spending. It skyrocketed during his first term, and I'm skeptical that this time will be any different. So far, it's not.
"The one solution has always been very simple: spend less while keeping revenue the same, increase revenue while spending the same, or increase revenue and spend less at the same time."
I'm not sure it's as simple anymore, one of the reasons being that revenue is tied to asset prices. Attempts to reign in the fiscal deficit (lower spending) would hurt asset prices, lower revenue which then blows out the deficit.
I mostly agree with what you are saying. However, the bond market is not all-knowing. China, which was the primary holder of US Treasuries, has now fallen to number 3 in the rankings, behind Japan and the UK. Why? They are waging economic war on the US. They are dumping US Treasuries, flooding the market, in order to make it harder for Bessent to refinance the $37 trillion US debt. And thanks to the nitwit Janet Yellen, $12 trillion of that debt is funded by short-term bills. Thus, Bessent is forced to hold Treasury auctions 30, 60 and 90 days in order to refinance that paper while facing a Treasury glut thanks to the Chinese dumping their paper.
Given that, it's been shown that tax cuts raise Federal tax revenues. Thus, Trump's bill will maintain the current level of revenues (i.e., they are extending existing tax cuts) and may possibly raise additional tax revenues due to the overtime tax exemptions. However, there is no excuse for NOT codifying the DOGE audit findings. A Democrat administration can undo EVERYTHING Trump has done with the stroke of an autopen. And that is on Congressional Republicans, many of whom are benefiting from the USAID-NGO fraud. Not only does codifying those savings reduce the deficit, it makes it harder for a subsequent Democrat administration from ramping up the slush funds they use to pay for their anti-American agenda.
Just because the shit show has gotten out of hand......and they don't want to get caught in the shit when this implodes DOES NOT mean they are "at war" with anybody.
Any rational, sane person could look at the US balance sheet and know that investing in that company is stupid at this point.
I wish you were right in saying the bond market will adjudicate the debt problem. More likely, it will be government intervention into the bond market, not higher interest rates, that will balance supply and demand for Treasuries. Expect Treasury (Bessent) to exercise YCC. Expect the Fed to intervene and monetize. Expect commercial banks to become major new buyers of government debt and monetize even more. Expect incentives, nudges, and perhaps even requirements for domestic savers to buy Treasuries. In other words, expect financial repression - soft at first, then good and hard if necessary.
"The one solution has always been very simple: spend less while keeping revenue the same, increase revenue while spending the same, or increase revenue and spend less at the same time."
Okay. Yes, I am looking for a debate here......from ANYONE.
That "solution" works if we are talking about you, me, or some other normal entity. But NOT when we are talking about the US government.......due to the monetary system we use.
The debt must ever expand. Debt expansion is how money is created. Period. When your stonk goes up, it is as a result of the debt expansion working its way through the system and settling in your stonk......for a variety of reasons.
When debt is created, money is created, what is not created is the INTEREST. The interest demanded by the debt is a constant suction pressure in the system that is sucking up dollars every minute of every day. If new debt is not being created fast enough to create dollars fast enough, then the interest will mathematically remove enough dollars from the system that there won't be enough to meet the debt payments. Now the goobermint is always going to make its debt payments because it has a "printing press," but you and I are a different matter. We have to find a way to secure the dollars to make our debt/expense payments. WE depend on the goobermint borrowing and spending MOAR! so there will be enough dollars in the system for us to get and make our debt/expense payments.
The system is in a catch 22 doom loop. The more they print to meet their obligations, the more their obligation of interest grows. So they have to print more to meet their obligation.
There was a time.....1992......when private debt creation was bringing enough dollars into the system to cover the interest demand. Today we have crossed the Rubicon. There is not....WILL NOT.......be enough private debt activity to ever meet the EVER GROWING demand of the national debt.
You guys that keep talking about "cutting the spending" as a solution are killing me. The only "solution" that offers is like putting a bullet in your head rather than suffering through the cancer eating you down to the bone over the next 5 years. Don't misunderstand me, the bullet route is fine with me. Just understand that either route brings about the same end result.
I struggle to understand how many of you........that are way smarter than me.........continue to go along with the narrative that we can somehow fix this when it is an impossibility. You can hope all your life that 2+2=5.......but it is NEVER going to be so.
Are you struggling to believe that a group of "elected" officials.......that "we" picked......that are supposed to be smart......because we only pick the best......especially in "red" states......can just sit there and blatantly take advantage of a system they know it going to collapse.....so they are making the most of it for themselves while they can? You don't want to believe that ALL OF THEM are just as corrupt as the rest of them? Or you want to believe that EVERY problem has a solution? If that were the case, no one would ever die, right?
Some things CANNOT be fixed. If captain and crew....those in charge....... had of announced on the Titanic that they were working to fix the hole.....AND WERE GOING TO FIX THE HOLE..... so there was no need for the life boats to be lowered or ANY action taken JUST IN CASE the ship pitched up into the air, broke in half, and sunk to the bottom of an icy water world, would there have been ANY survivors?
It is no different today with our "leadership" and those making the "announcements" to relax, don't be alarmed, we are AMERICANS.....we fix everything.......nothing is too hard for us.....we won a World War......kind of........WE CAN DO ANYTHING!......we have the dollar AND TEXASS.........
So this is where someone usually comes in and ask, "So, what is your solution, smart-ass?" And I reply, "You weren't listening, were you? THERE IS NO FKING SOLUTION!"
I am not your daddy or your problem solver......but I can tell you this. If you find yourself in the middle of the northern Atlantic, on a ship with a hole in the side of it the size of a Ford F250, and there is no such thing as airplane rescue or helicopters or any ships in the area to reach you before your ship sinks...........you had better start looking around and figuring out what you are going to do when you hit that ice cold water, others are flailing around screaming in a panic and latching on to everything they can to try and survive, including you, and God help you if you have others to think about as well......AND you also have a conscience and care about those that are too old, weak, and feeble to provide for themselves.
Now you go on and sit there and tell yourself that COULD NEVER happen here, WILL NEVER happen here........and then try and read a history book and see the multiple times it HAS happened......and remember they called the Titanic, "the unsinkable ship."
Then head for the lifeboats. Make sure you do the right thing and let the women and children go first. I'll stay and work to keep the ship afloat. Along with 75 million other Americans who love this country and will do what's necessary to save it.
Bill, you are a perfect example of a person with "all zeal and (obviously) no knowledge."
I must have missed it, so tell me again how they rescued the Titanic. Or tell me how they put Humpty-Dumpty back together again.
This problem cannot be solved.
I love the way they historically justify the suicidal stand at the Alamo. They even make heroes of the idiots who stayed there.......AS IF that was the only choice. Jim Bowie was right. They should have moved, hit, moved, and hit again. We would have still won the war, and most of those men would have gotten to enjoy the victory instead of wasting their lives......trying to rescue/fix/hold/ what was impossible.
75 million? So are you with the group on SS? Because the workforce in the US is around 140 million. You think you are going to save it by voting? LMAO. That is some of the most pathetic bullshit out there today.
Please describe for all of us how you are going to "save it." I am looking for a real debate here, Bill. Not someone high on hopium.
And by the way, for the historically illiterate like yourself, if it weren't for the French, you'd still be part of Great Britain.
Is any of this a surprise? We've been happily voting for cutting taxes for 25 years (which has not produced the advertised increase in productivity/revenue ). So here we go again, same game plan with Republicans this time, tax cuts which mostly benefit the rich, symbolic cuts to government which mostly hurt the middle and poor (Medicaid especially) but don't really count for much efficiency. I believe this is the looney toons phase of the capitalistic economic cycle. No defense of Democrats here, though the last administration to actually cut government spending AND have a burgeoning economy was Clinton, a moderate. I don't know how we get ourselves out of this mess but if we rise from the ashes I hope we understand that a bird can't fly without both a left wing and right wing and they need to work in rhythm together.
I'd "like" your comment if I could, but for some reason the tab won't respond when I click on it.
That being said, I would adjust your analogy from a bird to a muscle. For a lever to work it needs a fulcrum, for a muscle to work it needs anchor point to pull against. The "two parties" act as each other's fulcrum or anchor point.......to supply the "resistance" to get the lifting done. The "perception" of two parties is necessary to keep the sheeple divided and thinking there is a competition.
When Clinton was president, the republicans took the house and senate back for the first time in 40 years.
"the deficit has to be addressed—and the time for doing it is right now — not five years from now, not ten years from now, not at any other point in the future." This is very true but the time to address this was 20 yrs ago, as we all know. Next step to the shit hitting the fan will be after the big beautiful bill passes will be to get rid of Powell and get a new schill to lower interest rates.
"The bond market is, in essence, a collection of investors so sharp that they can’t help but realize exactly how precarious the country’s financial situation has gotten,"
Were these the same sharpies who drove the 10-year yield down under 1% in 2020 when spending was to the moon? And who lost money for 4 years after they bought under 1%?
In bonds? Lost money? For years?
Oy vey.
OK, a little snarky I admit. But the herd follows itself. That seems to be the only law of markets. If you keep your job that's the payday.
LOL
The FED drove the ZIRP policy for 10+ years. Where's the tar and feathers?
There are only two elected officials in DC who are principled deficit hawks. Massie and Rand Paul. That’s it. Everyone else, both parties, will drive this runaway fiscal train right off a cliff.
The government creates money. The private sector creates value. Trump is trying to move money from government to the private sector, where value can be created. Increased value is what we really need, not more accounting tricks.
Do we have five years? Will Trump's approach work? Damned if I know. But I've become pretty knowledgeable concerning what doesn't work...
"Trump is trying to move money from government to the private sector,....."
LMAO
You need to broaden your horizons. Here is what keeps Chump up at night as he tries to manage the bankruptcy of the US.
“For the first time ever, China’s CIPS (Cross-Border Interbank Payment System) surpassed SWIFT in single-day transaction volume. A red banner flashed across Bank of China’s HQ at 1:30AM on April 16, 2025.
CIPS processed a jaw-dropping ¥12.8 trillion RMB in just one day—roughly $1.76 trillion USD. That volume, if verified, overtakes the greenback-dominated SWIFT system in sheer daily cross-border throughput.
No fireworks, no Western headlines. Just one quiet early morning in Beijing where the dollar’s crown slipped. The world’s financial plumbing just got a reroute—through China.”
US Treasuries are the lifeblood of the empire. When they dry up, the empire dries up. The "drying" process is in full motion right now.
I get that. We should never have let this happen. We may well be in for a well-deserved drubbing. But it need not be fatal.
And as I say incessantly, if you make an economy about he money and not the productivity, you will be overseeing a failing economy.
That is exactly right.
We have become the financialization capital of the world. We will issue some derivative paper on everything.
For our current system it will be "fatal." I am not sure what we will get on the other side. We definitely don't have the men we had in 1776. It is liable to be uglier then than it is now.
Here's something to think about. For some reason I started thinking bout how the Roman Empire had it's conquered provinces pay tribute, and that's how the actual city of Rome sustained itself. No productivity, just tribute. Curious parallels to the USA.
For multiple reasons which I will not detail here, I think in the short term that the concerns about the trajectory of our debt relative to the size of our GDP may be close to peaking and the damage to the US brand in financial markets may be able to be somewhat reversed. Agree completely about the importance of bond rates both to the success of Trump’s goals and growth of our economy in general , and that the pessimism that comes from the lack of concern of the great majority of our politicians about anything except what actions maximize the probability of them winning their next election. That is almost always the length of their long term horizon. I also admit I am a perennial optimist, which at times has been problematic but in general has served me well during my investment career and has certainly made my life a lot more joyful. But I seriously see the possibilty that if we navigate the next six months successfully ( no recession, reasonably successful tariff negotiation, the threat of widening wars receding, the benefit of oil prices in the $50 -65 range , ending of non productive spending _ maybe waste , fraud and abuse but more importantly the immense misallocation of resources that have stemmed from climate hysteria) that we could enter into a virtuous cycle of growth which given political realities if combined with domestic spending discipline id the best realistic hope of reducing or budget deficits from the insane level of this decade.
Hopium.......it's a helluva drug.
When all of a sudden you look up and realize how deeply you've dug yourself into a hole, there is no better time to stop digging than that very moment.
I've seen no indication that Trump has any interest in cutting spending. It skyrocketed during his first term, and I'm skeptical that this time will be any different. So far, it's not.
Uh, the current bill he is shoving up our asses is PROOF that this time will NOT be different.
"The one solution has always been very simple: spend less while keeping revenue the same, increase revenue while spending the same, or increase revenue and spend less at the same time."
I'm not sure it's as simple anymore, one of the reasons being that revenue is tied to asset prices. Attempts to reign in the fiscal deficit (lower spending) would hurt asset prices, lower revenue which then blows out the deficit.
Great article & title!
New Budget is huge disappointment as Musk said Congress and of course Trump must cut spending or we're going to have a Debt Jubilee!
I mostly agree with what you are saying. However, the bond market is not all-knowing. China, which was the primary holder of US Treasuries, has now fallen to number 3 in the rankings, behind Japan and the UK. Why? They are waging economic war on the US. They are dumping US Treasuries, flooding the market, in order to make it harder for Bessent to refinance the $37 trillion US debt. And thanks to the nitwit Janet Yellen, $12 trillion of that debt is funded by short-term bills. Thus, Bessent is forced to hold Treasury auctions 30, 60 and 90 days in order to refinance that paper while facing a Treasury glut thanks to the Chinese dumping their paper.
Given that, it's been shown that tax cuts raise Federal tax revenues. Thus, Trump's bill will maintain the current level of revenues (i.e., they are extending existing tax cuts) and may possibly raise additional tax revenues due to the overtime tax exemptions. However, there is no excuse for NOT codifying the DOGE audit findings. A Democrat administration can undo EVERYTHING Trump has done with the stroke of an autopen. And that is on Congressional Republicans, many of whom are benefiting from the USAID-NGO fraud. Not only does codifying those savings reduce the deficit, it makes it harder for a subsequent Democrat administration from ramping up the slush funds they use to pay for their anti-American agenda.
Just because the shit show has gotten out of hand......and they don't want to get caught in the shit when this implodes DOES NOT mean they are "at war" with anybody.
Any rational, sane person could look at the US balance sheet and know that investing in that company is stupid at this point.
I wish you were right in saying the bond market will adjudicate the debt problem. More likely, it will be government intervention into the bond market, not higher interest rates, that will balance supply and demand for Treasuries. Expect Treasury (Bessent) to exercise YCC. Expect the Fed to intervene and monetize. Expect commercial banks to become major new buyers of government debt and monetize even more. Expect incentives, nudges, and perhaps even requirements for domestic savers to buy Treasuries. In other words, expect financial repression - soft at first, then good and hard if necessary.
"The one solution has always been very simple: spend less while keeping revenue the same, increase revenue while spending the same, or increase revenue and spend less at the same time."
Okay. Yes, I am looking for a debate here......from ANYONE.
That "solution" works if we are talking about you, me, or some other normal entity. But NOT when we are talking about the US government.......due to the monetary system we use.
The debt must ever expand. Debt expansion is how money is created. Period. When your stonk goes up, it is as a result of the debt expansion working its way through the system and settling in your stonk......for a variety of reasons.
When debt is created, money is created, what is not created is the INTEREST. The interest demanded by the debt is a constant suction pressure in the system that is sucking up dollars every minute of every day. If new debt is not being created fast enough to create dollars fast enough, then the interest will mathematically remove enough dollars from the system that there won't be enough to meet the debt payments. Now the goobermint is always going to make its debt payments because it has a "printing press," but you and I are a different matter. We have to find a way to secure the dollars to make our debt/expense payments. WE depend on the goobermint borrowing and spending MOAR! so there will be enough dollars in the system for us to get and make our debt/expense payments.
The system is in a catch 22 doom loop. The more they print to meet their obligations, the more their obligation of interest grows. So they have to print more to meet their obligation.
There was a time.....1992......when private debt creation was bringing enough dollars into the system to cover the interest demand. Today we have crossed the Rubicon. There is not....WILL NOT.......be enough private debt activity to ever meet the EVER GROWING demand of the national debt.
You guys that keep talking about "cutting the spending" as a solution are killing me. The only "solution" that offers is like putting a bullet in your head rather than suffering through the cancer eating you down to the bone over the next 5 years. Don't misunderstand me, the bullet route is fine with me. Just understand that either route brings about the same end result.
I struggle to understand how many of you........that are way smarter than me.........continue to go along with the narrative that we can somehow fix this when it is an impossibility. You can hope all your life that 2+2=5.......but it is NEVER going to be so.
Are you struggling to believe that a group of "elected" officials.......that "we" picked......that are supposed to be smart......because we only pick the best......especially in "red" states......can just sit there and blatantly take advantage of a system they know it going to collapse.....so they are making the most of it for themselves while they can? You don't want to believe that ALL OF THEM are just as corrupt as the rest of them? Or you want to believe that EVERY problem has a solution? If that were the case, no one would ever die, right?
Some things CANNOT be fixed. If captain and crew....those in charge....... had of announced on the Titanic that they were working to fix the hole.....AND WERE GOING TO FIX THE HOLE..... so there was no need for the life boats to be lowered or ANY action taken JUST IN CASE the ship pitched up into the air, broke in half, and sunk to the bottom of an icy water world, would there have been ANY survivors?
It is no different today with our "leadership" and those making the "announcements" to relax, don't be alarmed, we are AMERICANS.....we fix everything.......nothing is too hard for us.....we won a World War......kind of........WE CAN DO ANYTHING!......we have the dollar AND TEXASS.........
So this is where someone usually comes in and ask, "So, what is your solution, smart-ass?" And I reply, "You weren't listening, were you? THERE IS NO FKING SOLUTION!"
I am not your daddy or your problem solver......but I can tell you this. If you find yourself in the middle of the northern Atlantic, on a ship with a hole in the side of it the size of a Ford F250, and there is no such thing as airplane rescue or helicopters or any ships in the area to reach you before your ship sinks...........you had better start looking around and figuring out what you are going to do when you hit that ice cold water, others are flailing around screaming in a panic and latching on to everything they can to try and survive, including you, and God help you if you have others to think about as well......AND you also have a conscience and care about those that are too old, weak, and feeble to provide for themselves.
Now you go on and sit there and tell yourself that COULD NEVER happen here, WILL NEVER happen here........and then try and read a history book and see the multiple times it HAS happened......and remember they called the Titanic, "the unsinkable ship."
Then head for the lifeboats. Make sure you do the right thing and let the women and children go first. I'll stay and work to keep the ship afloat. Along with 75 million other Americans who love this country and will do what's necessary to save it.
Sorry you've surrendered. Are you French?
Like you would have fixed the Titanic?
Bill, you are a perfect example of a person with "all zeal and (obviously) no knowledge."
I must have missed it, so tell me again how they rescued the Titanic. Or tell me how they put Humpty-Dumpty back together again.
This problem cannot be solved.
I love the way they historically justify the suicidal stand at the Alamo. They even make heroes of the idiots who stayed there.......AS IF that was the only choice. Jim Bowie was right. They should have moved, hit, moved, and hit again. We would have still won the war, and most of those men would have gotten to enjoy the victory instead of wasting their lives......trying to rescue/fix/hold/ what was impossible.
75 million? So are you with the group on SS? Because the workforce in the US is around 140 million. You think you are going to save it by voting? LMAO. That is some of the most pathetic bullshit out there today.
Please describe for all of us how you are going to "save it." I am looking for a real debate here, Bill. Not someone high on hopium.
And by the way, for the historically illiterate like yourself, if it weren't for the French, you'd still be part of Great Britain.
“If something is beautiful, you don’t do it after midnight.”
The bond vigilantes have taken the printing press away from the Fed.
Is any of this a surprise? We've been happily voting for cutting taxes for 25 years (which has not produced the advertised increase in productivity/revenue ). So here we go again, same game plan with Republicans this time, tax cuts which mostly benefit the rich, symbolic cuts to government which mostly hurt the middle and poor (Medicaid especially) but don't really count for much efficiency. I believe this is the looney toons phase of the capitalistic economic cycle. No defense of Democrats here, though the last administration to actually cut government spending AND have a burgeoning economy was Clinton, a moderate. I don't know how we get ourselves out of this mess but if we rise from the ashes I hope we understand that a bird can't fly without both a left wing and right wing and they need to work in rhythm together.
I'd "like" your comment if I could, but for some reason the tab won't respond when I click on it.
That being said, I would adjust your analogy from a bird to a muscle. For a lever to work it needs a fulcrum, for a muscle to work it needs anchor point to pull against. The "two parties" act as each other's fulcrum or anchor point.......to supply the "resistance" to get the lifting done. The "perception" of two parties is necessary to keep the sheeple divided and thinking there is a competition.
When Clinton was president, the republicans took the house and senate back for the first time in 40 years.
I'm good with that analogy!
"the deficit has to be addressed—and the time for doing it is right now — not five years from now, not ten years from now, not at any other point in the future." This is very true but the time to address this was 20 yrs ago, as we all know. Next step to the shit hitting the fan will be after the big beautiful bill passes will be to get rid of Powell and get a new schill to lower interest rates.
Spot on. The best time to plant a tree was 20 years ago; the second best time is today
Do you think the perception of the Fed being the "responsible adult" in the room is a ruse or the reality of where we are currently?