> And he hinted at a novel approach to monetary policy, suggesting that “the ultimate intervention is our military”.
Yes, that was both funny and tragic. But it also demonstrates why smart people made him president: he is beyond perfect for redirecting attention. By burning the institutions down and by severing international relations, a certain class of people can finally disable the corrective and limiting mechanisms that keep them in check. Even if that means the whole country needs to be burned down. Zero sum in business, zero sum in church, zero sum in state governance.
The military threats include burning down other countries.
Now, people accept the "no angel" defense for Iran and Venezuela. Just like a cop is allowed to execute someone in the street if they have a criminal record. But now we have to work out how serious the threats against Western countries are, or whether they're just routine Trump bullshit for social media. Is there a real prospect of the use of force against Canada, or Canadian nationals in the US? Is there a limit to the trade sanctions? If the US can sanction individual ICC members, can't they exert pressure on Carney by debanking him too?
We know from crime that the only way to solve a crisis is to escalate, because that is what zero-sum dynamics basically forces one too. In that process, everything becomes a tool and there is barely anything that is off-limits.
Putting aside the possible change of guards with the other party getting into power, the USA are long-term heading to a serious crisis. The dems were able to reduce deficits in the past (a bit surprisingly because that contradicts the narrative), but I think their space for maneuvering is getting increasingly small. There is a serious possibility that notwithstanding efforts to save the ship the long term trend cannot be reversed because so many critical processes had been set in motion, about which control has been lost.
What happens after a decade? You can do the math. A disgruntled electorate want final solutions to an increasingly heavier crisis. It takes real states(wo)men to re-architect the USA in favor of the public. Also, if you ever open 'social' media or regular media even, you could experience first-hand how hard it has become to reach the public. The vested interests are not willing to give up their power.
When the dollar is low, the dollar is doomed. When it's high, it's doomed too. When interest rates are record low, we're punishing savers. When they are record high, we're stalling the economy.
Financial news is one place where AI could really displace the majority of human workers.
A garbage article. Yields went down after the housing bubble in 2007 because the central bank interest rates were lowered, not because the investors decided to flock to a safe asset.
Yields are high because the inflation is also running high and it doesn't like it will come down anytime soon so the central bank interest rates will also be kept at a higher level.
Long term bonds can be replaced with short term bonds which are constantly rolled over. The bond yields are pricing in the future interest rates, nothing more.
That’s the news. The fed is desperately trying to get interest rates lower, but the free market isn’t buying it. The treasury is also pulling out some very desperate moves to control this, like selling euro for JPY without even telling the EU, we will see how it works out.
Treasury interest rates just decoupled from bond yields. That's the news.
They were only coupled in the first place because treasuries were seen as the safest of havens. That means everything else had to pay more interest than them. So is that no longer the case?
The last Fed meeting saw high inflation and decided not to adjust interest rates, with the stated reasoning that the market will fix it by itself. This could be how the market fixes it by itself.
selling stocks and buying bonds in a recession where interest rates go down (so bonds are priced higher) and expected revenue for most sectors go down is a no brainer.
Agree, but there's also the expectation of future debt. A bigger debt means a bigger issuance of bonds, so the new supply-demand equilibrium moves the rates higher as it's the only way to convince investors to allocate more to bonds.
Technically, yes, but if you create demand for long term bonds and create supply for short term ones, you'll flatten the yield curve and pay long term yields for short term durations.
The bottom line is that the country cannot spend more than it makes in tax income indefinitely and anyone who says otherwise is delusional. Unfortunately, I think the reckoning for all this debt will come sooner than many people expect.
You can deficit spend indefinitely as long as your deficit percentage is below your economic growth percentage. That keeps the total debt as percentage of the economy stable and the amount of tax you need to service the debt a stable percentage of your total tax.
If you do that it can be a good idea. It's a way to accelerate investment. It can also be a good idea to modulate your deficit in a cycle counter to the economy so that it acts as a stabilizer.
The US has been failing on all these. The deficits are too large and are high both in good and bad times. Eventually that breaks things.
Sort of yes and no. I don’t think indefinite spending was ever on the cards.
But if other countries tried to maintain the levels of US deficit / debt, they were given far less lenience from investors, in pressure / yields. This was because US was seen as, on the whole, fiscally responsible, very productive, and safer from shocks - to the point that when the US mortgage crisis exploded, the safe haven for assets was… the US.
As these assumptions are challenged, the US is waking up to what the European old economies experienced following 2008. Increasingly yields, increasing costs of borrowing etc.
If you’re reliably printing good GDP growth, higher level of debt may be good as it gives you more leverage, and drives more growth in turn. But leverage is a multiplier and it isn’t free, so if the engine sputters, you might find yourself falling out of the car at a greater speed…
A debt crisis like in eurozone countries in 2008 is very unlikely to happen in the US. For it to happen, it would require the fed working against the us government.
The reckoning will be put on Democrats. It's quite hard to do this while the Republicans hold all the power, but as soon as it flips the media will care again.
I think countries can, but there is a limit to how much debt you can have. It’s fine and even likely better for countries to have some deficit, but not $40T while also starting a war with Iran and imposing random tariffs that destabilize the world economy (+ attacking your allies, and all the other things Trump has done over the past decade, including adding an insane amount to the deficit)
The military threats include burning down other countries.
Now, people accept the "no angel" defense for Iran and Venezuela. Just like a cop is allowed to execute someone in the street if they have a criminal record. But now we have to work out how serious the threats against Western countries are, or whether they're just routine Trump bullshit for social media. Is there a real prospect of the use of force against Canada, or Canadian nationals in the US? Is there a limit to the trade sanctions? If the US can sanction individual ICC members, can't they exert pressure on Carney by debanking him too?
We know from crime that the only way to solve a crisis is to escalate, because that is what zero-sum dynamics basically forces one too. In that process, everything becomes a tool and there is barely anything that is off-limits.
Putting aside the possible change of guards with the other party getting into power, the USA are long-term heading to a serious crisis. The dems were able to reduce deficits in the past (a bit surprisingly because that contradicts the narrative), but I think their space for maneuvering is getting increasingly small. There is a serious possibility that notwithstanding efforts to save the ship the long term trend cannot be reversed because so many critical processes had been set in motion, about which control has been lost.
What happens after a decade? You can do the math. A disgruntled electorate want final solutions to an increasingly heavier crisis. It takes real states(wo)men to re-architect the USA in favor of the public. Also, if you ever open 'social' media or regular media even, you could experience first-hand how hard it has become to reach the public. The vested interests are not willing to give up their power.
"Give us money to pay for our military or else our military will intervene"
The vaguepost by Bessent in today’s Financial Times looked pretty weak: https://www.ft.com/content/cb865200-1a06-40be-86a3-10ee2bb05...
No. Now you can move on with your day.
Still here? Ok...
When the dollar is low, the dollar is doomed. When it's high, it's doomed too. When interest rates are record low, we're punishing savers. When they are record high, we're stalling the economy.
Financial news is one place where AI could really displace the majority of human workers.
A garbage article. Yields went down after the housing bubble in 2007 because the central bank interest rates were lowered, not because the investors decided to flock to a safe asset.
Yields are high because the inflation is also running high and it doesn't like it will come down anytime soon so the central bank interest rates will also be kept at a higher level.
Long term bonds can be replaced with short term bonds which are constantly rolled over. The bond yields are pricing in the future interest rates, nothing more.
Check out the federal funds rate over the last 5 years: https://fred.stlouisfed.org/series/fedfunds
Vs the 30 year bond yield: https://fred.stlouisfed.org/series/DGS30
That’s the news. The fed is desperately trying to get interest rates lower, but the free market isn’t buying it. The treasury is also pulling out some very desperate moves to control this, like selling euro for JPY without even telling the EU, we will see how it works out.
Treasury interest rates just decoupled from bond yields. That's the news.
They were only coupled in the first place because treasuries were seen as the safest of havens. That means everything else had to pay more interest than them. So is that no longer the case?
The last Fed meeting saw high inflation and decided not to adjust interest rates, with the stated reasoning that the market will fix it by itself. This could be how the market fixes it by itself.
selling stocks and buying bonds in a recession where interest rates go down (so bonds are priced higher) and expected revenue for most sectors go down is a no brainer.
Agree, but there's also the expectation of future debt. A bigger debt means a bigger issuance of bonds, so the new supply-demand equilibrium moves the rates higher as it's the only way to convince investors to allocate more to bonds.
Technically, yes, but if you create demand for long term bonds and create supply for short term ones, you'll flatten the yield curve and pay long term yields for short term durations.
Sure buddy, keep that head buried in the sand.
The bottom line is that the country cannot spend more than it makes in tax income indefinitely and anyone who says otherwise is delusional. Unfortunately, I think the reckoning for all this debt will come sooner than many people expect.
You can deficit spend indefinitely as long as your deficit percentage is below your economic growth percentage. That keeps the total debt as percentage of the economy stable and the amount of tax you need to service the debt a stable percentage of your total tax.
If you do that it can be a good idea. It's a way to accelerate investment. It can also be a good idea to modulate your deficit in a cycle counter to the economy so that it acts as a stabilizer.
The US has been failing on all these. The deficits are too large and are high both in good and bad times. Eventually that breaks things.
Sort of yes and no. I don’t think indefinite spending was ever on the cards.
But if other countries tried to maintain the levels of US deficit / debt, they were given far less lenience from investors, in pressure / yields. This was because US was seen as, on the whole, fiscally responsible, very productive, and safer from shocks - to the point that when the US mortgage crisis exploded, the safe haven for assets was… the US.
As these assumptions are challenged, the US is waking up to what the European old economies experienced following 2008. Increasingly yields, increasing costs of borrowing etc.
If you’re reliably printing good GDP growth, higher level of debt may be good as it gives you more leverage, and drives more growth in turn. But leverage is a multiplier and it isn’t free, so if the engine sputters, you might find yourself falling out of the car at a greater speed…
A debt crisis like in eurozone countries in 2008 is very unlikely to happen in the US. For it to happen, it would require the fed working against the us government.
The reckoning will be put on Democrats. It's quite hard to do this while the Republicans hold all the power, but as soon as it flips the media will care again.
I think countries can, but there is a limit to how much debt you can have. It’s fine and even likely better for countries to have some deficit, but not $40T while also starting a war with Iran and imposing random tariffs that destabilize the world economy (+ attacking your allies, and all the other things Trump has done over the past decade, including adding an insane amount to the deficit)
For anyone not aware just how much: A quarter of it. A quarter of all US debt happened under Trump.