From “News Items” from @EllisItems (https://substack.news-items.com):

“4. Eurointelligence:

The bond markets are finally starting to roar. They are beginning to realize that central banks have given up on the 2% inflation targets. The US fiscal deficit is 6% of GDP. A useful metric of fiscal stress is when debt servicing costs exceeds the size of the defence budget. In the US, that is now the case. We should not think of a yield on 30-year treasury bonds of 5.2% as particularly outlandish. For a country that produces 3-4% inflation, with no improvement in sight, this is a pretty low number.

Writing in the Wall Street Journal, Stanley Druckenmiller calls the bond markets a pushover that is finally clearing its throat. He is sharply critical of his former Soros colleague Scott Bessent over his recent support operations to contain the rise of long-term yields through the issuance of short-term treasury bills. The long-term yield, he writes, is the only instrument of fiscal discipline left. A yield-management operation won’t solve the problem. It just postpones its solution.

It is interesting to note that the causes behind the ballooning deficit are the same in the US that they are in France, the UK, and even in Germany. It is a phenomenon of the late phase of western capitalism that we now live in. The underlying issue is an uncontrolled explosion in welfare transfers and unfunded pension obligations that politicians are not willing to address. This is true of all parties, from the far-left to the far-right.

Druckenmiller calls what is happening right now generational theft. We believe it will end in default of some sort. The exorbitant privilege is exorbitant only to the extent that it is not maxed out. If the US defaulted, it would default in different ways to the way a country like Argentina once defaulted. It would not stop servicing its debt. Most likely it would resort to large scale money-printing, or there would be a political crisis, with Congress refusing to raise the debt ceiling, causing federal spending to stop abruptly. It is far too early to speculate on the precise mechanism on how this default will play out in detail. But it squarely falls into the category of things that end one way or the other because they are not sustainable. (Sources: http://allamericanspeakers.com, http://wsj.com, http://eurointelligence.com 8/26/26)

From “News Items” from @EllisItems (https://substack.news-items.com):

“4. Eurointelligence:

The bond markets are finally starting to roar. They are beginning to realize that central banks have given up on the 2% inflation targets. The US fiscal deficit is 6% of GDP. A useful metric of fiscal stress is when debt servicing costs exceeds the size of the defence budget. In the US, that is now the case. We should not think of a yield on 30-year treasury bonds of 5.2% as particularly outlandish. For a country that produces 3-4% inflation, with no improvement in sight, this is a pretty low number.

Writing in the Wall Street Journal, Stanley Druckenmiller calls the bond markets a pushover that is finally clearing its throat. He is sharply critical of his former Soros colleague Scott Bessent over his recent support operations to contain the rise of long-term yields through the issuance of short-term treasury bills. The long-term yield, he writes, is the only instrument of fiscal discipline left. A yield-management operation won’t solve the problem. It just postpones its solution.

It is interesting to note that the causes behind the ballooning deficit are the same in the US that they are in France, the UK, and even in Germany. It is a phenomenon of the late phase of western capitalism that we now live in. The underlying issue is an uncontrolled explosion in welfare transfers and unfunded pension obligations that politicians are not willing to address. This is true of all parties, from the far-left to the far-right.

Druckenmiller calls what is happening right now generational theft. We believe it will end in default of some sort. The exorbitant privilege is exorbitant only to the extent that it is not maxed out. If the US defaulted, it would default in different ways to the way a country like Argentina once defaulted. It would not stop servicing its debt. Most likely it would resort to large scale money-printing, or there would be a political crisis, with Congress refusing to raise the debt ceiling, causing federal spending to stop abruptly. It is far too early to speculate on the precise mechanism on how this default will play out in detail. But it squarely falls into the category of things that end one way or the other because they are not sustainable. (Sources: http://allamericanspeakers.com, http://wsj.com, http://eurointelligence.com 8/26/26)

Source:https://twitter.com/hughhewitt/status/2092559272106144199