2026-07-29XQuote

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“The Fed has not been taking the inflation "problem" seriously..” B/C THEY DO NOT SEE IT AS A ‘PROBLEM’. Inflation has become a feature, not 🚫a bug 🐜 of the current system. It is how the USA 🇺🇸 will monetize its debt. Hank Paulson’s trial balloon 🎈has already clearly laid out treasury’s plan to backstop the treasury market. This will be QE ♾️ into inflation & they know it. Any serious economist knows this only leads to 1 outcome… An inflationary loop 🔁… Warsh/Bessent ➡️ Arthur Burns 2.0

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The chart below starts on Sept 18, 2024, the FOMC meeting at which they kicked off the rate-cutting cycle with a 50 bps move. 30-yr yields went straight up (I would argue in response to that cut) and, on May 19, 2026, hit a 19-year high of 5.18%. I continue to argue that the problem is that the Fed has not been taking the inflation "problem" seriously, and that the bond market has been rejecting its easy policy. So, a surprise hike might "fix" the bond market rather than worsen it. The Wall Street adage "bond investors can stop panicking when the Fed starts panicking" applies. A little Fed-driven panic about inflation might calm bond investors. Holding steady and the yield uptrend below will just continue until they do "choose" (Warsh's word) to deal with inflation.
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