Source item

7/8 Combined government and corporate interest costs are now 3.8% of GDP. This is the highest since 2008 but only slightly above the 65-year average of 3.5%, and well below the 1990 peak of 5.9%. https://t.co/1yMiXhMsQT 8/8 Why push back on debt levels as a driver of interest rates? Because way too many think debt is the MAIN driver of higher yields, interest costs are the burden, and the solution is financial repression such as yield curve control. This would be disastrous. If yields are MORE responding to higher economic growth and sticky inflation, as we have long been making the case, forcing interest rates unnaturally low (aka financial repression) would lead to bond investor running away from the bond market sending yields soaring to punishing levels, crushing the economy and financial markets. --- This is why we constantly say, "Bond traders can stop panicking when the Fed starts panicking." The Fed has been cutting rates (2004 to 2006) and coming up with reasons to not hike at the end of this month (link below), and yields are at 20-year highs. Effectively the Fed is doing a "mini" version of financial repression, and the results are what you expect, soaring yields ("Bond Traders Panicking.") So, if the Fed were to get aggressive in hike rates (they "panic") we would argue bond traders would calm down and so would long-term yields. --- Too many arguing debt levels, as a PRIMARY driver of higher yields and are demanding financial repression. In a June 29, 2025, interview with Maria Bartiromo on Fox's "Sunday Morning Futures," Trump said the Treasury would refinance the roughly $9 trillion coming due as short-term debt, effectively bills, rather than lock in 10-year debt at higher rates. The goal was to reprice that debt lower once he installed a Fed chair who would cut rates to 1%. He also called Powell "a stupid person" for not engaging in such financial repression, So, whenever I see rants about too much debt, and I agree there is too much, I worry the worst solution is the answer, financial repression, such as Trump wants. I can think if no more dangerous answer to a debt problem. https://t.co/lUhzAIc1co Color-coded real yields. Even with the recent spike, 10-year TIPS (2.91%) are only back to the pre-QE average (2.74%). Back then, debt held by the public was ~35% of GDP. Now it's ~100%. If debt were the driver, real yields would be far higher than pre-2008. https://t.co/3G49zfzkwk