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Daily Missive

A Tidal Wave of Debt

Loading ...Bill Bonner

November 13, 2024 • 3 minute, 43 second read


debt

A Tidal Wave of Debt

Bill Bonner, writing today from Baltimore, Maryland

When Mr. Trump spoke of a Golden Age in his victory speech, we immediately thought of the Golden Age of Greece… when Pericles delivered his famous funeral oration. Athens was at war, and many people thought they should give it up, sue for peace… and get back to work. Not Pericles. He saw an opportunity to Make Athens Great Again.

Pericles was a ‘war hawk’… and no slouch as an orator. The Athenians rallied around him, put on their panoplies — sword and shield — and the war cries resounded through the city as the menfolk, young and old, marched out to combat.

Uh oh… the result was a crushing defeat in which the Athenian empire was destroyed, the city itself conquered, occupied by foreign troops… and its population sold into slavery.

Not a good example for the uplifting spirit we’re looking for today…

So, we turn back to Donald J. Trump.

And one of our Dearest Readers writes:

Yes, there’s an entire mountain range of debt, but what if Trump’s policies actually do make things better? What if manufacturing does return to the US in a huge way? (Does America have any choice other than to incentivize it?) What if energy prices do drop 30-50%? What if regulations and federal government employment are meaningfully cut? What if the economy does start growing at 4-6%?

Scott Bessent, BSD on Wall Street, and mentioned as a possibility for Trump’s Secretary of the Treasury, had this to add. In the Wall Street Journal:

The failure of Bidenomics is clear. But Mr. Trump has turned around the economy before, and he is ready to do so again. [Nobel winning economists] may not understand this, but the financial markets have clearly spoken.

And not since Herbert Hoover’s election in 1929 have they shouted out so loudly. Bitcoin traded over $89,000 this morning. The Dow was falling, but still near a record high.

Mr. Bessent at least nods in the direction of the tidal wave of debt soon to wash over the new administration. “Mr. Trump must also address government borrowing,” he says. But he thinks the problem is that it is ‘expensive shorter-term debt’ that must be ‘deftly handled.’

Well… good luck with that! The problem is not the term, but the amount. Mr. Bessent needs to listen to the market more carefully. It’s saying that interest rates will have to go higher to cover it. MarketWatch:

10-year Treasury yield breaks through key resistance levels on way to 5%

Since mid-September, the widely followed yield has risen past one resistance level after another, starting with 4.21% and 4.3%, the latter of which is described as a proverbial line in the sand that has begun to cause problems for the stock market over the past year… The rate has jumped about 80 basis points from its 52-week low of 3.62% reached on Sept. 16.

Already, the feds paid $1.13 trillion in interest on the US debt over the last twelve months. It’s unlikely that that amount will go down — not with rates rising and debt increasing by $3 billion per day.

And now that the markets have got a good look at the approaching tsunami, they may figure that it’s time to head to higher ground. As reported in this space, the feds need to refinance $16 trillion in the next four years. Add to that amount deficits that are expected to come in at $2 trillion per year.

Investors might also recall that The Donald added $8 trillion to US debt during his first term. So, it wouldn’t be hard to imagine a total of nearly $44 trillion by the end of this term, with much of it sporting a 5% yield. That would mean interest payments of over $2 trillion per year. How are the feds going to handle that, investors will want to know? With more printing press money?

To make matters worse, only days after the election, Trump is already bringing in his hawks — war hawks, trade hawks, China hawks. Notably absent, so far, are the budget hawks — people who want to reduce federal deficits by cutting spending or raising taxes.

They are probably absent because they don’t exist. Members of Congress, political hacks, lobbyists and ‘influencers’ of all types earn their money and power by spending the public’s money, not by saving it. And like a Freudian nightmare, in the absence of serious budget cutting, the ‘Golden Age’…turns into the something much less appealing.

More to come…


The Useless Metal that Rules the World

August 29, 2025 • Dominic Frisby

Gold has led people to do the most brilliant, the most brave, the most inventive, the most innovative and the most terrible things. ‘More men have been knocked off balance by gold than by love,’ runs the saying, usually attributed to Benjamin Disraeli. Where gold is concerned, emotion, not logic, prevails. Even in today’s markets it is a speculative asset whose price is driven by greed and fear, not by fundamental production numbers.

The Useless Metal that Rules the World
The Regrettable Repetition

August 29, 2025 • Addison Wiggin

Fresh GDP data — the Commerce Department revised Q2 growth upward to 3.3% — fueling the rally. Investors cheered the “Goldilocks” read: strong enough to keep the music going, not hot enough (at least on paper) to derail hopes for a Fed pivot.

Even the oddball tickers joined in. Perhaps as fittingly as Lego, Build-A-Bear Workshop popped after beating earnings forecasts, on track for its fifth consecutive record year, thanks to digital expansion.

Neither represents a bellwether of industrial might — but in this market, even teddy bears roar.

The Regrettable Repetition
Gold’s Primary Trend Remains Intact

August 29, 2025 • Addison Wiggin

In modern finance theory, only U.S. T-bills are considered risk-free assets.

Central banks are telling us they believe the real risk-free asset is gold.

Our Grey Swan research shows exactly how the dynamic between government finance and gold is playing out in real time.

Gold’s Primary Trend Remains Intact
Socialist Economics 101

August 28, 2025 • Lau Vegys

When we compare apples to apples—median home prices to median household income, both annualized—we get a much more nuanced picture. Housing has indeed become less affordable, with the price-to-income ratio climbing from roughly 3.5 in 1984 to about 5.3 today. In other words, the typical American family now has to work much harder to afford the same home.

But notice something crucial: the steepest increases coincide precisely with periods of massive government intervention. The post-dot-com bubble recovery fueled by Fed easy money after 2001. The housing bubble inflated by government-backed mortgages and Fannie Mae shenanigans. The recent explosion driven by unprecedented monetary stimulus and COVID lockdown policies.

Socialist Economics 101