Capitol Farce

“We don’t have a trillion-dollar debt because we haven’t taxed enough; we have a trillion-dollar debt because we spend too much.”

–Ronald Reagan, before tripling said debt

It’s business as usual in Washington, even as the bond market drops red flags

May 22, 2025 — ‘Don’t f*** around with Medicaid…’
— Donald Trump to House Republicans

We remind readers that we do not take sides…nor do we imagine that we know the future. Our goal is merely to try to understand the Primary Trend and thus avoid the Big Loss.

Being on the right side of the Primary Trend is the real key to increasing long-term wealth.

So far this century, investors beat the stock market (the Dow) three to one, just by being in the best, safest asset class — gold. Can that go for another 25 years? We don’t know…that’s why we’re paying attention to the farce now playing out on Capitol Hill.

We also remind ourselves that the Primary Trend is not determined by what people want…or what they expect. Instead, they get what they deserve… shaped by patterns of history rather than the conscious efforts of those who live in it.

In the news yesterday… Barrons:

The bond market’s May meltdown has taken a turn for the worse.

Long U.S. bonds sold off Wednesday, pushing their yields through their 5% ceiling…. Bond yields and prices move inversely. The rise in yields was exacerbated by a disappointing 20-year U.S. Treasury auction.

That 5% level has been the general cap on the 30-year for about two decades, and the security hasn’t closed above it since October 2023. The 10-year Treasury’s yield, at 4.539% on Wednesday, has moved past its own psychological threshold of 4.5%.

Why are bonds selling off? Congressman Thomas Massie told us yesterday. Bond buyers have eyes and ears. They see Congress recklessly passing another big spending/big debt budget…and they “realize we aren’t fiscally responsible.”

Bloomberg:

Congress Pulls Tax Cut All-Nighter With SALT Fight Unresolved

Once the House passes the bill, the Senate could take weeks — if not months — to revise and approve the legislation.

The Republican budget proposal…already more than 1,000 pages of exceptions, qualifications, ifs and maybes… is getting more complicated all the time.

We can simplify. The idea is to pass a ‘big, beautiful bill’ that changes everything… but nothing. Some spending will be cut. Some will increase. Some people will get a juicy plum (keep reading)…others will get lumps of coal. The ‘all nighters’ determine which group has the stamina, insomnia, or lobbyists to get what it is after.

Here’s another headline from yesterday. USA Today:

Senate unanimously approves bill to create tax deduction for cash

The deduction would only apply to cash tips and could be claimed by people who earn up to $160,000, which would rise along with inflation.

Wow. Not a single member of the Senate thinks that tips should be treated like any other form of income. Not a one of them, apparently, is worried about raising deficits by reducing taxes.

This is a sign of a country that is not ready for a major change in direction…one that is not desperate for reform.

And how about this? Donald Trump went over to Capitol Hill. His mission: to make sure Republicans didn’t actually try to cut spending. In addition to telling them not to ‘f*** with Medicaid,’ he told them that he didn’t want ‘anything meaningful’ cut, but was instead focused on ‘waste, fraud and abuse.’

This is what you’d expect…from a leader who is not interested in real disruption. No need to make sacrifices. No need to change course. No need to cut ‘anything meaningful’. Things are basically OK; just trim out the ‘waste, fraud and abuse.’

Are we already headed to a $60 trillion national debt…with interest payments that will take up half of all tax receipts? What’s the big worry? We’ll cut taxes on tips…and make the deficits even larger.

Have Medicare rolls doubled…to 80 million people (Trump himself added 10 million of them during his first term) since Obama expanded the program? Do they not cost $11,600 per person? And couldn’t $4 trillion be saved by turning back the eligibility standards to the pre-Obama era?

Couldn’t America really be made Great Again if some fundamental changes were made?

Nah, never mind…don’t f*** with it.

Regards,

Bill Bonner
Bonner Private Research & Grey Swan

P.S. from Addison: With no structural changes in the “Big, Beautiful,” bill as it makes its way to the Senate and to President Trump for signing, America’s debt crisis is shifting to overdrive.

Bond yields continue to soar, with the 30-year Treasury bond topping 5.1% today. The last time this level was normal for the bond market was in the halcyon days of 2002-2003, when the U.S. government ran a $374 billion deficit and total debt stood at “just” $6.7 trillion.

Even with all the gusto of the Trump administration, a tipping point debt crisis is still a very real possibility worth keeping an eye on. As we covered in detail in Grey Swan Live! for paid-up members today, the bond market’s moves could precipitate a crisis and cause a massive capital shift out of the stock market and fuel a move higher in gold and bitcoin.

Your thoughts? Please send them here: addison@greyswanfraternity.com

“We don’t have a trillion-dollar debt because we haven’t taxed enough; we have a trillion-dollar debt because we spend too much.”

–Ronald Reagan, before tripling said debt

It’s business as usual in Washington, even as the bond market drops red flags

May 22, 2025 — ‘Don’t f*** around with Medicaid…’
— Donald Trump to House Republicans

We remind readers that we do not take sides…nor do we imagine that we know the future. Our goal is merely to try to understand the Primary Trend and thus avoid the Big Loss.

Being on the right side of the Primary Trend is the real key to increasing long-term wealth.

In the news yesterday… Barrons:

The bond market’s May meltdown has taken a turn for the worse.

Long U.S. bonds sold off Wednesday, pushing their yields through their 5% ceiling…. Bond yields and prices move inversely. The rise in yields was exacerbated by a disappointing 20-year U.S. Treasury auction.

That 5% level has been the general cap on the 30-year for about two decades, and the security hasn’t closed above it since October 2023. The 10-year Treasury’s yield, at 4.539% on Wednesday, has moved past its own psychological threshold of 4.5%.

Bloomberg:

Congress Pulls Tax Cut All-Nighter With SALT Fight Unresolved

Once the House passes the bill, the Senate could take weeks — if not months — to revise and approve the legislation.

The Republican budget proposal…already more than 1,000 pages of exceptions, qualifications, ifs and maybes… is getting more complicated all the time.

Here’s another headline from yesterday. USA Today:

Senate unanimously approves bill to create tax deduction for cash

The deduction would only apply to cash tips and could be claimed by people who earn up to $160,000, which would rise along with inflation.

Wow. Not a single member of the Senate thinks that tips should be treated like any other form of income. Not a one of them, apparently, is worried about raising deficits by reducing taxes.

This is a sign of a country that is not ready for a major change in direction…one that is not desperate for reform.

Couldn’t America really be made Great Again if some fundamental changes were made?

Nah, never mind…don’t f*** with it.

Regards,

Bill Bonner
Bonner Private Research & Grey Swan

P.S. from Addison: With no structural changes in the “Big, Beautiful,” bill as it makes its way to the Senate and to President Trump for signing, America’s debt crisis is shifting to overdrive.

Your thoughts? Please send them here: addison@greyswanfraternity.com

But Green is describing more than just a new calculation. He’s talking about a new form of misery.’ It’s a poverty where you may still have most of the accoutrements of middle-class life. But your relationship with the financial elite has changed: you are indentured to the credit industry — for life.

Historically, when the Fed has cut into inflation above 3%, one of two outcomes tends to follow:

A brief reprieve, followed by a larger inflation wave (see: 1970s).

A crisis born from cheap money rather than expensive money (see: housing in the 2000s).

We are heading into another round of cuts with:

• A still-bloated balance sheet

• A new digital plumbing that auto-funds the Treasury

• Hard-asset markets flashing warning lights

Paul Tudor Jones summed it up in one dry quip: interest expense is now one of Washington’s largest bills; commodities are “ridiculously under-owned”; and “all roads lead to inflation.”

The Fed’s flip from QT to easing doesn’t end this inflation episode. It likely begins its next season.

The question investors should ask themselves isn’t whether this trend is sustainable – it isn’t.

Instead, they should ask if the $2 trillion increase in Google’s market cap has sucked capital away from other promising parts of the market – and if so, where investors can expect a rally when Google reverses.

Long have we dwelt on the corrupting influence of funny money on capital asset prices and on the economy. Everything gets distorted, perverse…and false. We get high prices. We get low prices. What we don’t get are honest prices.

Yesterday, we looked at the ‘small time crooks’ — ripping off the public for a million or two.

Today, we move to the big fry.

You’ll recall that the money in question was never earned by anyone. No one has a genuine claim to it. And what kind of apple falls from this funny money tree? Just what you’d expect…a funny one…with the worms already in it.