Written by Bryan Lutz, Editor at Dollarcollapse.com:
Every Sunday morning I sit down to write a few thoughts.
Sometimes these thoughts end up being about life, other times they are on gold, geopolitical issues affecting the markets, or the economy.
Here are three thoughts for this morning:
1. US Treasury Bonds aren’t looking. Eventually, their return will be the same value as fiat.
After Nixon took the USD off the gold-standard in 1971 investors suddenly became interested in the bond market.
Treasury bond yields shot up.
Inflation shot up.
And investors wanted the high yield return. By the early 1980s, 10-year U.S. Treasury yields were above 15%.
You can see similar action after the “dot com” crisis and after the Great Financial Crisis(GFC), but something changed after 2010.
The Federal Reserve introduced Quantitative Easing(QE). They would start buying back bad debt from the market and then, over time, take it off the balance sheet.
So, the Federal Reserve printed the money to buy back bad debt, flooding the money supply, dropping interest rates to zero, which allowed for money managers to dump money into the stock market.
Why be interested in bonds when you and everyone else could just bid the price of markets up by dumping easy money into the stock market?
And that’s what happened.
Now the law of diminishing marginal utility applies here…
When applied to money: printing more and more units eventually makes each one less meaningful in exchange.
As the U.S. government issues more and more Treasury bonds to fund deficits, each additional dollar borrowed delivers less economic benefit (i.e., diminishing utility).
The first few trillion in debt might fund wars, infrastructure, or stimulus with clear returns.
But the next few trillion may just prop up asset bubbles, delay structural reforms, or pay interest on prior debt.
Result? Lower productivity and lower economic growth, which ultimately reduces returns on bonds.
Here’s what that looks like for the 10-year US Govt bonds:
The 30-year US treasury bonds are just a few years behind on the same bubble.
Can you see the symmetry?
Eventually, the fiat bubble returns to where it started – zero.
2. It’s been a hard week for Trump and most of his supporters. I want the bad guy to be Epstein.
Trump says, “No problem here.”
And, “Are we still talking about Epstein?”
The trafficking and rape and underage girls isn’t a small issue.
Deputy Director of the FBI, Dan Bongino wants to quit on that account.
Many of Trump’s supporters are being even more vocal. They’re speaking out publicly against his dismissal. After all, this was one of the main reasons Americans voted for him.
This is one story where you really want the bad guy to be Epstein, and I hope it is.
3. Socialists take note of Argentina. We do not lack resources. We lack resourcefulness.
Many people who are born into poverty have a rags to riches story.
The difference was that they made a choice.
They chose to believe that they had resources and then they found it within themselves.
Take Argentina, for example.
When Milei took office he slashed government regulation, intervention, and administration costs. Everything that was meant to protect people from their “lack of resources.”
Yet, when he did, this is what happened…
AIER reports:
Milei’s Economic Miracle: How Argentina Slashed Inflation to 1.5%
“Poverty also declined sharply, from 52.9 percent in the first half of 2024 to 38.1 percent in the second, with UNICEF noting that 1.7 million children were lifted out of poverty since Milei took office.”
He’s raised 1.7 million children out of poverty.
Anyone with the eye to see and the belief to take action can do the same.
2 thoughts on "3 Sunday Morning Thoughts – July 13 Edition"
Milei might have raised kids out of poverty for now, but what happens to those kids when he has to start paying back the IMF all the billions he borrowed to lift them out of poverty?
We discuss US debt, but overlook Argentina’s mainly because when the global south borrows from the West, the Banksters effectively own the country. Our oligarchs begin extracting resources and put the people to work for minimum wage. Instead of the country’s resources enriching the people, those resources make the rich oligarchs lots of money, and the people get the crumbs. This is why nearly all of the global south has shed dollars and become more aligned with China, India, and Russia (BRICS).
Borrowing money is the solution for right-leaning libertarians. Maybe that is a temporary solution while the Argentine economy grows.
Also, are you sure India is aligned with BRICS? The US is their #1 trading partner.