Art Blakey

OP, at his age if you can steer him away from orange Lamborghinis you are winning.

Congrats, you must be a proud dad.

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Unfortunately we're approaching fiscal dominance.

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Imo, we entered during covid response. The fastest rate hike in history being stimulatory (when combined by shifting issuance to the short end) was confirmation.

LINK

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You CANNOT INFLATE the National Debt away when you consistently run large annual deficits

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That is exactly how it is done. You're confusing nominal debt for debt/gdp ratio. Nominal debt goes up but at a slower pace than gdp. They need to take our 123% debt/gdp to 75 or 80. That can only be done by inflation. Austerity blows out the deficit further as tax receipts collapse while transfer payments increase.

Doge was a rugpull. Trimming defense spending was a rugpull. Cutting entitlements rugpulls the career of every member of congress. The 30 yr just hit 5%. What do you think is about to happen? Bessent went on tv yesterday and told us.

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You have no chance of getting re-elected if you aren't buying votes with government largess.

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While correct, of course, a bigger issue is total govt spending is 36% of gdp. Any meaningful cuts send us into a deep recession which further blows out the deficit as transfer payments increase and tax receipts collapse. I think this was explained to Trump and Elon while doge optimism was compressing yields. They can redirect the garbage and graft spending to something productive but our consumer/service oriented economy is still dependent on it in some form.

Big tariffs would have a similar effect and that's why we're starting to see a shift away from those to capital controls instead, specifically taxing foreign investment in US financial assets. This, will of course, suck some foreign money out of financial markets which will have to be replaced by the Fed and/or Treasury to keep markets inflated. The stock market effectively backs the treasury market since cap gains are the marginal driver of tax receipts.

TLDR: the least painful way out is inflating out and I think that's exactly what is about to happen. Boomers are going to pay for their health care but it's not going to come via cuts, it's going to come via shrinking purchasing power from their fixed income instruments.

They're both shitcoin scams.

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So explain why Powell is refusing to cut rates?

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It's really simple. He has lost control of the long end. After he lowered in Sept the 10yr yield INCREASED by 100 bips. If he lowers the front now the long end will take off on him again and he'll be forced into immediate yield curve control.

Once that happens it's over, any remaining credibility is gone and he'll have to buy it all in a QE spree that will make the covid debacle look tame.

How far is Trump going to let the market / bond fall

His entire agenda is predicated on lining the bond market up against a brick wall and shooting it in the face. Revitalizing domestic manufacturing can not happen as long as treasuries remain the global reserve asset. What is not clear is if he understands that.

They also want $50/oil and we're nearly there. Unless they are planning on subsidising horizontal drilling to the tune of $20+/barrel capex in the Permian and Bakken vanish and we get $150/oil in <1 yr. US shale has been >90% of global production growth for a decade. If that's not profitable, GL keeping a lid on oil prices.

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Trump has control of the situation and he won't let it get too bad.

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Trump to China: take your money and go home. The Nasdaq is nowhere close to having this priced in.

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In chart form