Let's Not Make a Deal
Interest rates are probably on their way to all-time highs. And if that is so, it is the single most important financial news you’re likely to get today, this week, or this year.
Tuesday, August 4th, 2026
Bill Bonner, from Paris, France
Yesterday, we noted that the celebrity dealmaker who runs the USA seemed unable to make a deal. The deals either never come together...or come apart immediately thereafter.
And now that we have the makings of another ‘deal’ with Iran, comes the Wall Street Journal with cruel mockery:
“A friend quipped the other day that President Trump truly deserves the Nobel Peace Prize because he has already ended the Iran war eight times. Will the ninth time be the charm after his latest decision to call off a military escalation in search of a deal with the revolutionary regime?”
A superficial view suggests that the Trump team is profoundly incompetent. In the latest dealmaking miscue, Trump apparently forgot what the point was. He was supposed to be fighting terrorism...not manufacturing it. Dave DeCamp:
President Trump said on Saturday night that he decided to hold off on launching major strikes on Iran that he said would have inflicted “military terror” on the country, which came after media reports said he was ready to significantly escalate the war.
No matter. We know what he meant. It’s his way of dealmaking. We do something abominable. The enemy fires back in kind. Then, we come up with a new atrocity.
But what possible good can be achieved by this tit for tat approach? We searched Sun Tzu and Clausewitz; neither mentions mutual butchery as a wise strategy. What’s the logic...what do we hope to gain? How does it help POTUS?
Similar questions could be asked of his immigration crusade. He began with wide support for closing the gates. And he did close the gates, reducing the flow of ‘illegals’ to a trickle. This was a clear success. He might have taken a victory lap and stopped there. But the praise soon drained away like dishwater. Gracelessly rounding up people who had done no wrong...and treating them with brutish recklessness — on video...made Americans uneasy. The LA Times:
In the time since Trump took office...the share of Americans who want immigration “decreased” in the United States dropped from 55% to 30%. The poll suggests Republicans’ sharp anti-immigrant views highlighted before November’s election — which helped return Trump to the White House — have largely faded.
But let’s more on to more important issues. Bloomberg has the headline that matters:
30-year Treasury yield sounds alarm in longest run above 5% yield since 2007
This is, we believe, the Primary Trend, the show worth watching closely. Rates headed up in 2020. Now, they’re nearly 300% higher. And the big, BIG question is whether this 5% threshold leads to much higher rates...or is the end of the trend.
The last time we saw 5% was nearly 20 years ago. But that was a joyful meeting, with yields sliding merrily down the yield cycle. We’re seeing it again now...5%...but now, the gaiety is gone. Interest rates are probably on their way to all-time highs. And if that is so, it is the single most important financial news you’re likely to get today, this week, or this year.
It means it’s too late for the stock and bond markets. Too late to attempt a controlled ‘soft landing.’ We might as well step away from the controls. In those immortal words of George W. Bush, ‘this sucker is going down.’ And it’s going down in a blaze of glorious inflation...and, most likely, violence.
Yesterday, we took giddy delight in watching the administration bumble along. The empire’s sacred fantasies...its most cherished protocols...are being pressed into pulp. The rule of law...the unbeatable firepower...the capitalist, free-market paradise, the pure heart...the can-do spirit, the sharp brain — the glittering virtues of the Old Republic are being stuffed into the blender...and decanted as slop.
And with them was pureed the last hope of avoiding catastrophe. It might have been possible 10 years ago — with only $20 trillion in debt and falling interest rates. Determined thrift at home and minding our own business abroad might have tidied things up nicely, without violence or bankruptcy. The total paid on interest on the national debt in 2017 was only $262 billion. The 30-year yield was just 1.31%. The entire debt load might have been refinanced, long and cheap.
Combined with a balanced budget and genuine America First foreign policy...today, we might be in high clover. Instead, Trump and Biden both went for more short-term debt to keep rates as low as possible...as if they could keep borrowing forever without a rate increase. And now, mostly thanks to Donald Trump, US debt has doubled. And interest rates are rising.
By 2030, total US government debt will surpass $50 trillion. And even without a rate increase, at today’s 5%, the interest on federal debt would come to about $2.5 trillion a year.
The interest alone will force the feds to borrow more. And then, we can turn the page to the next harrowing chapter of ‘The Decline of the American Empire.’
Stay tuned.
Regards,
Bill Bonner
Gracelessly rounding up people who had done no wrong...and treating them with brutish recklessness — on video...made Americans uneasy. The LA Times:
-
In other words, those that entered illegally did nothing wrong.
It's those nasty ICE agents that are breaking the law!
To the media, it's $$$ to exploit.
Isn't the real question whether the Fed ultimately has only two choices? Either allow long-term Treasury yields to rise, with all the consequences for government financing and asset prices, or suppress yields through bond purchases (yield curve control), effectively monetizing part of the debt. If political pressure makes the first option unacceptable, doesn't the adjustment simply shift from higher yields to a weaker dollar and higher inflation?