Liquidation Day

George Burns and Gracie Allen in ‘College Holiday,’ Source: Getty Images

Thursday, April 2nd, 2026

Bill Bonner, from Baltimore, Maryland

Seeking Alpha:

Foreign central bank holdings of Treasuries at the NY Fed at the lowest level since 2012

In simple dollars and cents terms, say goodnight, Gracie.

(Few readers will recall the close of the George Burns-Gracie Allen show. That’s one of many overlooked nuisances of growing old; not many people know what you’re talking about. And then, you can’t remember either.)

The debt goes up. Interest payments go up. Lenders disappear. And there’s no way to bring the ‘debt spiral’ under control. Shanaka Anselm Perera:

BREAKING. The United States Treasury’s own consolidated financial statements for fiscal year 2025 report $6.06 trillion in total assets against $47.78 trillion in total liabilities. That is a negative net position of $41.72 trillion. And that number excludes Social Security and Medicare, which CBO projects add another $50 to $70 trillion in unfunded obligations over 30 years. Steve Hanke and David Walker wrote in Fortune on March 23 that these numbers constitute insolvency under any standard accounting framework...But the numbers are the Treasury’s own. They are published on Treasury.gov. They are audited. And they show a government whose liabilities exceed its assets by a ratio of nearly 8 to 1. Now layer the war on top. Annual interest on the national debt reached $1.22 trillion in fiscal year 2025. That is more than the defense budget. More than Medicare. The war supplemental request for the Iran conflict exceeds $200 billion. The Federal Reserve cannot cut rates because Hormuz-driven energy inflation has pushed PCE to 2.7 percent and rising. Every basis point the Fed holds is a basis point that compounds against $39 trillion in gross debt. The war that was supposed to last weeks is now costing hundreds of billions while the borrowing cost of financing it rises with every barrel of oil that does not transit the strait. The arithmetic is circular and accelerating. The war spikes energy prices. Energy prices spike inflation. Inflation prevents rate cuts. Higher rates increase the cost of servicing $39 trillion in debt. Higher debt service costs expand the deficit. The expanded deficit requires more borrowing. The borrowing occurs at higher rates because the war is still running. The circle has no exit as long as the strait is closed.

This is why foreigners no longer want to hold US Treasuries; they don’t trust us to do the right thing. A nation deep in debt should be cutting back on its expenses, not increasing them. And a successful empire, late in the game, should be making friends and allies, not enemies.

An empire has to do two things in order to stay in business. It needs to provide security — not just for itself but for its vassal states as well. It also must nurture a financial system (with a solid currency) that allows people to produce and trade. If it can’t pay its bills, or keep the trade chokepoints open, what good is it?

On Monday (we were so sick yesterday...we couldn’t write), we focused on trading routes...and how the job of the empire is to keep them open.This leads us to a cluster of assumptions and guesses.

First, either our government is woefully ignorant of these things...or, more likely, ignorance is just a job qualification. Its real, historic mission is to weaken the empire. Intelligent, well-read leaders couldn’t do the job.

Second, the current policies and programs of the US government are a mixture of improv war and toxic chaos. The Strait of Hormuz was open. Now, it’s closed. POTUS says he will open it...then, he says it’s not his problem...and most recently, that he’ll end the war whether it is open or not. This is not exactly the strategic thinking that you’d expect from a great empire.

Third, the whole Trump team — or most of it — is hewn from scrub pine, not majestic oak. Hegseth’s character, for example, would be rejected by Marvel Comics as too much of a simpleton.

Bondi, meanwhile, should have her photo on a south Florida billboard: ‘Need a bond? Call Bondi!’ Trump himself, had his father not been one of the richest men in the outer boroughs, might have been a successful owner of a bar...or maybe a car rental franchisee.

Fourth, the original inspiration for the attack on Iran was said to be to obliterate its nuclear bomb program. It didn’t matter that Iran apparently had no nuclear program, according to international inspectors...nor that if it had, it had been obliterated last June...nor that it was actively negotiating in order to avoid getting bombed. Nor did it seem to occur to the Hegsethians that the more they bombed Iran the more Iran and every other nation in the world would want to get nuclear weapons to protect themselves from US bombing.

We don’t have an AK-47 at home. And there’s no battle-worthy tank in the back yard. We count on the feds to make these things unnecessary. Likewise, middle-level nations, who might be capable of making nuclear bombs, decided to spare themselves the expense.

Instead, they trusted in the US — the great empire — to protect them...and along with the UN and other international institutions...to administer a system of rough justice among member states.

Now they wonder: Can the US, its currency, its credit, or it military power really be trusted?

Regards,

Bill Bonner

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