Planetary Wealth Extinction

Even in 1993, the bond market flexed its muscles and prevented Bill Clinton from passing the stimulus package he had promised voters. Yields rose and he couldn’t finance it.

Source: Getty Images

Thursday, April 10^th, 2025

Bill Bonner, writing from Youghal, Ireland

‘Countries are kissing my a** to negotiate trade deals.’

Donald Trump

How exhilarating it must be. To have the whole world bending over and puckering up.

What a feeling of power!

Like Gen. Irvin McDowell setting out to teach those Rebs a lesson at Bull Run…Bonaparte chasing the Russkies out of Moscow…or the Titanic under full steam.

And what a pleasure it must be to jerk them around. You threaten them with tariffs…and then, at the last moment, you ‘pause.’ And then, you single out the world’s biggest exporter for punishment…because he disrespected you! On your own say-so, you introduce the biggest tax increase ever (no need to ask Congress!) on everyone who shops at Walmart.

And you — not the free market, not the citizens themselves, not buyers and sellers — decide who wins and who loses. Trump:

“Based on the lack of respect that China has shown to the World’s Markets, I am hereby raising the Tariff charged to China by the United States of America to 125%, effective immediately… At some point, hopefully in the near future, China will realize that the days of ripping off the U.S.A., and other Countries, is no longer sustainable or acceptable."

We thought we’d seen it all. But there must be more to this story…a sequel… a Part II. After all, in what kind of a story would we see such vaulting pride without a fall that followed?

What kind of dull, predictable world would it be if the bully got his way?

Fortunately for irony, sarcasm and long-odds bettors…there are still plenty of surprises…and many slippery feed-back loops to circle around and bite the Big Man on his big derriere.

And there it is — the snakiest bond market since Adam — a huge beast…nourished by Democrats and Republicans over the last half-century. Thanks to the US fake money system…nearly un-interrupted deficits, including half-a-century of trade deficits as well as federal budget deficits…there are nearly $37 trillion worth of US notes, bills, and bonds (not including dollars) outstanding.

And of all the prodigious borrowers, none outdid America’s current jefe, Donald Trump. In just four years, he accomplished what took his predecessor — Barack Obama — twice as long, adding $8 trillion to the national debt. Now he’s back. And back at it. Spending is going up. Breaking Defense:

A $1 trillion defense budget? Trump, Hegseth say it’s happening

“We also essentially approved a budget, which is in the [vicinity], you'll like to hear this, of a trillion dollars,” Trump said while meeting with Israeli President Benjamin Netanyahu.

Debt is going up too. The Peterson Foundation:

The tax cuts proposed by President Trump and Republican leaders would reduce tax revenues by $7.8 trillion through the 2025–2034 budget period, according to the Tax Foundation. If not offset with spending cuts or tax increases, the tax cuts would increase deficits by $9.1 trillion over 10 years, including related interest costs.

And that’s in addition to the trillions in new debt already on the program.

But there is a wobbly planet in the Trump firmament. The feds can cut off trade with friends and ‘enemies.’ They can pump up the economy with stimmies. They can back the stock market with ‘put options’ and rescue packages. They can reduce unemployment by hiring people… and increase sales by spending money they don’t have.

But they can’t control the value of the money they spend… or control the cost of borrowing it. And when Planet Debt spins out of control, watch out.

James Carville famously remarked in 1993:

“I used to think that if there was reincarnation, I wanted to come back as the President or the Pope or as a .400 baseball hitter. But now I would like to come back as the bond market. You can intimidate everybody.”

But back then, the US treasury market counted only $4 trillion in federal debt. Today, it is nearly ten times as much. Worldwide there’s more than $100 trillion of debt that is either directly or indirectly calibrated to US Treasury market yields. And this week, those yields went over 5%. The Wall Street Journal:

U.S. Treasury yields continued to surge after President Trump’s sweeping duties, including a 104% tariff on Chinese goods, took effect Wednesday and investors raced to pull money out of bonds. In overnight trade, the 30-year Treasury yield briefly touched 5% before retreating. It was last trading at 4.835%, still up 12 basis points on the day and up about 45 basis points this week, according to Tradeweb data. Yields rise when bond prices fall.

Newsweek comments:

A swift and sharp sell-off in U.S. Treasuries is rattling global financial markets, shaking the foundation of what has long been considered one of the world's premier safe-haven assets.

Even in 1993, the bond market flexed its muscles and prevented Bill Clinton from passing the stimulus package he had promised voters. Yields rose and he couldn’t finance it.

Today, the bond market is much bigger and much stronger. It is where investors all over the world register their faith in the US dollar, the US economy, and US leadership.

But with enough tariff hikes, pauses and tax cuts, that faith could evaporate.

A big increase in bond yields would mean a big increase in the cost of funding US deficits.

Either the Trump Team would be forced to back off. Or, brace yourself for wealth extinction on a planetary level!

Regards,

Bill Bonner