The Cadence of Death Itself

After the Peace of Westphalia came the glory of the nation state — one people, one place, and one King...typically united by one common language, one God, one law.

King Louis XIV of France, The Sun King. Source: Getty Images

Tuesday, September 29^th, 2026

Bill Bonner, from Ardmore, Ireland

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The big news yesterday was this. Interest rates are shooting up. Asia Times:

Japan flashed the first warning, with 10-year yields hitting a 30-year high near 3%. [Last] week, US Treasuries followed, with yields reaching levels unseen since 2007 — traders called it “Black Wednesday.” Thirty-year yields sit at 22-year highs; 10-year yields are at two-decade highs.

Longtime Bonner Private Research sufferers (you have our sympathy) will remember 2020, when the 40-year interest rate cycle finally bottomed out. With the US 10-year note plunging below 1%, it was all risk and no reward, the Big Loss waiting to happen.

The Primary Trend of the credit cycle was now headed to higher priced credit, we guessed. And here we are...six years later, the 10-year yield is over 5%, and bond investors are back in the saddle…demanding higher interest rates to compensate for inflation.

The answer to the question — what’s the big deal? — is right there. There are now $365 trillion dollars’ worth of debt in the world. The 400+ basis points between September of 2020 and September of 2026 represent about $14 trillion annually. That’s how much more it would cost to pay interest at today’s rate on the whole enchilada compared to the rate six years ago.

This brings up the other question you’re probably not wondering about. Hauled out of the water and now flopping on the deck is our catch of the day — the modern warfare/welfare state. A shark fattened on surfers, it’s the government we’ve lived with all our lives. We’re going to cut it open to find out what’s inside...and why interest rates matter so much.

Governments come and never quite go. Among the clickety-clackety of high heels and leather soles in our Capitol city, you can hear the echoes of Greek democracies...the Roman Republic...and the Empire. Socialism, Authoritarianism, Oligarchy, Kleptocracy; the marble walls have heard whispers of them all. The welfare state is fairly recent. But the warfare state is as ancient as the bow and arrow. Donald Trump’s quest to build a monumental arch is just another way of saluting it.

After the Peace of Westphalia came the glory of the nation state — one people, one place, and one King...typically united by one common language, one God, one law...and the willingness of young men to be shot dead for them.

America was never a nation-state, despite much yearning and pretending on the part of many political leaders. Its people were diverse. They were governed neither by a dictator nor a monarch. And they could talk nonsense in any tongue they wanted.

The US was designed for a modest, inexpensive government...leaving people free to build whatever lives they could. Good, bad…rich, poor – it was none of the feds’ business.

But in this Post-WWII era...this fish morphed from a friendly freshwater carp into an apex, ocean-going predator...a Big Government. The public believes it is in control. Voters think Washington ‘works for us.’ Or, as Hillary Clinton put it, with a straight face, ‘government is all of us.’

The theory seemed to justify the practice. Why not spend money if we were spending it for our own good? Why worry about the debt, inasmuch as we ‘owe it to ourselves?’ These poor lambs actually believe they run the shearing shed.

But butter costs money. And we don’t mean to reveal any state secrets, but the feds are skint…broke…busted…no bread…like nothing.

Counterfeit dollars gave them plenty to spend. For 40 years — 1980 to 2020 — falling interest rates eased the annual carrying cost. And the more they spent, the more The People wanted them to spend...and the greater the damage inflicted on any politician who dared to oppose them. Everybody can see that these pension and medical care programs are dragging the whole country towards a fiscal crisis. But even ‘conservative’ Republicans, if there are any left in ‘public service,’ are afraid to propose cutting back.

So…what happens to these social programs when politicians and central bankers fail to rein them in? They cut themselves back. The politicians continue to pay. But the value of their money goes down...along with the services they promised.

A single percentage point in interest rates takes $3.65 trillion/per year out of the present world economy to pay for the spending of the past. And in the last six months alone the yield on the 10-year note — the diesel fuel of our financial system — went up about 100 basis points (1%). William Pesek continues (in the Asia Times):

Things are likely even worse than the data show. IIF economist Emre Tiftik notes… “as benchmark rates rise, interest expense is set to surge, while structural pressures from healthcare and public pension spending remain largely unaddressed.” At the same time, mature-market governments now spend more on interest expense than the world invests in either artificial intelligence, defense or clean energy.

It’s the unforgiving arithmetic of a Ponzi scheme.

Fewer young people are paying into the system. And many of those who should be paying in, are instead taking advantage of the loose, over-generous programs and getting payouts.

Meanwhile, rising interest rates, marching to the unrelenting cadence of death itself…doom the whole swindle. The feds can still ‘print’ money...but the bond market – once burnt, now doubly shy -- sends a bill every time.

Regards,

Bill Bonner