The Dirty Work of History

Could these things be corrected? Could the slippage be stopped? Yes, theoretically. But in practice, History has her own story to tell.

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The farm in San Martin. Source: Author

Thursday, May 21st, 2026

Bill Bonner, from San Martin, Argentina

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We’ve come back to San Martin to see how our daughter and son-in-law are doing. They’ve taken on a big project — looking after our farm here in the Calchaqui Valley.

“No one has ever made any money in the valley,” our lawyer warned us. So far, we haven’t proven him wrong. But we haven’t given up. Stay tuned...

In the meantime...

Yesterday, we lamented the ouster of the ‘last conservative’ in Congress — Thomas Massie. With him out of the way, the Trump Express – on the way to the grim, little town of Perdition, USA – is picking up speed.

“Five percent is the new four percent,” comments Guneet Dhringa on Bloomberg. He’s referring to yields on US bonds. They’ve gone up, meaning...the value of the bonds themselves has gone down. Meaning, the cost of borrowing has gone up. Meaning...an economy with more than a hundred trillion dollars in combined public and private debt is going to feel some pain. A 1% increase on $100 trillion is...well...$1 trillion more in interest to pay. Some people, already at the margin, won’t be able to keep up.

But why are yields rising? Could it be that the smart money is getting out of dollars...and out of US government debt? CNBC:

Japan, China lead foreign government retreat from US Treasurys as Iran war fallout stokes currency fears

USA Today:

The 30-year U.S. Treasury bond hit its highest yield in nearly two decades on May 19 as concerns about inflation permeate financial markets.

At about 5.2%, the yield on the 30-year was the highest since 2007. Bond yields — interest rates — rise when prices fall, and vice versa.

Traders and investors have been selling bonds of all durations because the fixed income streams they offer become less valuable as prices rise throughout the economy. Inflation has surged since the start of the Iran war, pushing up prices for energy and goods that need to be transported.

Yesterday, too, we described the three main opinions on the US decline.

Trumpian — the USA is number one and will stay that way

Positivist — the USA is slipping, but can stop the decline with the right policies

Spenglerian — the USA is doomed

We go with the Spenglerian view. DEPF — details, elaboration, politics, and fakery — has taken over the US economy, imposing heavy costs and counterproductive behavior. Violence. Wokism. Welfare. Corruption. Deficits. Greenland. Iran. A $1.5 trillion Pentagon boondoggle. $39 trillion in debt. $2 trillion deficits. Tariffs. Sanctions.

Could these things be corrected? Could the slippage be stopped? Yes, theoretically. But in practice, History has her own story to tell. It is a story of sturm and drang...boom and bust...life and death. So, History sidelines the sensible Massies...and finds dumbells and stooges who will do her dirty work.

But China has its dumbells, its central planners and its DEPF too. For an entire generation, China’s policies favored exports. But its industries made things and sold them to people who couldn’t afford to buy them. Americans paid in dollars, which they got on credit.

China took the fake money and bought US Treasurys. Since the US was such an important market for Chinese goods, the yuan tended to follow the dollar — down (Chinese authorities ensured this with what they called a ‘managed floating exchange rate’ where the value of the yuan was tied to the dollar).

Low interest rates (part of the DEPF complex) led to too much debt in both countries. Local communities in China lent far too much to developers, who built apartments for people who didn’t exist. Officials have acknowledged that there are between 65 and 80 million empty apartments in China. Those apartment buildings are now being torn down...and the municipalities are going broke. Total government debt in the US is about 125% of GDP. In China, it’s equal to 300% of GDP. The Wall Street Journal:

The Achilles’ heel of Chinese industrial policy is its cost and waste. China runs bigger budget deficits relative to economic output than the U.S. Outside advanced manufacturing, the economy is moribund, weighed down by debt, deflation and aging demographics.Many critics thus expect, even hope, that Chinese industrial policy will eventually implode under the weight of its own contradictions.

China? The US? Which is destined to be the world leader in 2030? Or which is most likely to blow up first?

Regards,

Bill Bonner

P.S. Preparations for the fiesta at the farm.