I've usually already read other sources and gleaned the points from them, so I read your posts less for information than for the cherry on top of the sundae: clarity. That is, you have a knack for taking colorless, technocratic reports on economic issues and making them colorful and engaging. As a result, your analyses are what stick in my head and cause me to feel that I 'get' it. Thanks!
I’m so grateful for your thoughtful, clear and timely explanations of what the hell is happening. As soon as your Substack alert pops up, I drop whatever I’m doing (even if it’s Wordle!!) and read and think and understand more. Thanks for keeping us informed!
Apparently every Wednesday they offer bonus puzzles, so when you opened Wordle today you may have missed it. “Wordle in 1” is one of those bonus puzzles.
You can try downloading the NYT Games and Puzzles app to access it today. Since I played it already I can’t send a link.
Thank you so, so, so much! We all "know" in our guts that we are walking on the edge of a steep drop-off into a ravine that we can't see the bottom of. We hear the pebbles clatter as they go down. We can't hear if they ever hit the bottom. It is less worrisome if we understand why we are being pushed to the edge of the ravine and who is doing the pushing. It's pretty clear from Bessent's recent foray into the market that nobody in Trump's inner circle knows how to rescue us if something bad happens. (It's a really bad sign that the Treasury secretary's name is as recognizable as the president's name. Finance should be boring.) Forewarned is forearmed. Here's hoping the managers of my 403(b) are investing more responsibly than Wall Street is.
Thank you for continuing to share your explanations with all of us. As an ordinary person in the U.S.—and a retiree—I’m no economist or financial expert. But this week in particular, seemingly unrelated reports are beginning to connect: rising bond yields and borrowing costs, enormous AI investment and debt, a weakening labor market, and a trade report increasingly influenced by AI-related investment. Is our economy really as strong as it appears? And how resilient is it if something goes wrong? Tomorrow’s jobs report may tell us a little more.
The Divisia M4 Index weighs different components of money (currency, checking accounts, T-bills, and commercial paper) by how liquid they are. A rising M4 growth rate means broad financial liquidity is expanding rapidly.
For a 10-year Treasury investor, this implies several critical risks:
Monetarists argue that "inflation is always and everywhere a monetary phenomenon." A consistent month-after-month expansion of broad money Divisia M4 at 7.9% suggests that consumer prices could feel upward pressure in the future, threatening to erode the long-term value of a fixed 4.75% coupon. If broader assets appreciate at or near the rate of M4 growth, holding a 4.75% bond means you are losing purchasing power relative to larger capital investments.
The Treasury is financing deep fiscal deficits, it pumps vast liquidity right back into the system. It effectively offsets the Fed's quantitative tightening (QT), which explains why Divisia M4 is surging at 7.9% despite high policy rates. The acceleration of Divisia M4 from ~4.5% late last year to 7.9% in July 2026 implies a massive wave of monetary liquidity is already baked into the pipeline with a lag of 12-18 months. If the 7.9% growth in Divisia M4 fully translates into a parallel resurgence in consumer price inflation by 2027, the 10-Year U.S. Treasury yield could realistically peak between 5.50% and 6.25% in the 2027–2028 window.
If the average blended yield on a $40 trillion federal debt load reaches 6%, the baseline annual interest expense will skyrocket to $2.4 trillion. When a nation's debt load reaches $40 trillion, the Treasury and the Federal Reserve find themselves in a mathematical checkmate where every single policy lever they have cures one symptom while worsening another. If they choose to implement Yield Curve Control (YCC) on the long end to artificially cap interest rates, or if they choose to do nothing and let the free market price the benchmark 10-Year Treasury, the end result is equally perilous.
“Every morning I wake up grateful nothing has gone too badly wrong yet. What I worry about is whether we’d have the competence to get out of it if it did.” —Ditto that.
Oh, this is great! Trump is now threatening to start a trade with the U.S. Federal Reserve. If the Fed doesn't lower the interest rate, Trump will cut off trade with countries with which the U.S. has a trade deficit.
You can tell Trump didn't write that post himself. He would have dangled the preposition. Natalie must have written it.
So, countries with which the U.S. has a trade deficit: China and Mexico top the list. Then Canada, Germany, India, and Japan. Not necessarily in that order. Just broad categories. So, really, Trump will cut off trade with Canada and Mexico? Nothing like isolating yourself from your closest neighbors. Will we have to build a wall with Canada, too?
I've usually already read other sources and gleaned the points from them, so I read your posts less for information than for the cherry on top of the sundae: clarity. That is, you have a knack for taking colorless, technocratic reports on economic issues and making them colorful and engaging. As a result, your analyses are what stick in my head and cause me to feel that I 'get' it. Thanks!
I’m so grateful for your thoughtful, clear and timely explanations of what the hell is happening. As soon as your Substack alert pops up, I drop whatever I’m doing (even if it’s Wordle!!) and read and think and understand more. Thanks for keeping us informed!
Have you tried Wordle 1 yet? First time this morning for me.
No, I looked for it, but did not find it (is it on another site besides NYT?
Apparently every Wednesday they offer bonus puzzles, so when you opened Wordle today you may have missed it. “Wordle in 1” is one of those bonus puzzles.
You can try downloading the NYT Games and Puzzles app to access it today. Since I played it already I can’t send a link.
Good luck.
Sent you a DM
Thank you so, so, so much! We all "know" in our guts that we are walking on the edge of a steep drop-off into a ravine that we can't see the bottom of. We hear the pebbles clatter as they go down. We can't hear if they ever hit the bottom. It is less worrisome if we understand why we are being pushed to the edge of the ravine and who is doing the pushing. It's pretty clear from Bessent's recent foray into the market that nobody in Trump's inner circle knows how to rescue us if something bad happens. (It's a really bad sign that the Treasury secretary's name is as recognizable as the president's name. Finance should be boring.) Forewarned is forearmed. Here's hoping the managers of my 403(b) are investing more responsibly than Wall Street is.
Thank you for continuing to share your explanations with all of us. As an ordinary person in the U.S.—and a retiree—I’m no economist or financial expert. But this week in particular, seemingly unrelated reports are beginning to connect: rising bond yields and borrowing costs, enormous AI investment and debt, a weakening labor market, and a trade report increasingly influenced by AI-related investment. Is our economy really as strong as it appears? And how resilient is it if something goes wrong? Tomorrow’s jobs report may tell us a little more.
The Divisia M4 Index weighs different components of money (currency, checking accounts, T-bills, and commercial paper) by how liquid they are. A rising M4 growth rate means broad financial liquidity is expanding rapidly.
For a 10-year Treasury investor, this implies several critical risks:
Monetarists argue that "inflation is always and everywhere a monetary phenomenon." A consistent month-after-month expansion of broad money Divisia M4 at 7.9% suggests that consumer prices could feel upward pressure in the future, threatening to erode the long-term value of a fixed 4.75% coupon. If broader assets appreciate at or near the rate of M4 growth, holding a 4.75% bond means you are losing purchasing power relative to larger capital investments.
The Treasury is financing deep fiscal deficits, it pumps vast liquidity right back into the system. It effectively offsets the Fed's quantitative tightening (QT), which explains why Divisia M4 is surging at 7.9% despite high policy rates. The acceleration of Divisia M4 from ~4.5% late last year to 7.9% in July 2026 implies a massive wave of monetary liquidity is already baked into the pipeline with a lag of 12-18 months. If the 7.9% growth in Divisia M4 fully translates into a parallel resurgence in consumer price inflation by 2027, the 10-Year U.S. Treasury yield could realistically peak between 5.50% and 6.25% in the 2027–2028 window.
If the average blended yield on a $40 trillion federal debt load reaches 6%, the baseline annual interest expense will skyrocket to $2.4 trillion. When a nation's debt load reaches $40 trillion, the Treasury and the Federal Reserve find themselves in a mathematical checkmate where every single policy lever they have cures one symptom while worsening another. If they choose to implement Yield Curve Control (YCC) on the long end to artificially cap interest rates, or if they choose to do nothing and let the free market price the benchmark 10-Year Treasury, the end result is equally perilous.
“Every morning I wake up grateful nothing has gone too badly wrong yet. What I worry about is whether we’d have the competence to get out of it if it did.” —Ditto that.
Oh, this is great! Trump is now threatening to start a trade with the U.S. Federal Reserve. If the Fed doesn't lower the interest rate, Trump will cut off trade with countries with which the U.S. has a trade deficit.
You can tell Trump didn't write that post himself. He would have dangled the preposition. Natalie must have written it.
So, countries with which the U.S. has a trade deficit: China and Mexico top the list. Then Canada, Germany, India, and Japan. Not necessarily in that order. Just broad categories. So, really, Trump will cut off trade with Canada and Mexico? Nothing like isolating yourself from your closest neighbors. Will we have to build a wall with Canada, too?