MUTUALLY ASSURED ECONOMIC DESTRUCTION. Large-scale tariffs are the "big red button" that closes the US capital account off to the world. The US has had to mirror China's closed capital account to protect itself from a system so good at giving it what free markets want. 1/

RT @Daniel_VonAhlen: @countdraghula This is your best substack post!!.

14/ . it's the inevitable fiscal spend that occurs after. If the BoJ cancelled all JGBs, nobody would know the difference until the govt started spending in size. Resource limits cause inflation, not monetary tinkering.

13/ Finally, here's an instructional guide on inflationary money printing. Shortening issuance is just a tactic on a sliding scale of debt tricks authorities can pull. The most extreme is debt cancelation. But like shortening issuance, cancelling debt isn't inflationary. .

12/ I wrote a piece here on why I dislike QE - not because it did anything bad (it does little), but the trade-off was destroying trust in the Fed from the commoner. Silly. This piece annoys people that use QE as a scapegoat for everything.

11/ Lower term issuance doesn't cause a bond rally either. This is partially because no bonds end up in benchmarks and most buyers are duration matched with issuance. I've traded markets with low issuance and it actually discourages buying. Off the run liquidity is poorer.

10/ There is a key difference at the moment. Inflation is above target, but so are short rates. I don't think this invalidates the steepener thesis but likely supercharges it.

9/ . and coupled with on hold or falling policy rates is a yield curve steepener. The chart below highlights each QE period and the movement in 2s10s.

8/ It did drive confidence nearly every time it was tried though, and I do believe this drove an easing effect. This shouldn't be a surprise as most times the market was begging for it. Surging confidence and a better outlook should be bearish for bonds. .

7/ This in turn loosens FCI and should deliver easing and should drive inflation. However, in the ZIRP, NIRP and QE days of the 2010s it did sweet FA for inflation. Think it avoided deflation? That's a theoretical argument.

6/ . as many have commented, this plan is just QE done by the Treasury instead of by the Fed. QE assumes duration risk by the Fed on behalf of the market, with the theory being that the market search for risk elsewhere (credit, equities etc).

5/ It is fair to be worried about inflationary effects with a push towards lower Fed funds, but a shortening of issuance isn't a worry without that second order effect of deficit expansion. Now, when it comes to shortening and QE. .

4/ If I'm wrong and it doesn't result in a bigger primary deficit then a lower interest cost will be contractionary as borrowing requirements would fall as would money creation. Monetary policy is a very distant second place to fiscal in economic effect.

3/ For Trump this is just the common-sense decision. Why pay more for debt if we don't need to? Fair enough. Where the overheating risk lies is that the savings on interest cost are likely to just find their way in a bigger primary deficit. Primary deficits stick.

2/ First up I don't consider shortening debt issuance to be a concern. The US government doesn't have refinancing risk like a corp does, so it's purely a choice on the economics. Fade the doomers. The risk lies in the fiscal deficit.

Shortening debt issuance is the functional equivalent to QE, and QE is unambiguously a yield curve steepener (but ambiguously bond bearish). This seems counterintuitive (there is less long-term debt?) but respect (1) Say's law and (2) it might increase the primary deficit. 1/.

RT @fejau_inc: The market is already beginning to price in a major dovish pivot in monetary policy once Powell is gone. March and June 2026….

"Workers & Resources: Soviet Republic" in realistic mode is one of the most brutal "tycoon" games I've ever played, and it's a recent-ish one. They still make them. Hugely detailed economic model in which you have to run a profitable communist city to win (the irony).

7/ It could be as simple as dutch disease making any real industry uncompetitive. I just hope Australia cashes in on its leveraged US equity bet before the global system changes.

6/ Australia shouldn't be a current account surplus country, it is small and should be attracting foreign capital. However, we end up borrowing at great rates with a great credit rating to just send it offshore again.

5/ . but leaves little in the form of productive Australian assets to hand down to the next generation. Super and housing are the ultimate form of financialization which are both forced forms of saving which cause other bad effects.