There has been a little turmoil in the bond market. It isn’t just the U.S. bond market, as we have also seen trouble in Japan and even Europe. But the U.S. bond market is the biggest player.
Yields have risen, although not dramatically. There has definitely been some intervention on the part of the Treasury and the Fed, but we don’t fully know to what extent. They are also admitting that there is intervention to come.
Maybe it’s not “admitting” so much as trying to build confidence in the system. Just announcing the future purchase of bonds helped to slightly lower interest rates, but it didn’t last long.
It reminds me of the oil market and Iran. How many times did Trump announce that there was almost a deal or that the conflict would be over soon? It would drive down the oil price until people realized that oil was still not getting through the Strait of Hormuz.
Speaking of military conflict, Trump was asked by a reporter about the bond market. Trump said: “We have many types of intervention. That’s one. The ultimate intervention is our military. And if we have to use that, we will.”
WHAT?
I heard the commentators on CNBC just mocking Trump over the comment. Someone said that the bond traders are dispersed, so you can’t just drop a bomb on a group of people.
Sure, leftist commentators on television often make fun of Trump. But in this case, it was actually correct to mock him.
Is Trump saying that he is going to use the military against people who sell bonds? I suppose anything is possible in this second term.
Trump can’t blame Iran for the bond market. But even if he tried, he has already bombed Iran.
Is Trump talking about China? He is going to start a war with China because the Chinese central bank is lowering their holdings of U.S. Treasury securities?
Trump has absolutely no idea what he is talking about, and the only thing he knows at this point is how to make threats.
The people around him are a bit more sophisticated, but don’t take that to mean that they will do the right thing. The U.S. government just surpassed $40 trillion in debt, and there is no slowing down at this point. The only ultimate solution these people have is to create even more money out of thin air.
Gold and Stocks
This is probably why the price of gold is going up again. No matter how you interpret this turmoil in the bond market, it almost has to be good for gold.
If there is going to be more bond buybacks, as said by Bessent, how are they going to get the money to do that? They can only create the money out of thin air.
Is this trouble in the bond market the straw that will break the camel’s back? Trump and the Congress can only point to themselves in the mirror. Maybe this wouldn’t be happening if they didn’t spend so much money and rack up so much debt.
The digital money printing may be good for stocks, but it also spells trouble for the overall economy. A recession obviously wouldn’t be good for stocks in the short run.
I have said that the Fed won’t engage in massive monetary inflation to bail out the stock market, but it will do it for a crisis that threatens the major banks or the bond market.
Well, we already have trouble in the bond market, and we haven’t even hit a recession yet (that we know of).
I have zero confidence in this administration to do the right thing. They like to speak against the “democratic socialists” when virtually everything this administration does involves some kind of socialism or economic fascism.
If we get a hard recession, we could see the deficit balloon even more than it already has. This is not sustainable.