https://blog.sentinel-team.org/p/special-report-rising-bond-...

https://www.cnbc.com/2026/11/12/in-policy-switch-fed-says-it...

Fundamentally, due to structural demographics, we have arrived at a capital shortage period after a long capital surplus period [1]; there will be, for long into the future, more projects chasing a shrinking supply of capital. This will continue to push interest rates up, which will also drive asset prices down (real estate, private equity, etc).

Tangentially, about a year ago, I predicted that the Fed could beat on the economy all it wants with higher rates and this would not cause mass unemployment, because the world is rapidly aging and how fast workers are retiring out of the labor force [2]. This thesis appears to have been proven accurate, but more time is required to make the thesis more durable.

[1] https://www.apollo.com/wealth/insights-news/insights/daily-s...

[2] https://news.ycombinator.com/item?id=44392820

Doesn't increasing interest rates reduce demand though? So they can't print more oil, but they can reduce the attractiveness of investments that will require oil, thus indirectly driving prices down?

https://www.rbc.com/en/economics/us-analysis/us-featured-ana...

https://www.cnbc.com/make-it/2026/03/06/e-shaped-economy-rep...

https://www.axios.com/2026/01/22/jobs-stock-market-rich-amer...

I didn't know this. I wonder if the concavity is symmetric between an increase and decrease in wealth...

In the US, the economy is passing increased money and energy costs to consumers. In China and other countries, they are rapidly electrifying light and heavy vehicles. Different responses to similar economic signals.

So maybe elastic or inelastic isn't a binary, but somewhat closer to a step function

Reducing our reliance on oil would be a very sensible response. Unfortunately, I don't think it is one our current government would consider.

Raising rates makes credit more expensive. That cools down growth. That, in turn, eases resource demand (as a function of the resource intensity of GDP).

Practically speaking, higher rates today would mean less borrowing to build datacenters. (And new homes, et cetera.) Which would mean those marginal resources going to other uses. Which would ease price pressure.

> there will be, for long into the future, more projects chasing a shrinking supply of capital

Capital is priced in rates. Too many projects chasing too little capital will drive rates up until the capital markets balance.

And current spreads indicate a surplus of capital [1]. That's why we're seeing e.g. multi-trillion dollar IPOs.

[1] https://www.macrotrends.net/3229/us-high-yield-bond-spread

This is only true if the cost of capital is a functional constraint. If the constraint is elsewhere (in this case: sourcing GPUs, bringing online energy resources) it will not have any significant effect.

When the expected return is very high because the captured resource is perceived to be monopolistic, this lever does practically nothing. Unless they raise it so much they destroy everything else.

Then there are not, by definition, "more projects chasing a shrinking supply of capital."

It can be true if it is a subset of “more projects”, if the decision mechanism works outside a market, or if that capital is accessible via mechanisms within the market which are not directly linked to borrowing rates, such as where the cost of capital was locked in years ago. Rates are not a panacea.

> This is supply-side inflation. You can still bring down inflation with rates by cooling demand. (Less free cash in the economy means less spending on AI means less demand for GPUs.) The downside is it costs you more output than in a balanced economy.

You said the same thing I said, just euphemistically. This is like saying you can rid your house of insects with a flamethrower.

Sure. Now do the next project that's going to lock itself in today.

> Rates are not a panacea

Nobody argued as much. Just that the effect has size and meaningful magnitude.

> You said the same thing I said, just euphemistically

No, I didn't. In an economy where private investment dominates consumption, you can reduce output and thus inflation without touching consumption, i.e. without impacting household budgets. You're giving up future jobs. But barring a large influx of new workers, something America doesn't have a problem with right now, unemployment will stay steady.

It's like chemotherapy: it works, but it destroys so much of the rest of your body in the meantime that sometimes you wonder if the pain is worth the gain.

Trump & Congress have access to much less painful means to lower inflation, but they've refused to act.

Reducing the deficit. Credit changes how private money is made through the monetary system. Fiscal policy directly creates and destroys dollars in the economy–it's fare more powerful.

Just households. The inverse of what Germany did.

Say a system had X capacity and 100% utilization. Now someone wants to build a data center that consumes 0.1X power. Demand is now 1.1X and to prevent the system from going over capacity 0.1X of pre-existing demand has to be destroyed.

Subsidizing other users makes the problem worse because they will increase their energy usage in response to the lower prices.

Every household gets X gallons of water a month at a regulated rate. After that, everyone competes equally.

Regulation and increased taxes/fees just make everything more obtuse and expensive, not better or simpler.

But you're right, we could also solve this problem very simply, without gradiated utility rates, by taxing the crap out of corporate profits and redistributing them to everyone else. This would punish corps who aren't building data centers, but if you don't mind turning the whole country into an AI server farm, I guess that would work too.

Money does, in fact, create generating capacity, as expensive, idling energy sources are turned up.

2016's $585bn DoD budget [1] bought what $817bn does today [2]. 2027's NDAA requests $1.1 trillion [3]. On top of like $100bn–on par with Saudi Arabia's military budget–we gave to ICE.

I'd generally consider myself a defence hawk. I think we should support Ukraine. I value our commitments to Korea and Taiwan. But what in the actual fuck are we doing blowing an already-bloated deficit on checks notes a WW2 battleship.

[1] https://dodcio.defense.gov/Portals/0/Documents/Library/2016%...

[2] https://www.bls.gov/data/inflation_calculator.htm

[3] https://comptroller.war.gov/Portals/45/Documents/defbudget/F...

Or taxes raised. I'm personally a fan of adding a few and then doubling all tax brackets.

Changing stupid energy policy that is propping up oil demand.

When China is selling batteries and solar below cost or at tiny profit, the federal government is effectively giving the subsidy to other countries.

When wind is the cheapest with the highest ROI we should be doing more of it.

I don't know if the new Congress is going to be able to put a stop to this.

Do some positives. Work with Congress to arrive at a sane resolution to the US economy's persistent reliance on undocumented labor. (The policy of deporting all immigrants, legal or not, is inflationary.) Implement a healthcare backstop policy to guarantee access to healthcare for all citizens. (Health insurance premium inflation is running around 2x+ overall inflation.)

There are a lot of options.

Rates can be raised, and demand cooled, without raising unemployment.

Sort of [1]. Labor-force participation stayed flat until federal lay-offs and tariffs hit [2].

[1] https://fred.stlouisfed.org/series/UNRATE

[2] https://fred.stlouisfed.org/series/civpart

The problem is it requires the economists to realise they've dedicated their education and professional careers to the economic equivalent of the heliocentric model.

Gross private domestic investment contributed more to output growth than personal consumption expenditure in two out of the last three quarters [1].

Reduce marginal investment, e.g. by raising the cost of borrowing for folks building datacenters, and you that demand goes away without any major shock to current employment.

[1] https://apps.bea.gov/iTable/?reqid=19&step=2&isuri=1&categor...

That's the point. They shift their investment into Treasuries instead of buying up land and turbines and power and GPUs. Also, as the rate goes up it gets harder to make the math math. So e.g. large construction projects get paused, et cetera.

Sometimes. Sometimes it shuffles them to other work, often less resource-intensive work. There is a lot of latent demand for construction.

We have precedence for supply shocks being cooled by rate hikes without causing an unemployment spike.

Cue companies like Microsoft and Oracle laying off even more workers to make room for the higher AI budgets.

We've seen a lot of the first in 2026 -- wage increases have dropped significantly below the rate of inflation.

In the private sector. The public sector (and what I'd call non-discretionary hiring, e.g. in healthcare) makes the response a bit more inelastic.

Elaborate?

Do you mean raising taxes and cutting spending?

The levers they can pull include using diplomacy to end of the stalemate at the strait of Hormuz that is increasing energy and shipping costs. Scrapping excessive import taxes (tariffs) inflicted since "Freedom day" could help some, though prices have a ratcheting effect and retailers are likely to pocket the difference to pad their profits.

They noodle tiny decimals of percents such the financial network effects make them richer.

That’s work to them. Zero meaningful contribution. They're TV personalities who offer nothing more to humanity.

Monetary policy is where the central bank changes rates. This is effective to a point. It defuses a lot of zero-interest nonsense but the primary idea was to cool the business sector by making borrowing more expensive. Thing is, we don't really do that anymore. We don't borrow a bunch of money to build a factory to make widgets. No, we simply financialize everything. Yes, we have a ton of AI debt now but (IMHO) it's not productive output. The big product and promise of AI is labor displacement. That's going to destroy the economy.

Private equity technically borrows money but usually only temporarily. The target gets bought, restructured, a loan is taken out against the assets to pay back to investors and the corpse is spun out before the debt explodes. The problem? The market seems to be wising up to this bargain and these husks need to be kept on the books longer than desired. PE firms are having to borrow to refinance. That's another house of cards in all of this.

But what really fuels PE and all of this? Real estate. Hoarding land has become the best performing asset.

So the second lever the government has is fiscal policy, specifically taxation. Prior to the pandemic, a lot of companies were afraid to raising prices too much as they'd lose market share. An energy crisis triggered a fundamental change in corporate attitudes to raising prices and we've had a ton of raising prices simply to maintain profits or in anticipation of inflation. Pepsi now is in deep trouble because they've discovered that people don't want to pay $8 for corn chips and Walmart's generic brand is $5 and probably made by the same factory.

In the wake of the pandemic some countries introduced a windfall profits tax. Basically, predatory price-raising should be punished with at least a form of wealth redistribution. These measures were few and far between however.

As an example, because of 2020 energy crisis (caused by Trump) and Russia's invasion of Ukraine, Europe has been in a deep energy crisis for years with no end in sight. Many European governments have tried to protect consumers by subsidizing electricity. Well, these energy providers are making record profits. Why aren't they taxing the back end to pay for those subsidies? Instead, we just have a massive wealth transfer from European governments to (often private) utilities and gas producers.

But fiscal policy, particularly in the US, never gets discussed int his way. We could solve so many problems by simply having a 50% corporate tax rate. The standard objection is "they'll move overseas". Well, you can't move land overseas, particularly mines and oil wells. And the IRS is capable of tackling transfer pricing and profit shifting. Well, they would be if they weren't deliberately starved by successive governments. And if all else fails, punish companies for moving overseas with tariffs. That's what they're actually for.

So, back to your question, no, I don't think the theory is sound because we have a malignant tumor at the heart of our economy, which is land-hoarding.

Can you elaborate on this please? I find this claim interesting and probably true. But it's not clear how you reached that conclusion.

It's worth adding a little about the subprime debt crisis and the GFC. Mortgage debt is probably the most liberal in terms of collaterization rules. You can borrow so much more of the value because housing was considered "safe". So subprime loans started at a low rate but then that rate kept going up. There's more to it of course but the point I want to highlight how this was a case of complicated debt that exploded.

Private equity is really the next generation of corporate raiding. Here's how it works. You start a PE fund and raise capital for it. You then identify a target you can profit from and do what's called a leveraged buy out ("LBO"). You borrow more money against your capital and the business.

A lot of businesses have been poorly performing and they're sitting on a ton of real estate appreciation. Toys R Us was a big example of this. Toys R Us was an old company so owned a lot of its stores. But now that unrealized gain doomed them.

The PE firm will typically restructure a company into two companies: one holds the business operations. The other holds all the real estate. The first one will have binding contracts to rent from the real estate holding company.

Somewhere in all this the new owners will take a loan out against the company's assets to repay the LBO. So they've basically gotten a company for "free" and just loaded it up with debt. The financial arrangements will be complex and you may find that the rents will explode in future years, ultimately dooming the business operations. Now if you're a PE firm, you don't want to hold onto that. You want to sell it. That usually means relisting it on some exchange.

At some future point the business collapses, the PE firms often still owns the real estate and because that real estate has usually kept appreciating, it's even more profit.

So if the real estate hadn't appreciated so much, Toys R Us and many other companies simply wouldn't have been targeted this way. We killed a longstanding business that employed thousands of people so a handful of people could cash in on appreciating real estate. That's all that happened.

For this to work, somebody needs to buy the business operations half. And investors are increasingly cottoning on to this. If you can't sell it, it stays on the books and none of this works. This is where the principals in PE firms are being asked to contribute capital to keep this ball int he air until buyers can be found. Also, there are now trillions in private credit to keep this all afloat.

PE defenders will bring up Hilton and Kroger as two companies that were arguably improved by these LBOs but they are the exception.

As time has gone on, PE has gotten increasingly evil too. Now it looks for what they call "pricing power". They've invented a new term because the existing term would make what's going on obvious. It's inelastic demand. PE now loves private utilities. People need electricity. Profits are guaranteed. People also need healthcare so a PE firm will try and buy up every medical practice in an area or every vet or every trailer park.

Adam Smith:

> As soon as the land of any country has all become private property, the landlords, like all other men, love to reap where they never sowed, and demand a rent even for its natural produce

Karl Marx (quoting Adam Smith in 1844):

> Landlords, like all other men, love to reap where they never sowed

and

> The landlords,... operate a certain kind of monopoly against the tenants. The demand for their commodity, site and soil, can go on expanding indefinitely; but there is only a given, limited amount of their commodity.... The bargain struck between landlord and tenant is always advantageous to the former in the greatest possible degree.

PE is just one of many distortions that come from a system that allows people to hoard land.

>So if the real estate hadn't appreciated so much, Toys R Us and many other companies simply wouldn't have been targeted this way. We killed a longstanding business that employed thousands of people so a handful of people could cash in on appreciating real estate. That's all that happened.

Which is in "large enough to direct blame and shame their way" part a side effect of the environmentalists and zoning karens who joined forces to combat the concrete jungle. Everything they did had the side effect of increasing the value of an already built, already paved site.

It used to be 50yr ago that an aged out facility, even a clean one, was a liability. Because if you wanted to do anything there you'd have to demo it or rehab it up to modern expectations/competitiveness (note I did not say code) which would cost more than starting from nothing. Last century's liabilities are now lucrative "brownfield redevelopments".

YIMBYism is often used an excuse for rampant deregulation. I believe that private developers won't ever build our way out of this problem because that hurts profit. It takes the government as a major player to solve this problem. People will point to examples like Austin having declining rents as a direct result of supply but that doesn't really invalidate my criticism.

UK supermarkets used to engage in a practice called land banking [1]. Basically they would buy up land and do nothing with it. They were buying it to prevent competition. And if land kept going up in value there was no cost in doing it. Ultimately Aldi and Lidl came along and ate their lunch by building in less desirable but cheaper areas. But another consequence was that it restricted the supply of housing.

What YIMBY policy would prevent land banking (hoarding)? You need something and it's not even more deregulation. The cost of just holding land needs to be higher. You need some form of land value tax [2].

More than a decade ago, I remember hearing about "investors" buying up all the trailer parks and jacking up the rents (eg [3]). This is entirely parasitic behavior. Any form of ground rent on permanent structures like this should be somewhere between illegal and uneconomical. The land of the trailer parks should be co-owned by the residents, period.

This has a huge negative social cost too. Trailer parks are often the housing of last resort for many. Make it unaffordable and people end up living in cars and them ultimately the streets. So what have we achieved here other than padding the profit margins of investors? We've shifted that cost onto the government, which is just another wealth transfer from tax coffers to the wealthy.

Ten years ago, Xi Jinping quietly popped China's real estate bubble, which has been in decline ever since. He famous said [4] "Houses are for living, not for speculation". It's funny reading Western reporting on this because China's real estate recession is viewed as a negative when it's just a correction from intentional state policy.

That required government intervention in the housing market. This would never have happened with any set of incentives of private developers.

[1]: https://www.theguardian.com/business/2014/jun/26/tesco-hoard...

[2]: https://en.wikipedia.org/wiki/Land_value_tax

[3]: https://publicintegrity.org/inequality-poverty-opportunity/w...

[4]: https://en.wikipedia.org/wiki/Houses_are_for_living,_not_for...

This is not immediately ringing a bell. Are you referring to the 5-7% drop in energy demand associated with the global pandemic?

Without recounting the entire saga, OPEC tries to maintain a floor and a ceiling for oil prices. Too low and they don't make enough money. Too high and it causes political problems. They meet every 3 months to project demand and they adjust supply accordingly. Some members cheat and lie about their output but the system generally works. One thing that keeps the Gulf powers in line is military support, particularly Saudi Arabia.

When the pandemic hit in March 2020, demand cratered. Futures prices briefly went negative because producers had nowhere to store oil and nobody was buying. This is where Trump cajoled MBS into cutting supply in a 2 year deal. This superseded the normal 3 month review and adjustment process so it wasn't even necessary. This deal was huge too. It would initially cut global supply by 10%.

So then in 2021 demand roared back and prices exploded. The Biden admin obviously came in in January 2021. They quietly went to MBS to get him to rescind the deal. MBS refused.

Republicans blamed Biden even though it was a Trump deal. Democrats blamed oil companies for being greedy because they, just like the Republicans, didn't want to upset Saudi Arabia even though Biden could've absolutely threatened Saudi Arabia with the weapons the US provides.

As to why MBS refused, it's complicated and there's a lot of history but a big part of it is that Trump screwed over OPEC in 2018 and (in OPEC's view) the Obama admin screwed them over in 2015 by removing the ban on crude oil exports.

What gets me though is nobody talks about the Trump 2020 OPEC deal.

[1]: https://www.reuters.com/article/economy/special-report-trump...

[2]: https://www.reuters.com/article/business/opec-agrees-largest...

My reading of the 1000+pg Basel3 document from BiS seems to point to the weighted risk categories being fundamentally flawed (relating to valuation for those risk weighted categories, not unsurprising given the subjective value of assets), not to mention the indirect business flaws that limit new banks potentially growing the number of GSIBs, leading to concentration of risk through sieving.

AI debt seems to be supercharging the indirect stagflation indicators which started showing up a few years ago.

Most empire's above a certain size inevitably run into internal conflict from land-use issues related to rentseeking and monopoly.

For anyone confused how the fed rate could go up without a fed meeting; it cannot. The above is shorthand for market predictions of the fed rate going up.

Finance being finance, the jargon around this is fucked.

The federal funds rate–"the interest rate at which depository institutions trade federal funds (balances held at Federal Reserve Banks) with each other overnight"–is set by the market [1]. (Well, by banks. But among themselves.)

The FOMC "meets eight times a year to determine the federal funds target range." The FOMC then directs the buying and selling of securities–usually Treasuries–to encourage that market rate into their range. (The FOMC is "composed of the seven members of the Federal Reserve Board and five of the twelve Federal Reserve Bank presidents" [2]. It's a superset of the Board of Governors.)

[1] https://fred.stlouisfed.org/series/FEDFUNDS

[2] https://en.wikipedia.org/wiki/Structure_of_the_Federal_Reser...

how did it

Eh, it's an issue. We should solve it now. (We should have solved it ten years ago.) But we have a little time.

Emergency will be stagflation. Crisis would be if the Treasury couldn't sell debt.

> the old method of raising interest rates to cool inflation isn't effective anymore with this sort of fiscal deficit, because it increases the interest payments

There is no evidence of this. There was in Japan. But Americans don't save as much as the Japanese, and the concavity of the wealth effect means that those who do don't tend to spend much more when their interest income rises.

Housing prices tend to go down or at least stabilize when rates rise.

You're right.

"...contractionary monetary policy increases both real and nominal rents. A 25 basis point unexpected increase in the 30-year fixed rate mortgage raises real (nominal) rents by 1.7 (1.4) percent 12-24 months following the monetary policy shock. We find that the effect is driven primarily by a shift in household demand from the owner-occupied market to the rental market. Using transaction level data, we show that when monetary policy tightens, renters are less likely to become homeowners and the home-ownership rate drops. This then crowds in the rental market and increases rents. We find that the increase in demand for rentals is accommodated by real-estate investors who capitalize on the higher rents by buying houses from owner-occupiers and renting them in out the rental market" [1].

Going back to the top, however, despite rent being "the single largest component of" CPI, we have not seen evidence anywhere of higher rates causing higher inflation. I suppose one could argue within the constant-unemployment state the effect of rates on inflation may be muted by the above. But again, being in an economy where private investment rivals personal consumption gives the Fed a lot more leeway on the upper limits of rate rises.

[1] https://business.columbia.edu/sites/default/files-efs/citati...

China specifically does not actually want to be the reserve currency and replace the US, a good reserve currency should be fairly liquid and they like the ability to shut down capital flows into and out of China.

The other alternatives are not great; JPY has the same debt problems as USD. EUR has the same debt problems in certain member states like France, and the fiscal/banking crossborder liquidity isn’t very good and the governance still fickle and precarious. CHF is too small.

One of these things is not like the others, one of these things just doesn't belong...

Austerity and entitlement cuts are what we've been trying since Reagan. They haven't worked. They don't work.

Raising taxes is unpopular, sure, but a) it can actually solve the problems—not just the symptoms, but make a good hard dig in at the root causes—and b) if we do it right, only a tiny fraction of the people will have to bear those increases.

Because what we need to be doing is returning tax rates to what they were like before Reagan. Before "trickle-down economics". Before all this black magic shit that has never worked, will never work, and any actual economist with a brain and a functioning heart could tell you would never work right from the start.

Yeah, I'm generally onboard for higher top tax rates, some additional higher brackets, and higher tax on investment income, ideally paired with lowered rates on the lower brackets/higher standard deduction. This would hit me, but I think we need it to avoid some of the more extreme populist futures.

But we also really need to fix spending, especially procurement, the amount of wealth that we're collectively being cheated out of via terrible government contracts is staggering, there's a large network of extremely inefficient businesses that live off of the federal govt. Also, the medical system, though my understanding is that Medicare is generally getting a better deal than private insurers.

But 99% of the time, if you say "reduce spending", everyone, on both sides of the aisle, will hear "stop helping people", which is deeply counterproductive, as well as being cruel.

1. Republicans get elected. Pass bills that cut taxes for businesses and ultra high net worth individuals. Maybe toss some crumbs to people.

2. Democrats get elected, notice budget deficit from previous cuts. Propose increasing taxes on W2 working class, including white collar. Businesses and UHNW people continue with their tax breaks and schemes.

3. Back to p.1

When you directly compare the US to Europe, the gap is widening rapidly.

Pretty clear that the high tax model is a complete failure. Not to mention a European brain surgeon is paid like a slave compared to an American one, and you can make those comparisons across any industry.

A Senior Engineer in Stockholm makes less than a new grad in the US, for example. And pays higher taxes!

Sweden may have fewer billionaires flying child models to tropical paradises for coke and popper fueled orgies, but I'm guessing their senior engineers plans for long term unemployment or serious injury/illness don't often include choosing between suicide or homelessness so maybe they're doing something right? I'm sure a happy medium exists and we don't need to go back to our 'great' (1950s) era tax rates though

large SUV? written off via accelerated depreciation.

hotel or travel or leisure? written off as a business expense.

W2 workers are taxed on wages (income), while capitalists are taxed on profits (so they are able to deduct a lot of stuff).

plus capital gain tax is 10%, while marginal income tax rate (fed+state) can be 50%+

We have to stop with these dumb extrapolations.

It's kinda like bitching about administrations for government spending when Congress controls it all.

Yes, as long as you don't allow companies to flood the job market with low cost foreign labor.

there is a huge gap between working class and capitalist class.

https://taxpolicycenter.org/taxvox/effective-income-tax-rate...

I am here to discuss Tax policy, not your racist jingoism

Tax policy is a red herring even if you don't realize it. Wealthy people never pay more than about 25% in tax. If you raise the actual tax rate more than that their tolerance for risk goes down and you gimp your economy.

I have far more in common with tech visa workers who are overtaxed on their W2 wages, than with big capitalist who never sells and never pays a dime to irs

If I fire a bunch of people in the US and hire the same number of people in another country to work on the same project, that's clearly offshoring. But what if I don't fire anyone in the US? What if I fire them five years later?

The whole thing is a mess for regulation and I suspect if you wrote regulations that weren't easy to bypass you'd hamstring local producers.

- Paid medical insurance for all

- Free child care

- Regulatory oversight which requires funding and committees etc

- Affordable housing (there are ways to solve this with gov spending and without, but likely we’ll need some form of gov incentives/spending)

I’m not commenting on the validity of these things individually, just that I don’t believe the Democrats since Clinton era have tried to reduce spending

Honestly I think it’s a fundamental hurdle with our political system. Charlie M’s quote of “show me the incentives and I’ll show you the outcome.”

The Budget Control Act of 2011 capped discretionary spending and cut $1 trillion over ten years, the administration further cut administrative spending by 20% via executive order in 2011. Subsequent actions reduced the deficit by $2 trillion, with 3/4 spending cuts and 1/4 tax increases (e.g. the 0.9% Medicare surcharge and capital gains taxes on earners of >$250k).

I agree with you, though, both parties seem to have stopped trying to reduce the deficit over the last decade, I think in part because it hasn't been rewarded politically at all.

My confusion is augmented by the focus on the first derivative (the deficit) during this period while the national debt rose by more than $10T [2#Background]. It's not clear what matters more on an admins report card. Interest accruing is arguably less under your control, which might be relevant to this question.

Finally, I'm struggling to understand why the 2011 passage of the BCA (which cuts spending in exchange for raising the debt ceiling) is attributed to Democrats primarily. Reading [2], if I were to narrativize it, the story seems to be that the Republicans, spurred on especially by the Tea Party, forced Democrats to agree to spending cuts.

Quoth Wikipedia: "The Republican Party, which gained control of the House of Representatives in January 2011, demanded that President Obama negotiate over deficit reduction in exchange for an increase in the debt ceiling, the statutory maximum of money the Treasury is allowed to borrow. The debt ceiling had routinely been raised in the past without partisan debate ... </quote>

Furthermore, in the House, 72% of Republicans voted for the bill, while only half of Democrats did. In the 112th Senate the story was more mixed, with about 86% Dems and 60% Reps voting yes.

I have not read all this shit in great detail but I hope you can appreciate my confusion, and invite you to indicate what I might be missing. For example, I don't why the deficit was so high in 2009. In one universe of explanations, the conclusion: it's not very praiseworthy to decrease the deficit you skyrocketed yourself.

1: https://www.us-debt-clock.com/data/deficit-by-year

2: https://en.wikipedia.org/wiki/2011_United_States_debt-ceilin...

Most mainstream economists think it's good for a government to increase deficit spending temporarily during a recession because it helps prevent deeper recessions that cause long-term impairment of the tax base. If you let half the auto industry fail, for example, it may take a long time for your tax base to recover and start generating taxable income again.

After the crisis, there was bipartisan agreement that the deficit needed to be reduced, but the disagreement was on how. Obama was willing to cut spending but also wanted to increase taxes on higher income households, while the Republicans in Congress drew a hard line against any tax increases and wanted deeper spending cuts. In the end, they reached bipartisan bills, including the American Taxpayer Relief Act of 2012.

The debt ceiling brinksmanship was political theater. Republicans used the threat of defaulting on US debt in order to extract concessions from Democrats without having to agree to any policy demands. Congress passed laws with required spending every year and no one has the legal authority to not spend it. If Congress really cared about reducing the deficit, they wouldn't pass spending bills that required deficit spending.

As for increasing debt in the 2010s, I think it was viewed as a potential long-term problem but sustainable because interest rates were quite low. When inflation was at 2% and interest is at 2%, the US government was able to borrow money at 0% in real terms. Government spending on roads, airports, and even marginally productive projects that increase economic growth could be viewed as rational.

I think the US and world got complacent during the low interest rate era, and eventually realized deficit-spending in a low-rate environment boosted economic growth more than expected. The US doubled down on this by passing the 2018 Tax Cut and Jobs Act, which reduced taxes significantly without cutting spending concurrently, which created large deficits even during periods of economic growth.

The problem now is interest rates have gone up substantially, so debt servicing is going to become a much bigger burden. I don't think it's politically possible to reduce the deficit through spending cuts alone. The annual deficit is greater than the entire US defense budget and Medicaid combined.

Unless we suddenly get a burst of growth from AI that will increase our tax base, (which I think a lot of politicians are counting on), a long-term fix will require increased taxes (which will slow economic growth at least somewhat) and reduced spending (in particular lowering healthcare expenses, which are still rising at an unsustainable rate).

Everything you just described is an investment that has a substantial positive output economically, Even when implemented incompetently.

It's so funny to see economic "rationalism" always pop up as soon as Democratic political waves appear, while when Republicans have all the control of the purse strings: utterly unrestrained fiscal malfeasance.

And the disturbing trend with Republican administrations is that the corruption and incompetence gets worse every cycle.

I would say "look at the numbers," but the 2008 housing crisis and the 2020 pandemic really don't make for easy comparisons.

But by a first order of approximation, I fear your statement is correct. Tax cuts sometimes goose the economy but always increase the deficit. Democrats sometimes advocate for tax cuts, but Republicans always do, regardless of the current macro-economic climate.

They might partially repeal tax cuts, but if they expand social security and medicare then the deficit will increase dramatically. Don't expect any of the recently elected senators to do the fiscally responsible thing when Social Security is insolvent in 2032.

(note: I did not say this was a bad idea.)

The only way out of this is to remove the profit motive sparking this avarice: either nationalize the healthcare, or ban healthcare insurance and regulate hospitals so tightly that they aren't allowed to profit as a business, the executives have capped pay, and the business can't be publicly or privately traded.

The laissez-faire approach to healthcare has completely failed in the US. Given it is the wealthiest country in the world, I cannot think of a more damning result.

Why do you think we have a free market approach to healthcare? Why can I only sign-up once per year unless I have a QLE? Why can I contribute a certain amount to an HSA which is triple tax advantaged with an HDHP but I can't with a PPO? If I have an HDHP+HSA why can I also contribute pre-tax dollars to an FSA that is use-it-or-lose-it for dental or vision only but if I have a PPO I can have a limited purpose FSA that can be used for medical, dental, and vision? Why are there contribution limits? Or even more basic, why is healthcare tied to employment?

The reality is we don't have a free market when it comes to healthcare at all, we have a hampered market where over the years we have politically regulated it into the abomination it is today with some of the worst incentives possible. We can certainly have the debate of whether a free market or nationalized healthcare is best, they both have trade-offs, but it's fallacious to assume we have the former and discount it entirely thus leaving either more regulation or nationalization as the only alternatives. More regulation is almost certainly the worst possible option, we've been on that path since WW2.

The average person cannot pay. Health insurance is designed to maximize extraction of wealth from the non-wealthy, while doing just barely enough that they don't immediately get register away. The reason for this is greed: sure, greed drives efficiency in capitalism, but if it isn't reined in via regulation we wind up with the abomination we have today.

This is exactly where we part ways though. You specifically said "laissez-faire", i.e. "leave it alone" in French; economically this is anti-interventionist, let the markets sort themselves out without interference from government. You are saying regulation is required for the market to function or it leads to what we have today and I'm pointing out that we already have enormous quantities of regulation in healthcare. I pointed out several very easy examples to identify with but by no means is that an exhaustive list of healthcare interventions. The very thing you are advocating for, regulations, has been increasingly attempting to "fix" this market for the past 80 years and our current system exists because of it, not in spite of it. It is not a free market in any sense of the word, and doubling down on more regulation will not improve it. I am more than happy to debate an actual free market or nationalized healthcare model, but further regulating this "free" market is misdiagnosing the system we currently have and assumes the same good intentions that have failed to improve it for four generations will somehow produce better results this time.

Seems to be flaunted in tech.

https://globalnews.ca/news/11812425/alberta-family-fights-fo...

https://globalnews.ca/news/11801531/bc-denies-funding-drug-c...

All economic systems allocate scarce resources which have alternative uses and thus rationing must always exists regardless of whether it is a free market, mercantilist, socialist, or as yet unknown economic system. Prices are a rationing mechanism within markets[1] but every other system will have its own set of one or more rationing mechanisms such as by-status, by-lot, by-need, by-survivability, etc. That necessarily means that there aren't enough resources to treat everyone for everything under all circumstances. Do you believe that all economic systems are thus macabre? If so I agree if only because life itself gives us hard choices, never utopic solutions.

[1] In terms of emergency healthcare by-need tends to be used even in market systems.

And the least accurate label to apply to the US health care system is "laissez-faire approach", since the government is involved in literally every decision.

But what actually happens is you pay $20, the insurer pays $80, and then the hospital has to remit a large block discount back to the insurer at some point (it's either the end of the quarter or year. I can't remember). I haven't looked into this in awhile, but when I did local area hospitals were discounting payments by almost 80%, meaning the insurance company actually pays $16 on that bill and the plan that's supposed to have you paying 20% of the bill actually has you paying 55.6% of what the hospital receives. Like I said, it's fraud. It may not meed the legal definition of fraud, but it's still fraud.

Profit, for various entities, is baked in at every level, in multiple ways that are very difficult to disentangle from the actual costs without getting real auditors on the ground with access to all the data.

GLP-1 treatments alone are responsible for a plurality of the rise in costs this year and next. Over $7000/per/year for a huge fraction of the population.

I guess nixing patents might have the same effect, but it'd be easier to get Republicans onboard an approach that simply cuts outlays rather than one that ruins the wet dreams of biomedical research private equity.

Sure, people should know what they are taking, and they should take things that are safely manufactured and safe to use.

But, there needs to be room for a person to make decisions as part of their body autonomy. I personally want to wait before taking peptides because they're so new, but people who see the initial results and want to be human guinea pigs should be allowed to.

There really needs to be a middle ground between a decade of testing on the off-chance that 1-in-1,000,000 parents gets an upset stomach, and ordering who-knows-what research chem from a sketchy website.

We're an incredibly rich society with a near universal ethos that cost should be no obstacle to life saving treatments, and by extension life prolonging treatments. Despite our many inequities we'll blow millions on treatments that extend life by 5 months. Sometimes (often?) we don't, and it gets roundly criticized as a moral failure, but nobody seriously suggests maybe our target standard of care should be something other than everything possible. (Ivory tower proposals abound but most of us regress to the mean when push comes to shove.) Examples of treatment unavailability that are scandalous here are the norm almost everywhere else, because countries carefully throttle the introduction of expensive therapies at their borders.

In this environment of course our healthcare costs will skyrocket, so long as there's a steady stream of marginally better therapies. We don't need fraud or corruption or misaligned incentives. Those things accelerate the situation and contribute to inequities, but the fundamental trajectory is just perfectly predictable and in a sense unfixable without either changing our shared ethos or fooling ourselves into rationing [future] care by sabotaging the pipeline of new therapies.

Now that is the number three or four. Depending on how you count, we're going for the actual number one, which is unfunded Medicare.

Unfortunately, the second highest expense now is interest on the debt accrued.

That's not how money is created:

* https://www.bankofengland.co.uk/explainers/how-is-money-crea...

When governments (or anyone) wants to sell bonds, the money has to already exist 'in the wild'. The selling of government bonds does not create new money/currency.

The pool(s) of money is already out there, and when bonds are offered, the people who control the pool(s) decide whether to buy or not.

Seems pretty clear historically

https://en.wikipedia.org/wiki/Producer_price_index?wprov=sft...

> US producer prices rose moderately in October, but inflation at the factory gate posted its largest annual gain in four years, supporting the view that the Federal Reserve could continue raising interest rates after next month's widely expected increase.

> Despite the better-than-expected monthly reading reported by the Labor Department on Friday, there were more signs of inflation broadening out beyond energy goods, with food prices increasing by the most in eight months as expensive diesel raised transportation costs. Prices of goods excluding food and energy logged their biggest gain since May.

First sentence of the submission btw.

People blame Biden (and Trump) for that, amongst other things related to Covid, so what do they do? Vote the party into power that loves nothing more than tax cuts so they do what they do and cut taxes aggressively on those same people who benefitted the most from Covid inflation (i.e., the wealthy) when almost all of their net worths have gone through the roof, which is precisely when you can raise taxes to account for the over-aggressive Covid handouts.

And even after all of that, when it looked likely the US was actually getting inflation under control, the same party doesn't put up any fight against its leader who rams through nonsensical tariffs and then starts a war that obviously will (and does) spike the price of the great elixir of growth, a material increase in the price of pretty much everything produced on earth.

As I said when the election happened, people finally woke up, but I just gotta say you cannot hate the politicians enough who caused all of this. Oh, and now we have the party that doesn't know how to balance a checkbook coming into (some) power to further exacerbate the whole thing (and thank god they are because the other guys are straight up crooks, but, man, if this doesn't end poorly there's no justice in the world (and I say that not in some gleeful way, but shouldn't there be some repercussions for the absolute idiocy we've seen these past 6 years or so?)).

Sorry for ranting. I just am so so mad because when you say "who is responsible for this?" people either raise their hands and say "wasn't me!" or, worse, point at the person next to or across the aisle from them. Maybe the silver lining is we're all responsible because we just stick our heads in the sand and let this go on (though, again thank god the election shows at least a little bit of a comeuppance. That's not a partisan comment if you can believe it!).

you should look up which of the two crazy parties actually has issues balancing the checkbook, you’ll be surprised it is not the one you think…

High energy prices?

* https://en.wikipedia.org/wiki/Cost-push_inflation

Geopolitical adventures by leaders who are clueless?

After the Big Beautiful Bill, I think that "the party that doesn't know how to balance a checkbook" may have switched sides. (I mean, the Democrats didn't learn how, but the Republicans drastically forgot.)

   Normally I would say no, but it was easy enough to search for
   and there's already a fair amount of discussion going on.  This
   is the hit I found in google news after searching for "us october
   ppi":

   [[ https://www.cnbc.com/2026/11/13/ppi-inflation-report-october-2026.html ]]

That's what happens when you put a person with no concept of what economic restraint is in the Oval Office and let him run the country like his own business ventures, which included a casino that went into bankruptcy. The nearly recession-proof business model could not weather his management style. And of course, he claimed a tax credit he didn't deserve on the write-off of said casino, just like many of his ilk have over the last generation or two, which has contributed to deficit spending, which in turn has been "dealt with" by quantitive easing (read: the Fed printing money backed by nothing).

It's been a f*cking decade of this guy. How are people still surprised that this is the outcome? And when are we going to legally do something decisive about it? I watched my late 20s and early 30s get fed through an economic shredder by this clown. Life milestones are passing my generation by.