“Midnight Black” vs. “Crow Black”

There’s always that one person at the office who represents the “Peter Principle”—the notion that certain folks rise to the level of their incompetence.

In the Biden Administration, that person goes by the name of Jared Bernstein.

Now, if Jared was heading up, say, an Ag Department program aimed at counting the number of boll weevils in the Mississippi cotton crop, well, he might get along just fine—and we’d be spared his incompetence.

Alas, Jared—and America—isn’t so lucky.

See, Jared Bernstein is Biden’s Economic Advisor.

He is the chair of the US Council of Economic Advisers.

He was senior fellow at the Center on Budget and Policy Priorities.

And yet this poor chap found himself in an interview for a documentary called Finding the Money:

Jared: The US government can’t go bankrupt because we can print our own money.

Interviewer: They print the dollars, so why does the government even borrow?

Jared: Well, some of the language is just confusing. The government definitely prints its own money. The government definitely prints money and lends that money. The government definitely prints money. [pause; to himself] It then lends that money by selling bonds. Is that what they do? [hesitation] They sell bonds and then people buy the bonds and lends the money. Yeah.

If ever you’ve wondered how it’s possible that the US government has accumulated history’s largest mountain of debt, and morphed over the last several decades from “Most Likely to Succeed” into “Most Likely to Turn Tricks to Afford Her Debt”… I give you Jared Bernstein as Exhibit A.

Now, the situation could very well be that Jared simply had a brain hiccup and just confused himself as he answered the question. I’ve been there, done that myself.

But the other possibility is that just because you have an Ivy League education and a bunch of credentials behind your name, that does not, ipso facto, mean you should oversee anything more significant than a riding lawnmower.

First: Yes, the Treasury Department prints Uncle Sam’s money. But assuming the government can’t go bankrupt is a stupendously smooth-brained notion. It most certainly can go bankrupt by way of hyperinflation.

The spin-doctors in government and their lapdogs in the econ industry will argue that hyperinflation is not bankruptcy, and technically that’s true.

But in practical terms it’s the difference between midnight black and crow black.

Not having enough dollars to pay your debts is functionally no different than having so many dollars in circulation that household savings deplete to effectively zero. Just ask Zimbabweans who resorted to using local currency for toilet paper because real toilet paper was actually worth more.

That’s not technically bankruptcy. The country was still functioning.

But in consumer terms, what’s the real difference?

Your savings that once might have been enough to purchase a house are now not even enough to buy toilet paper… because the value of your money has been destroyed.

Will the US reach that point?

Even asking the question seems a bit ditzy.

This is the 21st century. The money-men (and women) are smarter than their deceased predecessors, are they not?

Ummmm… no.

They are not.

The basic rules of supply and demand do not change with time.

Too little of something, and the price shoots up.

And yes, the government sells bonds to investors, who buy those bonds as a way of lending money to the government.

Which leads us into an equally troubling problem, as noted in a Finbold.com headline:

U.S. economic apocalypse imminent? Government debt market collapse begins

As the X/Twitter account known as Game of Trades notes:

U.S. government bonds have shattered a 40-year uptrend, with prices plummeting to levels not seen since 2013. This unprecedented decline, one of the most vicious bear markets since the 1980s, has inflicted significant losses on investors, particularly those heavily invested in Treasury bonds.

This is what I’ve been presaging for the last couple of years.

Bond traders are pretty much the smartest people in any room. They play in a different league than do stock-market pros.

They don’t see the writing on the wall.

They see beyond what’s visible and often focus on what most others refuse to see, or simply can’t see.

Bond prices sinking is a massive problem that money printing is not going to solve. When bond prices fall, bond yields rise.

And when bond yields rise, Uncle Sam’s debt costs rise.

And as you already know—because you’re a savvy Field Notes reader—Sammy’s already on the hook for debt-servicing costs that will equal nearly 15% of the 2025 budget.

Which means debt costs in 2026 are going to be even more painful.

And it will be even worse for 2027 (which is getting into the time frame when I think a full-blown fiscal/monetary crisis slams the US).

The bond market woes that Game of Trades highlights are a very real problem you won’t see widely covered in the mainstream financial press—and which Jared Bernstein probably doesn’t understand.

But you and I do understand it.

And we’re prepared.

If, however, you’re not prepared, then this dispatch is your wake-up call. Buy and stack gold. Buy and stack bitcoin. Buy and stack silver and Swiss francs.

I know I say that all the time… but I harp on about it because the crisis really is coming… And I want you to survive the best you can.