You’re Already Paying the Bill

It’s not the debt that will break America. It’s the hypocrisy.

Two specific men spent years warning that rigging the Treasury market to hide the true cost of the debt was going to blow up the American economy. Yet now those same two men are running that same playbook—only hotter than former Treasury Secretary Janet Yellen ever did.

What’s going on here is inside baseball, for sure, but stick around—because you’re already paying the bill for this hypocrisy in your rent, your groceries, and basically every dollar you spend and save.

For today’s dispatch, we’re stepping back a week, to a Treasury auction held on July 30, when the US Treasury Dept. sold $110 billion in four-week T-bills at a yield of 3.63%.

That single auction is now the biggest chunk of debt Uncle Sam sells at any one time. And Treasury will have to run it over and over again — every four weeks.

Forever.

Or until the wheels come off the economy again.

And I know that 3.63% doesn’t sound like much—I get that.

But let me give you the comparison…

In early 2021, when Yellen took over as Treasury Secretary, the same 28-day auctions were going off at a yield of just five basis points. That’s 0.05%—basically free money.

Today, what was once free money costs Uncle Sam more than 70 times as much to borrow for the same 28-day cycle.

And it gets worse.

Roughly 85% of everything the Treasury Department now issues are T-bills—short-term paper that has to be paid back inside a year.

That is the exact scheme that Scott Bessent (now Treasury Secretary) and Stephen Miran (a former Federal Reserve Governor) publicly called dangerous and misguided back when Yellen was running that plan.

Bessent, in particular, was on television back then, when he was a hedge-fund jockey, calling Yellen’s approach a manipulation of the yield curve.

Now, here we are, running Yellen’s same playbook at doom-scroll speed.

Ahhhh, the smell of hypocrisy in the morning.

And let’s go from bad to worse, because why not…

Fully 20% of America’s $39 trillion in debt comes due in the next four months. And a third of the entire federal debt—that’s $13 trillion, give or take—is up for refinancing within a year.

So, what we’re looking at is the Treasury Department having to refinance America’s mortgage every 30 days or so… and praying the rates don’t go higher, which, as I mentioned in yesterday’s dispatch, is something economists call “fiscal dominance.”

And it’s a death-rattle for America.

Basically, the Treasury is now running America on the world’s largest Adjustable Rate Mortgage.

And because a lot of that debt was issued at near-zero pandemic rates, every single time Treasury rolls over maturing debt, the debt resets at substantially higher rates.

The family analogy: Imagine resetting your mortgage payment every month and living with the stress that rate hikes could wipe you out.

And here’s where all of this slaps all of us in the wallet…

The vast and increasingly larger amount of debt the US has to constantly sell means bond investors have already begun demanding more return for the risk they perceive. That hits mortgages. It hits credit card interest rates that make the balance you carry pricier.

It means greater inflation across much of your life that eats away at your paycheck and your savings account.

No wallet in America escapes this.

And let’s wrap up with this little treat: Treasury desperately needs the Fed to cut rates so that Uncle Sam’s rollover costs decline. Yet that just fuels even greater inflation that slams the consumer even harder.

Yet Fed Chair Kevin Warsh told the world at his July 29 press conference that the Fed is determined to bring inflation back toward 2%, which implies rate cuts that Treasury can’t afford.

But cut rates, which the Treasury is praying for, just means inflation runs even hotter.

Ultimately, there is no exit.

America is in the mother of all Catch-22s.

And every four-week Treasury auction is a monthly reminder of why Uncle Sam is a lot like his people: Wildly overindebted and putting everything on the credit card.

Which brings us back to where we started: the debt isn’t what breaks America. It’s the hypocrisy of the men who saw this coming—but decided to run the treadmill even faster.

Your wallet is the collateral damage.

And a crisis is the finish line. It’s coming.

More on that soon…