THE DEBASEMENT TRADE.

Peter St. Onge uses that felicitous term to contemplate the creaking fiscal edifice called Federal Borrowing.

First, it’s escalating debt interest payments, which go on top of old debt — we borrow every penny.

Second, it’s raising interest rates across the board as federal borrowing crowds out everything else — business loans, personal loans, mortgages.

Third, it’s raising concerns among investors -- the people who buy all that debt -- whether government will actually pay it back.

That's where the debasement trade, otherwise understood as a flight from dollars, comes in.

About 81% of voters say they care about the debt, but when they rank issues it comes around number 10 or 12, down with transgenders. Presumably because voters know in the back of their mind it’ll never be paid back.

It’s just numbers.

But it’s not just numbers to the investors who buy those bonds, including every major bank and pension fund. Their fear is already driving up interest rates -- bond yields -- which rise in lockstep with default risk.

And it’s driving the so-called debasement trade - gold and silver - as investors worry they’ll let inflation run to reduce the debt burden. So-called soft default.

This actually happened under Biden, where he added $8 trillion in debt but the debt to GDP ratio went down because of inflation.

In the extreme case, Weimar Germany used inflation to shrink their crippling national debt to the price of a loaf of bread.

Alas, Biden crashed out out before we got the loaf of bread.

James "Long Emergency" Kunstler suggest there will be no bread, only a long emergency that voters intuit is upon them.

The precious metals are sending out a distress signal in the futures charts this morning, even while the equities markets worldwide melt up. That’s got to be a bad combo. Something is going wrong with money everywhere. The overarching question is: will money continue to be money? (That is, will it be worth anything?) Money that is increasingly worthless leads to some of the worst social and political outcomes imaginable.

The authorities of the money world only pretend to be in control of the forces behind money and its movements. Money is subject to the laws of physics like everything else: actions and reactions. . . momentum / inertia . . . entropy. As economist Herb Stein sagely observed a half-century ago: “Things that can’t go on, stop.” An awful lot of things in our world need to stop if we want to continue the project of civilization. We can see, to our distress, that many things are actually stopping: Truck shipments of goods, idle freight trains, stores closing, closed down construction sites, restaurants empty. That tends toward rents, loans, mortgages not being paid. That leads to daisy-chains of broken obligations. Inflation reverses to deflation. Money starts to disappear.

In a deflation, money will stop losing its value. The catch is, people will have less money. There will be less of it around, chasing whatever goods get produced. Some people will have no money at all. The government will almost certainly attempt to counter that by giving them money created out of nothing. It will also give money to broke institutions like banks, and perhaps to businesses deemed “critical” to society. That will cycle back into money losing more value. We’ve been through this cycle a number of times in this young and turbulent century.

You’ve probably noticed that our country is seething with pissed-off citizens. All the machinations of the money authorities pretending to manage money have produced perversities, distortions, and spooky unintended consequences. Things manifest strangely. For instance, medical care is a godawful mess, namely, the ACA, Affordable Care Act. Got an acute problem like abdominal pain? We can give you an appointment three months from now, the HMO says when you call? Are they insane? Do they not hear themselves speaking? And you’re paying, like, $20-K-a-year for the family’s health insurance, so-called.

Is "gradually" becoming "all at once"?