Debt has seized power
The United States is now borrowing at ultra-long maturities at interest rates that have reached their highest level in twenty years.
And yet the economy is slowing and inflation is easing—conditions that would normally drive interest rates sharply lower.
But that is not happening, because:
markets are no longer focused on the economic cycle. They are now staring into the abyss of U.S. debt.
Investors are demanding a risk premium—additional interest to compensate for the growing threat of uncertain solvency.
In other words, it is no longer the health of the economy that determines the price of money. It is the bill—and the fracture—of debt.
And there is, of course, no reason why this phenomenon should remain confined to the United States.
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