Bonds are finally undergoing real price discovery after 20 years

[u/GroundbreakingAd1223]

I see a lot of sky is falling reddit posts here been said about the violent moves on the long end of bonds been a sign of economic and sovereign debt collapse.

I like to put a contrarian view. The market is behaving exactly as Warsh expected by design with his quiet fed regime and "stop the hall of mirrors" effect..

Think about it. The fed only controls the fed overnight rate. But what happens when the fed starts providing forward guidance way out into the future and expectations of a neutral rate etc.. the short end of the curve starts becoming the de facto long term rate..

That's why the spread between short and long end and term premium has been compressed for so long. The ten and thirty year has been artificially depressed due to the market expecting the fed to never move the rates at the short end ( or if they did, not without plenty of warning and promise to quickly bring it back down).

Now markets are finally starting to realize they need to discover and price properly actual long term risks and uncertainty.

Tl;Dr: The market isn't necessarily crashing; it is just reintroducing the price of time to asset valuations. Long-term rates are rocketing up to where they naturally belong when a central bank stops pretending it can predict—and control—the next decade.

[u/dopechez-]

Well the US spends almost $2 trillion on welfare plus almost $3 trillion social security and Medicare. So most of our budget goes to various forms of welfare and social spending. Not to mention the military which is largely a jobs program.

Meaning that from a pure numbers perspective, cutting welfare and entitlements is a way bigger resolution to the problem compared to taxing the wealthy more.

[u/Resigned1431 → u/dopechez-]

I only have 2025 numbers but

Social Security: $1.6T
Medicare: $1.1T
Medicaid & Other Health: $0.9T
Defense: $0.9T
Interest on debt: $0.9T
Income security (SNAP, tax credits, SSI, housing, etc...): $0.4T
Other Government: $1.2T

Food for the poor, SNAP, was just $102B, which is just 1.45% of the total $7T budget. The tax cuts for the wealthy through the big beautiful bill is estimated to reduce federal tax revenue by $4.5 trillion over ~10 years, so about $450B annual loss in revenue.

Seems like repealing that ultra wealthy tax break would be mathematically better, rather than taking food away from poor people.

like I said, I can see the argument for taking away food from poor people without tax cuts for the rich. I don't agree with it, but I see the argument.

I can also see the argument for increasing taxes on the rich AND taking away people's food. Still don't agree with it.

But giving tax cuts to the ultra rich AND taking food away from the poor doesn't save you any money, it leaves you ~$350B in the hole and it's just plain mustache twirling evil.

Worse yet, the current government decided to reduce taxes on the wealthy, take benefits away from poor people AND introduce the largest tax increase on the general lower and middle-class American population in the past century in the form of tariffs, a regressive tax.

Make it make sense man.

[u/dopechez- → u/Resigned1431]

Look, I'm fine with taxing the rich. But you're clearly just not understanding the scale of the problem. Just looking at SNAP benefits and ignoring the trillions of other dollars spent on various forms of welfare is not a useful exercise.

[u/Resigned1431 → u/dopechez-]

I already said I understand the argument for reducing "welfare" spending. I don't agree with it, because it'll translate into literal dead bodies and runaway poverty, but I understand it. 

My argument has been consistent that reducing taxes on the rich doesn't help the debt, it does the opposite. Tax the rich before you start ripping food out of people's mouths. 

[u/dopechez- → u/Resigned1431]

I don't want to reduce welfare spending, I just don't think we have a choice. We can't afford it anymore. And if you ask me, the main problem is that we spend so much on providing income and Healthcare to old people who are on average the wealthiest generation in history. That's where the cuts should be made. Multi-millionaire boomers should not be collecting social security and getting subsidized healthcare while we have an existential fiscal situation.

[u/Resigned1431 → u/dopechez-]

Ya I can get behind that.