Chaos, ambiguity and uncertainty
Blatant lies
A very good post from Phil Bak: Things That Matter
“I often find that the biggest hurdle to clear when trying to get people to look squarely at what we know and what we can reasonably infer about the Jeffrey Epstein case is that for most people, it just sounds too horrible to be believable. Sure, the government's corrupt, politicians lie, yada, yada, yada, but they wouldn't do that. But we know they would because they have, and they've done much, much worse.”
- 5 1/2 hour podcast on Jeffrey Epstein by Darryl Cooper from a few years ago. Transcript.
For anyone who wants to downplay what Jeffrey Epstein was - including, stunningly, some prominent people on twitter - here is a 2006 article I suggest you read carefully. Note Alan Dershowitz’ slimy presence:
We can spend money by reducing revenues
This was excellent, by Harrison Lewis: Stop Calling It Tax Reform. It Isn't.
…They explained that if the federal government wants to encourage something, there are really two basic ways to achieve that public policy goal. We can spend money through the outlays side of the budget, or we can spend money through revenue side of the budget. That is to say, we can spend money by reducing revenues.
More nodding. Vague understanding coming into view.
And then a simple example finally did the trick: Home ownership. The government really likes home ownership (and home price appreciation) and wants to encourage more of it. So we have a mortgage interest deduction. That’s spending through the tax code - a policy provision specifically and expressly passed for the purpose of subsidizing the purchase of a home. Thus the promotion of home ownership.
To fully grasp the concept, just imagine a scenario for a moment in which instead of getting a tax deduction for the mortgage interest, the government just sent you a check. They’d keep your tax rate unchanged - no deduction - but they’d instead send you a check once a year for whatever the interest deduction would’ve been worth. Would you care? Probably not.
What’s the difference to your bank account? There is none. What’s the difference to the government’s books? Not one red cent. It’s a wash for both parties. The cost of the subsidy is the same and the benefit to you is the same.
But while there is no difference whatsoever for the government’s finances - same deficit and same debt - the political difference is MASSIVE!
Why? Perception.
The public, by and large, hates hearing about massive new spending programs. But a massive new tax cut, on the other hand…. Well… that’s a different story altogether!
So which program do you think a politician would choose to run on if given the choice? Sending millions of lucky homeowners a nice big check every year in perpetuity? Or running on a platform that calls for cutting taxes for millions of hardworking Americans? Same policy. Same cost. Different optics…
We can all probably agree that homeownership is a good and wholesome thing, but wouldn’t it seem a little weird to pitch legislation where the government is going to start sending checks out to perfectly affluent and able-bodied people just to help them pay their mortgages? And how do you reckon all those poor bastards who rent are going to feel about it?
Here’s a novel idea. Just pop it in the tax code instead. Boom. Job done.
“It may sometimes be expedient for a man to heat the stove with his furniture. But if he does, he should know what the remoter effects will be. He should not delude himself by believing that he has discovered a wonderful new method of heating his premises.”
Ludwig von Mises, Human Action
It’s not a macro call. It’s a lottery ticket.
Great writeup on sovereign CDS by Boring Bonds, PhD, CFA: Buying Default Insurance on America?
He explains things so even a caveman like me can understand.
“Buying CDS on US sovereign debt is a bet on procedural failure.”
In 2023, the so-called cheapest-to-deliver Treasury bond (the one you would price CDS with) was deeply discounted. It was the May 2050 30-year bond, with a 1.25% coupon. Issued near par (100) in 2020, it was trading around 55 cents on the dollar during the drama.
So, while the probability of a failure to pay during a debt ceiling standoff is extremely low, the payoff if there is one is extremely high. With one year CDS at 0.80% at the time and a payoff of 100% - 55% = 45%, government stupidity could earn an aggressive hedge fund a 55x return. Even if it was only the shortest of failures to pay.
CDS spreads were the highest they’d been since 2008 not because default was more likely, but because the payout was bigger.,,
The same setup is now in play for August 2025. The US hit the debt ceiling in January, and the Treasury has been deploying "extraordinary measures", essentially accounting tricks to keep the lights on. Those measures are expected to run out this summer.
If political gridlock drags on and Congress doesn’t act in time, even a minor payment delay could count as a Credit Event. That’s why CDS spreads are already creeping higher.
And if the executive branch decides to get cute — say, issuing ultra-long, ultra-low-coupon bonds to stretch out obligations — all bets are off.
In that scenario, the buyer of a 60 bps CDS could earn 55 cents on the dollar. That’s the potential for a near 100x return.
That’s not a macro call. That’s a lottery ticket.
Also, love the title of a new piece: “We’d love to buy Treasuries, but we’re not insane”: “the bond market isn’t broken because of regulation. It’s broken because pretty much everyone’s already in. And it’s become visibly risky.”
Lawrence Lepard
from the book, “The Big Print”
It was a beautiful fall day in New England. Three hundred attendees, representing some of the nation’s brightest business minds and captains of industry, sat in anticipation. Graduates of Harvard Business School, now leaders in their respective fields, had returned to their alma mater for a special event. On stage, three figures stood larger than life: Larry Summers, Hank Paulson, and Tim Geithner — architects of America’s response to the 2008 financial crisis.
It was 2018, precisely a decade since Wall Street’s house of cards had come tumbling down, taking with it the hopes and dreams of millions of ordinary Americans. Yet here we were, not in a court of law but in an academic setting, watching what felt like a victory lap.
Geithner’s voice rang out, clear and unapologetic. He extolled their actions as necessary and proper, even going so far as to suggest they should be praised for their response to the crisis.
The audience nodded in agreement, a sea of monetary leaders eager to absolve their idols, and perhaps themselves, of any wrongdoing.
Let me be clear. They knew that what they had done was wrong, but they were looking for redemption.
“Is there anyone here,” the presenters asked, their eyes scanning the crowd, “who thinks what we did was improper?”
The silence was deafening. Three hundred ambitious minds and not a single dissenting voice.
Until I raised my hand.
All eyes turned to me as I stood, my heart pounding but my resolve firm. “I disagree,” I said, as my voice cut through the stunned silence. “What you did was not proper, and here’s why.”
I laid out my argument, years of pent-up frustration and analysis pouring out. I spoke of the billions in taxpayer money funneled to banks, of the $20 billion in obscene bonuses paid out while Americans lost their homes and livelihoods, and of the fundamental injustice at the heart of it all.
Geithner’s response was swift and dismissive. With a hint of condescension, he characterized my proposal as “Old Testament justice — an eye for an eye —” an outdated form of justice unsuitable for the dire circumstances they faced.
As I sat down, I could feel the weight of hundreds of angry stares. The air in the auditorium was thick with tension; I had shattered the unspoken code of compliance.
But afterward, as the crowd dispersed for coffee, a few brave souls approached me. “Thank you,” they said. “You’re right. You said what needed to be said.”
“Fink owns bitcoin, lock, stock, and barrel.”
I may survive this cough.
The usual good stuff below, starting off with Philadelphia Fed President Patrick Harker lying on live TV - which is what Fed Presidents do. It’s their job, and it’s Steve Liesman’s job to kiss their ass.
It’s all propaganda now. All of it.
My next post will probably just be a paid-subscriber only summary of the best interview I’ve heard in a while - from an old favorite of mine and yours - so stay tuned, and Godspeed.
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