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The Borrower on the Other Side of Treasuries is a Deadbeat

The Borrower on the Other Side of Treasuries is a Deadbeat

Oct 5, 2023
Marty's Ƀent

The Borrower on the Other Side of Treasuries is a Deadbeat

It's important to understand the mechanics of what's actually happening if you buy a treasury bond. You are parting ways with cash to lend the government money in an attempt to make a "risk-free" rate of return in the form of interest over the lifetime of the bond plus some principal when the bond reaches maturity. When lending money for any reason it is important to do proper diligence on your counterpart (the borrower) the increase the chances that you get paid back. Diligence typically requires a credit score, some insight into the health of the borrower's balance sheet, their income, and how they typically spend their money.

If you apply this level of diligence to the US government when thinking through whether it makes sense to lend them money by purchasing their treasury bonds, it is insane to think that there is any demand for treasuries at all. Currently, our government is led by a President who can't form coherent sentences and a uni-party that acts on behalf of special interests. That same government is spending money on things that are making the US economy more fragile. Think; the subsidization of "renewable energy" that is making our grid systems less reliable and more expensive. The subsidization of a hyper-industrial food industry that is making everyone fat and unhealthy. A healthcare system that is becoming more expensive as it attempts to treat the increasing amount of woefully unhealthy people. A pharmaceutical industry that is worried more about profits and creating lifelong customers than actually curing those woefully unhealthy people of their ailments. An education system that indoctrinates the youth of this country instead of teaching them valuable skills that will allow them to be productive members of society. A massive military budget that is supporting a military that can't pull out of a 20-year war without handing the country we occupied back to the terrorist group we "saved" it from. And a banking system that is structurally insolvent.

Why on God's green Earth would anyone lend this entity money? Especially when you consider that it is already $33.48 TRILLION in debt. Lending money to the US government is no different than lending your deadbeat cousin who is tens of thousands of dollars in gambling debt and addicted to Xanax some money so he could "win it all back". It makes absolutely no sense. And as we highlighted last week, it seems that more and more people are beginning to come to this realization. US Treasury bonds are being dumped harder and faster than gym memberships in February.

The whole world has been lulled into a false sense of "risk-free treasuries" security over the last forty years while the borrower has turned into an absolute degenerate. And there is panic in the streets as everyone is beginning to realize that they are holding debt instruments that aren't going to be worth much when they mature. People are learning the hard way that nothing is "risk-free".

The way out of this is to stop enabling the degenerate by lending it money and seek alternatives. Treasury bonds have had so much demand over the last half century because people have, again, been led to believe that they are "risk-free" liquid assets that can store value over time. As it becomes clearer that treasuries are not what they have been cracked up to be more and more people will be looking for alternative and bitcoin is the most obvious alternative on the market right now. It is a liquid digital bearer instrument with a hard capped supply that lives on a distributed ledger that cannot be manipulated by central planners. When you buy bitcoin you are buying a hard asset that comes with no borrower risk. The only risk you take on is custodial risk; can you or the exchange that you trust secure your bitcoin properly so that you have access to it at a moment's notice? That is the risk that comes with using bitcoin as your long-term liquid savings vehicle.

It makes much more sense for people to put their wealth into a hard asset like bitcoin that cannot be manipulated by central planners and that they can possess themselves. It makes even more sense when you consider the fact that wider adoption of bitcoin drives the price higher, increasing the purchasing power of the productive class that holds it. Giving them a greater ability to go out, invest and be productive throughout the economy in a distributed and emergent manner. Ridding the world of terrible central planners who waste so much precious capital. (They're objectively terrible at capital allocation. History has proven this time and time again.)

Keep this in mind as the world begins to seek answers in the coming years as it becomes abundantly clear that tens of trillions of dollars have been lent to a deadbeat government.

Final thought...

Happy for the Bears fans in my life.


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