Druckenmiller: WWII debt was paid for by suppressing yields, causing double-digit inflation which was paid for by the people, and it's still a bad idea

Druckenmiller understands our predicament very well, but even he won't call for raising taxes, which we must. 

How much government spends is NOT the only variable. 

That is the Big Lie of our time.

  

Commentary: Let the Bond Market Speak By Stanley F. Druckenmiller (Wall Street Journal) -- Aug. 24, 2026 05:27 PM

 

The Treasury Department announced on Aug. 19 that it would double the size of its long-dated bond buybacks, from $2 billion to at least $4 billion per operation, aimed at the 10- to 30-year sector and running from Sept. 9 through Nov. 4.

The announcement came after the 30-year yield touched a 19-year high.

Yields fell within minutes.

By the next afternoon they had round-tripped to levels above where they started.

The market's verdict was swift and correct: This wasn't liquidity management, it was price management-and a mistake far larger than $4 billion suggests.

Treasury's announcement gave the game away.

It justified the larger operations as liquidity support in sectors with "consistent strong sponsorship from market participants," but strong sponsorship is the definition of a healthy, working market. 

There were no failed auctions, no dealer balance-sheet seizure, no forced unwinds, nothing resembling Treasurys in March 2020 or U.K. gilts in September 2022, the sort of genuine dysfunctional episodes that justify official action.

Volatility was contained, and trading was orderly-not a malfunction but the machine doing its job.

Consider what the machine was pricing.

Inflation is 3% to 4% and has been above the Fed's target since 2021.

Unemployment is 4.1%, full employment by any definition.

The deficit is running near 6% of gross domestic product, a number America has never before produced in peacetime at full employment.

The national debt crossed $40 trillion the same week Treasury intervened.

Net interest will exceed $1.1 trillion this fiscal year, more than the defense budget.

The 10-year yield, even after the summer selloff, sits at or below the economy's nominal growth rate.

That means a borrower (federal government) running 6% deficits at full employment, with above-target inflation, still funds itself at roughly the rate its economy grows.

Historically, that configuration is accommodative, not restrictive, of financial conditions.

The bond market wasn't being a vigilante, as some would argue.

It was being a pushover that had finally begun to clear its throat, and Treasury moved to quiet even that.

I have spent five decades trading on a simple premise: Markets aggregate information no committee possesses, and prices are how that information reaches decision makers.

The long-term Treasury yield is the most important price in the world.

It is also the only fiscal disciplinarian the U.S. has left.

Neither party will run on entitlement reform.

Both have spent the past decade expanding commitments while ignoring arithmetic.

Democracies don't repair their finances because a budget office publishes a table.

They repair them only when the cost of inaction becomes visible and immediate, when mortgage rates bite, when auctions tail, when the political price of a rising long bond finally exceeds the political price of touching spending.

Every basis point of artificial yield suppression is a subsidy to procrastination.

Suppressed long rates sugarcoat the interest-cost projections, shrink the apparent urgency, and let incumbents assure voters the debt is someone else's problem.

If Congress and the administration are unlikely to touch entitlements even with the market's signal, they are certain not to touch them without one.

Whatever this operation saves in basis points, it will cost multiples in delay.

Yield management always begins as a technical operation and ends as a policy commitment.

From 1942 to 1951, the Federal Reserve capped long Treasury yields to finance World War II.

The cap outlived the war, financed deficits with printed money, and fueled double-digit inflation.

It took the 1951 Treasury-Fed Accord to dismantle the cap, followed by years of financial repression that quietly taxed a generation of savers.

U.S. policymakers built the wall between debt management and price management for a reason.

This intervention starts dissolving it.

Within a day of the announcement, Treasury Secretary Scott Bessent indicated the operations could grow beyond $4 billion, and analysts observed that Treasury can double them again and again.

When the bond market didn't respond to this threat, senior Treasury officials told reporters that the department could use the Treasury General Account to intervene.

Once markets believe Treasury is defending a price, every rise in yields becomes a test of official resolve, and the operations must grow to survive the tests.

There is a quieter cost, too.

Buying back long bonds while funding the purchases with bills shifts duration, or long-term interest-rate risk, out of public hands-economically, a small dose of quantitative easing run out of the Treasury rather than the Fed, easing financial conditions while inflation sits above target.

These enlarged operations happen to run through the final stretch of a midterm campaign.

Debt management that even appears to follow the political calendar spends the one asset that took two centuries to accumulate: the credibility of the Treasury market.

That asset doesn't regain its value so easily.

During the debt-ceiling fight in 2011, I said a brief technical delay in payments would be terrible, but less terrible than another decade of can-kicking without reform.

In 2013, Geoffrey Canada and I toured college campuses calling the entitlement trajectory what it is: generational theft.

Transfers that accounted for roughly a quarter of federal outlays in 1960 consume 70% today.

I told students, "I love entitlements, but I want them for you guys," when they turn 65, not merely for my generation at their expense.

In 2023 I said Washington was spending like drunken sailors, with federal outlays up from 20% of GDP before Covid to 25% after, and I called Secretary Janet Yellen's failure to term out the debt at generational-low rates the biggest blunder in Treasury history.

Every household and corporation in America locked in low rates, and the one borrower that needed to most, didn't.

At prevailing rates, interest expense reaches 4.5% of GDP by 2033 and 144% of all discretionary spending by 2043.

We are tracking those markers early.

Anyone who tells you entitlements won't be cut is lying-not about the outcome but about who decides it. 

Either we restructure the promises deliberately, on our terms, protecting those who most need them, or the bond market restructures them for us, all at once, on its terms.

The defense of the buybacks writes itself: It is a routine tool, introduced in 2024 for liquidity and cash management, trivial against a marketable debt stock approaching $30 trillion.

All true but beside the point.

Routine operations aren't announced off-cycle, at double size, on the heels of the long bond's hitting a two-decade high, with a signal that they can grow without limit.

Judge an intervention by what it responds to.

This one responded to a price, not to plumbing, which is exactly how the market read it, and why the effect evaporated within a day.

You can't buy your way out of a solvency conversation with liquidity tools.

You can only postpone the conversation and raise the eventual price.

What should happen instead is straightforward.

Return buybacks to their stated purpose: small, scheduled, off-the-run liquidity operations announced at quarterly refundings, never off-cycle responses to yield levels.

Term out the debt honestly and pay the price the market sets.

If the 30-year must trade at 5.5% to clear, that isn't a crisis.

It is an invoice.

Then do the only thing that durably lowers long-term yields: address the primary deficit.

Reform entitlements gradually and honestly, through means testing, indexing changes, eligibility adjustments phased in over decades-so that the burden is shared across generations instead of dumped on the youngest.

The reward is enormous: A credible fiscal package would do more for the long end of the curve than a buyback program 1,000 times this size.

Governments defending prices against fundamentals always lose.

The only variable is how much they spend before conceding.

The U.S. shouldn't put itself on the wrong side of that trade, not with the most important price in the world, and not when that price is trying to say the one thing Washington most needs to hear: Let the bond market speak.                                  

https://www.wsj.com/opinion/let-the-bond-market-speak-81529d74?mod=hp_opin_pos_1 

University of Michigan snowflakes in the news

  University of Michigan Drops First-Semester Grades to ‘Curb Mental Health Crisis’

A pilot program aims to ease pressure on freshmen and help them adjust to demands of college

The University of Michigan will drop grades for first-semester freshmen next year in an effort to “curb the mental health crisis unfolding among college-aged individuals,” according to the school. ... 

I hope Taylor Farms sues the incompetent Trump FDA into oblivion

 

The Wall Street Journal is worried about GOP voters staying home if the Save America Act fails lol

Can't you just hear the WSJ after the GOP loses in November?

"It wasn't a Blue Wave, Republicans just didn't vote".

 

Northeastern Liberal Republicanism is new again?

Can wage and price controls be far behind?

How about a bigger, better EPA, renewed affirmative action, a larger welfare state, more Keynesian deficit spending, and detente with Putin, Xi, and that little squirt from North Korea? 

Young Conservatives Have Unlikely New Icon: Richard Nixon...

Richard Epstein eviscerates John Roberts' reading of the 14th Amendment

In The Wall Street Journal: 

 In Trump v. Barbara, Chief Justice John Roberts screams from the rafters that the framers of the 14th Amendment affirmed “citizenship, then as now, was the right to have rights—freely to participate in our community.” That’s contrary to history. The framers made sure that the newly freed black citizens didn’t get the vote, because if that benefit had been included, the amendment wouldn’t have passed. 

It took the 15th Amendment, ratified more than 1½ years later, to enfranchise black Americans. And that still didn’t extend the franchise to all adult citizens. In Minor v. Happersett (1874), the Supreme Court unanimously held that although women were citizens, the 14th Amendment didn’t confer on them the right to vote. The justices applied the then-standard definition of citizenship as an exchange of protection by the sovereign for loyalty of the citizens. It took the 19th Amendment to enfranchise women as a matter of constitutional right. In the meantime, voting was left exclusively to the states. The Civil Rights Act of 1866 covered only the private rights to contract, testify and make wills. No political rights were involved. 

The chief justice wholly failed to explain how his flawed originalist methodology supported birthright citizenship for the children of illegal aliens or temporary visitors. His blunder is captured in the false proposition that birthright citizenship “crossed the Atlantic with the colonists—and was adopted with little fanfare after the Revolution” as an outgrowth of the common law of England. 

Not so. English law had adopted a form of birthright citizenship—but, as Blackstone noted, not as a common-law matter but because naturalization “cannot be performed but by an act of parliament.” The English statutory framework was explicitly rejected in the U.S. Alexander Hamilton noted in Federalist No. 32 that the constitutional requirement of a “uniform” naturalization law conferred exclusive jurisdiction on the federal government, to the exclusion of the states. 

The chief justice never cites that clause or the Naturalization Acts of 1790 and 1795, which limited naturalization to “free white persons” who had resided in the U.S. for two years (later raised to five), were of good character, and had explicitly renounced their loyalty to all other sovereigns, and determined the status of minor children solely by the status of their parents. That provision excluded all people of African descent until reversed by the 1870 Naturalization Act, which didn’t apply to people of Asian descent until after 1900. Chief Justice Roberts then cites a group of irrelevant state-law cases, none of which deal with birthright citizenship, but addressed such issues as the ability to inherit under state law, to hold state office, or to vote in state elections. 

A key to the constitutional structure was the distinction between “subject to the jurisdiction thereof” in the 14th Amendment’s Citizenship Clause and “within the jurisdiction” in the Equal Protection Clause. The latter isn’t limited to citizens, as the Privileges or Immunities Clause is, but applies to all persons. 

That rests on Blackstone’s explicit distinction between “local” and “natural” allegiance. The former requires all persons to respect the criminal and civil law while in a foreign nation, but ceases to bind them on their departure. Local allegiance never confers any opportunity to obtain citizenship, which natural allegiance does. The chief justice incorrectly collapses the two into one by writing that “the Citizenship Clause uses jurisdiction in its ordinary sense—referring to the power of the United States to govern those within its territory.” The Equal Protection Clause had nothing to do with citizenship. How could the 14th Amendment confer automatic birthright citizenship when the 1870 statute set out more-rigorous conditions to apply for naturalization? 

Against this background, U.S. v. Wong Kim Ark (1898) wrongly held that birthright citizenship attached to a man born in the U.S. whose Chinese parents were legally resident in the U.S. In so holding, Justice Horace Gray committed three major blunders. First, the Naturalization Acts then didn’t make Asians eligible for citizenship until after 1900. Second, Wong Kim Ark traveled on a Chinese passport and thus hadn’t renounced his former sovereign. Third, an elaborate set of treaties with China prevented any Chinese national from applying for U.S. citizenship.

All these arguments are found in my friend-of-the-court brief, written with Benjamin Flowers; in my extensive comments on the oral argument; and in my recent book, “The Myth of Birthright Citizenship.” The chief justice found it all too comfortable to ignore every objection.

Mr. Epstein is a professor of law and NYU Law School, a senior lecturer at the University of Chicago and a Senior Fellow at Civitas Institute. 

Former Attorney General Bill Barr endorses Todd Blanche to run the Department of Injustice because Blanche is the only person who has a snowball's chance in hell of bringing Mad King Ludwig back to reality

But that's just Barr's cover story.

 

Bill Barr knows Blanche's only successes defending Trump as his personal lawyer relied on delaying tactics, both in the classified documents case and in the federal election subversion case.

 

Do we really want more of that in his official capacity as Attorney General? 

 

Isn't that what the Justice Department was famous for under Bondi, who dragged her feet releasing the Epstein files?

 

C'mon man. 

 

Other than that, Blanche lost the Manhattan hush money case and Trump was convicted of 34 felonies. 

 

I see no reason for Todd Blanche to fail upwards, unless of course he's probably the best choice to have around if you want to delay what's coming for Trump after November.

 

 

 

Confirm Todd Blanche at Justice

William Barr, Wall Street Journal

 

... Mr. Blanche is likely in the best position of anyone in the country to deliver strong counsel to the president and have him accept it.

 

...  Mr. Blanche doesn’t shy away from giving the president straight-from-the-shoulder advice and, where warranted, pushing back on bad ideas. He doesn’t always prevail, but, frankly, no one has a better chance of getting through to Mr. Trump. ... 

With Trump a failure in the Red Sea in 2025 and now in the Persian Gulf in 2026, it's easy to imagine China pulling the trigger in Taiwan

China's Navy Tightening the Noose on Taiwan...

Good energy news

Russia Faces Spreading Fuel Shortages After Drones Pummel Refineries...

How do you spell Mamdani?

DC's Mandami Moment? Frontrunner for mayor is avowed Socialist...

 

... Janeese Lewis George, proudly affiliated with the Democratic Socialists of America ...

Powell is still Fed chair

 

Study finds that female liberals believe words can harm, tend to be emotionally less stable, see themselves as victims, experience higher levels of anxiety and depression, support laws which make you stfu

... “People higher in the belief that words can harm tended to be younger, female, non-White, and politically liberal.”

... restricting speech feels like protection as opposed to censorship.

... mental health appears to influence political ideology more than political ideology influences mental health, with increases in psychological distress predicting a subsequent shift toward political liberalism. 

... the most empathic people support the least tolerant policies. ... 

More.

Dumbass Trump, who never paid the slightest attention to what's been happening in and to Ukraine, is surprised how easily Iran shut down the Strait of Hormuz with drones

 

The Wall Street Journal, here:

... The strait has been a particular source of frustration. Before the U.S. went to war, Trump told his team that Iran’s government would likely capitulate before closing the strait, and that even if Tehran tried, the U.S. military could handle it, The Wall Street Journal has reported. Some of the president’s advisers were caught off guard that tanker traffic would grind to a halt so quickly after the bombing began, according to a person in contact with the White House. 

Trump has since marveled at the ease with which the strait was closed. A guy with a drone can shut it down, Trump has said to people, expressing belated irritation that the key waterway was so vulnerable. He has publicly oscillated between demanding support from allies to help open it and insisting that the U.S. doesn’t need or want military assistance. ... 

White House concerns about security threats have been heightened, aides said.

In recent weeks, for example, Trump and his team have noticed an increase in security. On a cloudless night in April at Mar-a-Lago, every umbrella was up on the patio in an unusual arrangement, guests said. Club members were told that there was an effort to limit drone visibility, a Mar-a-Lago member said. 

Rubio told others about standing outside his home at the military compound where he lives and watching a suspicious drone, administration officials said. Secret Service protection teams have expanded to carry weapons White House officials had never seen before. ...

 

In other words, this would mean Trump is going to cut and run from the Persian Gulf just like he cut and ran from the Red Sea on May 6, 2025

 Trump Tells Aides He’s Willing to End War Without Reopening Hormuz: Administration officials assess that forcing the waterway back open would mean extending the military mission

WASHINGTON—President Trump told aides he’s willing to end the U.S. military campaign against Iran even if the Strait of Hormuz remains largely closed, administration officials said, likely extending Tehran’s firm grip on the waterway and leaving a complex operation to reopen it for a later date.

In recent days, Trump and his aides assessed that a mission to pry open the chokepoint would push the conflict beyond his timeline of four to six weeks. He decided that the U.S. should achieve its main goals of hobbling Iran’s navy and its missile stocks and wind down current hostilities while pressuring Tehran diplomatically to resume the free flow of trade. If that fails, Washington would press allies in Europe and the Gulf to take the lead on reopening the strait, the officials said. ...

 

If we already won in Iran why is this still happening?

 

Iran Resumes Hanging Protesters

Wall Street Journal

The Trump administration learned nothing from its fight to a draw with the Houthis last year

... Iran is still believed to have a vast stockpile of mines, cruise missiles on trucks and hundreds of undamaged boats in hidden facilities with deeply dug tunnels along the coast and on islands, said Farzin Nadimi, an expert on Iranian defenses at the Washington Institute for Near East Policy.

“I think it will take weeks to reach a point where there can be safe operations in the strait,” he said. “Even then, a lot of the Iranian assets will survive.” ...

Houthi militants in Yemen, who are aligned with Iran, waged a two-month campaign last year with missiles, drones and unmanned boats against international shipping that parallels Iran’s closure of the strait. The U.S. struck more than 1,000 targets in Yemen, but never succeeded in halting Houthi attacks fully until the two sides declared a truce in May. ...

More. 

Senator Ron Johnson, who is implicated in Trump's fake elector scheme, is a fake conservative

 

Move To End Filibuster Now--Before Democrats Do

Sen. Ron Johnson, Wall St. Journal

You will not be any wiser for having read it

 

FLEX? Global Elite Give Up on Spelling and Grammar..

The best part was the professor who lamented Epstein's typos while he himself misused the word disinterest:

“It was nihilistic almost in its total disinterest in communicating,” Bessner said.  

China expected to expand submarine fleet to 80 by 2035, up to half nuclear-powered, from 60 now, more than half of which are diesel-powered

 

China Building Subs That Can Strike USA From Closer to Home, Navy Warns...

... Brookes cited a Pentagon projection that China’s submarine force will reach 80 vessels by 2035, about half of them nuclear-powered—up from the current estimated fleet of more than 60 subs, most of which are less capable diesel-powered vessels that have a shorter range of movement and must surface more frequently than nuclear-powered ones. This projection has appeared in past Pentagon annual reports on China’s military power. ...

The editor at large for The Wall Street Journal recoiled at the number of falsehoods in Trump's State of the Union address