Are Free Markets Dead? (EP. 479)

The Treasury Department recently attempted to talk down long-term interest rates, a move that one host described as a "bazooka" approach. Rates fell briefly before rising again the next day, exposing the limits of jawboning. This episode of Animal Spirits uses that event as a springboard to question how much control anyone actually has over the bond market, whether the US faces a genuine debt crisis, and why the most hated asset class might offer the best risk-reward tradeoff in years.

The Government vs. The Bond Market

The hosts immediately disagree on the Treasury’s intervention. One host calls himself a "free markets guy" who dislikes political interference with bond prices, arguing that rates should be set by "buyers and sellers." The other counters that "there's no such thing as free markets," pointing to World War II rate caps and the Fed’s 2020 bond buying as precedents. The real tension is not about principle but about efficacy. The host skeptical of the intervention notes that the real way to lower rates would be to stop the war in Iran and remove tariffs. "Instead of doing that, we've decided, no, let's just throw a bunch of money at it," he says, comparing the approach to a surgeon who keeps bandaging wounds instead of stopping the surgery that causes them.