The Rate Hikes Are Coming

"Countries don't cease to exist because they're invaded. They cease to exist because they go broke," Scott Galloway argues in this episode of Prof G Markets, laying out a stark thesis: the United States is drifting toward a fiscal crisis that most political leaders refuse to acknowledge, and the bond market is already screaming about it.

The Inflation and Debt Spiral

Since January 2020, the US has experienced a 40% cumulative price increase. The majority of Americans have not seen their wages rise to match it. Galloway calls this "a decline in the standard of living for the majority of Americans" — a pay cut they never voted for. Corporate bankruptcies are up 12%, the highest in a decade, concentrated in small and medium businesses that cannot hedge floating-rate debt.

The national debt has surpassed $40 trillion. The federal deficit under the current administration is on track for $2 trillion this year. Interest payments now total $1.25 trillion annually — more than national defense spending — and are expected to double as a percentage of federal revenue over the next decade. The bond market is responding: the 30-year yield hit 5.35%, the highest since 2007, and the 10-year breached 4.9%. This has happened despite the Treasury tripling its bond buyback program to $6 billion. Investors are not buying the message.