Desperado

Yes, I agree. Things are weird.

Bond yields continued their ascent today. Benchmark 10- and 30-year US debt has raced ahead despite Treasury Secretary Scott (‘Yappy dog’) Bessant attempts to halt them. The bond guys don’t care.

They see $100 oil again. They see inflation. They see producer prices rising. They see tariffs and a costly trade war. They see $40 trillion in accumulated US federal debt. They see an unwinnable, expensive war. And last night they heard the American president try to bribe an entire country. Vote for me/us, he said, and we’ll send every citizen $5,000 if we win. Seriously. It happened.

By the way, that would cost the States $1.5 trillion – which is more than half the entire Canadian economy. It would be massively inflationary, drastically undercut the effectiveness of the central bank, add an extra trillion to the deficit and debt and create more merry hell in the bond market, pushing mortgage and loan costs higher.

Of course, it ain’t happening. It is desperation. It would have to pass through Congress. And it;s just more Trump hyperbole.

But this also underscores the fact the most powerful man in the world, leading the biggest economy, has no idea what he’s doing. He would wreck that economy for a better poll, a bigger crowd and more golden adulation.

Equity markets dipped on the opening this morning. Naturally. Oil at a hundred bucks alone is enough to do that. Meanwhile when investors can scoop 5% by owning a risk-free bond, that’s a sweet alternative to dumping capital into stocks that can have oodles of risk. Markets now think oil is going to a lot higher for a lot longer, with the Iran war being potentially endless.

This analysis by our fav Bay Street economist is withering:

“The US had no strategy for the war, no buy-in from Congress or allies, and no exit plan and it’s all coming home to roost,” says Derek Holt. “There has been no regime change, Iran’s stockpile of enriched uranium still exists, the country continues to have large stockpiles of drones and missiles to inflict damage on neighbouring countries and US military bases, and Iran still has help from the Houthis, Russians and others. I note this because it reinforces the narrative that oil prices will be higher for longer with no end in sight for what remains Iran’s strategy of managed irresolution through US midterms.”

There are reports that Secretary of State Rubio and others are telling the White House this war will still be unresolved by the time Trump leaves office. Thus, no reason to think we’re going back to the days of cheap energy and cut-rate gas soon. That hits consumer costs, business inputs and inflation.

Add it all up, and it appears the Fed will have little choice but to raise its key rate next week to try and corral swelling costs. As I write this, the odds of a quarter point boost in a few days sit at 69.8%.

And this brings us to another Trump problem.

The US president has made it clear he wants interest rates to fall. No, to plunge. By more than a full 1%. Days ago he even made the extreme threat to cut off US trade with all countries that have a trade surplus with America (like us) if the Fed hiked instead of slashed.

Yes, you’re right. That would likely create a global recession. Or worse. But that’s not happening, either.

New Fed boss Kevin Warsh may be Trump-picked, but he’s no lackey. As a former CB board member he clearly understands the gravity of his actions. Count on that increase, and rest assured the president will go further into his own delusion.

It won’t be smooth or straight. But Canada chose the right path.

About the picture: “Three-year-old Echo protects the garden from rodents.,” writes Barb. “A gopher had been hiding under a pile of scrap lumber at the fence. Echo scattered soil in a 20-foot arc one foot deep … gopher 1, dog 0.”

To be in touch or send a picture of your beast, email to ‘[email protected]’.

Source: https://www.greaterfool.ca/2026/09/10/desperado-3/