The wire

Two days ago some yahoos sliced a fibre optic cable fifty km away. The cable guys showed up. The cops came. The wire was about an inch thick, so it must have taken some sharp bolt cutters to chew through.

My wi-fi died. And the phone. The TV signal, of course. A blog post had to be piteously tapped out on the Lilliputian screen of an iPhone mini. And with no Internet, as we know, all contact with the outside world and wider human civilization went dark. No utility bills or statements. No online banking. No social media. No email. No client communication. No access to portfolio management tools, trading platforms or current financial data. If the cell service had also been disrupted, the emergency would be complete. Yes. The End of Life

By the way, that one cable slice wiped out the service for homes and businesses in an area of hundreds of square miles. Walking Cody down the main street, store after store had signs posted saying ‘CASH ONLY’. Or they just shuttered. I mean, who has a cash register anymore? Or a cash box? Or a receipt book? Or real money?

The lesson is simple. This is an essential service. Like water in the pipes and electricity in the socket. We have rendered society dependent upon a single connection. Worse, that entire digital network is vulnerable. If you were, say, an Iranian terrorist, would there be any simpler way of kneecapping a country than by chopping a few cables? Especially when AI is replacing thinking?

This brings us to risk. It’s surging, which is something Mr. Bond Market has been trying to tell us lately. Yields have been rising to alarming levels because investors fear future inflation, insane data centre borrowing and the ultimate impact of runaway government debt. With every billion borrowed, countries like Canada – and especially America – grow less able to withstand a shock. Like Iranian, Russian, Chinese or North Korean AI agents hacking into and shutting down essential digital systems. That possibility is growing right along with the pile of borrowed money.

Put down the turkey drumstick and consider where we are at the moment.

This year Canada will spend between $54 and $58 billion on interest, servicing the federal debt. That will suck off about 11% of total federal tax revenues. It will exceed the amount Ottawa transfers to the provinces for health care and is vastly more than we spend on national defence or subsidizing families with children.

Interest on the debt in 2026 will be the second-largest outlay of federal cash. Only elderly benefits (at a staggering and growing $88 billion) take more of the pie.

In America, it’s worse. This year the accumulated federal debt surpassed $40 trillion, with Trump’s presidency alone expected to add $4 trillion. Over the last year gross interest payments hit $1.4 trillion (a trillion is a thousand times a billion) – with the drain on tax revenues being twice what it is in Canada, at 21% of revenues. If the US were unable to print money in the form of the world’s reserve currency, this situation would be unsustainable.

By the way, net interest on the debt is now the second-largest budget item in the States as well. It ranks just below social security and ahead of the almost-$1 trillion defence allocation. This year marks the first time debt servicing costs have exceeded the entire American defence budget and all Medicare spending.

The US Treasury must issue bonds continuously to cover deficits while also refinancing $10 trillion in maturing debt over the next year. This massive need for capital comes at the same time AI companies and hyperscalers are borrowing massively for data centre buildouts.

The result is upward pressure on interest rates, which is why yields on long-term debt have shot higher. As the yield curve steepens, central banks are forced to consider upping short-term rates, which have an immediate impact on consumer and business borrowings, mortgages, car loans and credit card balances.

For the US, there are fears swelling debt charges will crowd out the borrowing Washington needs to make to feed its military machine. The Iran war has cost more than $40 billion and seriously depleted America’s stockpile of missiles, bombs and interceptors. Middle East bases have been destroyed and expensive weapons system proven ineffective against cheap drone and symmetrical warfare.

Unrestrained deficits, growing debts and mounting interest charges also cast doubt on the long-term viability of the US dollar as the world’s dominant medium of exchange. The Wharton Budget Model shows that if nothing changes – and America continues down this current spending path – the bond market will blow up in 14 to 20 years.

So start your flock of chickens and herd of dairy cattle now.

You have a decade to get ready. If the wires hold.

Happy Thanksgiving!

About the picture: “I’ve been reading your blog for over a decade now,” writes Chris. “Thank you very much for your blog.  The daily dog pictures keep me stocked with endorphins, and your advice has kept me from making a number of poor financial decisions these past few years. This is Miae, my wife’s sister’s fluffball.  sort of like a niece.  She is a Korean rescue pup, half chow half corgie.  She lives a charmed life in Kelowna where, on occasion, is mistaken for a bear cub.”

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

Source: https://www.greaterfool.ca/2026/10/11/the-wire/