Treasuries are losing their moneyness
- Washington has spent decades treating government debt like magic currency rather than actual borrowed money.
- The 'wormhole' of endless borrowing is slamming shut as Treasury yields climb toward uncomfortable territory.
- The historical distinction between bonds and cash is reasserting itself with a vengeance.
- Fiscal dominance is back: The Fed is running out of options to keep inflation at bay without crashing the market.
Brief Summary
For years, Washington has operated under the convenient fantasy that U.S. Treasuries were as good as cash—liquid, risk-free, and infinitely demanded. This allowed the government to ignore fiscal constraints, effectively blurring the lines between debt and currency. But that era of 'moneyness' is evaporating. With yields rising and the market losing its appetite for endless deficit spending, the reality of the Hamiltonian system is returning: a bond is just a bond, and the bill is finally coming due.
Why This Matters
When Treasuries stop acting like reliable 'cash' and start acting like volatile debt, your financial life gets significantly more complicated. Rising yields on government debt force borrowing costs higher across the board, meaning your mortgage, car loan, and credit card interest rates aren't coming down anytime soon. More importantly, as the government loses its ability to print its way out of trouble without triggering painful inflation, the purchasing power of your savings is directly on the chopping block. You are watching the end of an era where Washington could spend without consequence, and you are the one who will pay for the hangover.