The global bond market is screaming that we are in the financial endgame. • Roughly $10T in U.S. debt needs to be refinanced this fiscal year at market rates. Higher rates will add significantly to our interest expense. • AI companies are borrowing enormous amounts of money but rising yields will push their borrowing costs higher and could eventually burst the bubble that is propping up our economy. • Japan, the largest foreign holder of U.S. Treasuries, just saw its 10 year yield hit 3% for the first time since 1996. • Higher yields in Japan could incentivize Japanese investors to move capital back home, reducing demand for U.S. Treasuries. If the yen continues to weaken, Japan may also be forced to sell U.S. Treasuries to support its currency. Borrowing costs are exploding at the moment governments around the world need more money to fund massive deficits and expensive wars. We are seeing the wars in Iran and Ukraine potentially expand or even merge, creating a new global war that will be extremely costly. This is also happening as demographic collapse continues to impact the world. Lower working-age populations decrease potential tax revenue and put even further strain on government budgets. So the options for the U.S. are: 1) Aggressive YCC to suppress yields. Borrowing costs stay down, but you risk more inflation and currency debasement. 2) Raise rates and tighten monetary policy to slow inflation. But yields and borrowing costs stay elevated putting even more pressure on governments and businesses, especially as AI borrowing continues to increase. With this backdrop, it wouldn’t surprise me to start seeing more financial repression. The government will find ways to force capital to stay here, but this will anger the population. As I’ve said before, we are in a fourth turning and living through an even bigger version of 1929-1945. An era of outsized peace and prosperity (1945-2019) may come to an end in equally outsized manner of chaos and destruction.