Harley Bassman, The Convexity Maven

The U.S. faces a structural fiscal crisis characterized by unsustainable debt levels and a lack of institutional trust, rather than a conventional inflation problem. With annual interest payments on $40 trillion in debt projected to eclipse defense spending, the government’s reliance on deficit financing creates persistent upward pressure on long-term yields. This environment is exacerbated by price-insensitive borrowers, including major technology firms and the federal government itself, which continue to issue debt regardless of interest rates. While the MOVE Index indicates a return to historical volatility norms, equity markets remain detached from traditional valuation metrics due to massive, consistent inflows from passive investment strategies. Ultimately, the economy’s stability hinges on future unemployment levels, as the current K-shaped recovery disproportionately benefits the top tier of earners while leaving the median household increasingly vulnerable to rising costs.