The long-term forecast for higher interest rates, according to Treasury Secretary Janet Yellen, makes it more difficult to control US borrowing needs, which emphasizes the significance of raising revenue in the forthcoming budget talks with Republican lawmakers. There is only one problem. She is wrong.

According to the Congressional Budget Office (CBO) baseline, which does not assume a single year of recession and already counts with record tax revenues, the 2025 primary deficit will reach $851 billion, while net interest outlays will rise to $951 billion. Furthermore, the minimum expected primary deficit from 2025 to 2034 will be a staggering $676 billion with $1.2 trillion of net interest outlays, while the average annual deficit will likely be above $700 billion. The accumulated figures are even more concerning. The CBO estimates that the aggregate primary deficit in the 2025–2034 period will reach a brutal $7.4 trillion, with accumulated interest expenses of $12.4 trillion. We must remember that the CBO baseline estimates no recession and constantly rising tax receipts above the record 2024 level.

The money supply is rising again, and persistent inflation is not a surprise. Inflation occurs when the amount of currency increases significantly above private sector demand. For investors, the worst decision in this environment of monetary destruction is to invest in sovereign bonds and keep cash. The government’s destruction of the purchasing power of the currency is a policy, not a coincidence.

Readers ask me why the government would be interested in eroding the purchasing power of the currency they issue. It is remarkably simple.

Inflation is the equivalent of an implicit default. It is a manifestation of the lack of solvency and credibility of the currency issuer.

Consumers are unhappy with the United States economy, and it makes sense. Consumers in the United States survive on soaring credit card debt, while inflation, the hidden tax, weakening labor, and real disposable income figures prove that the economy is far from strong.

The renewed slump in University of Michigan consumer sentiment proves that the recent bounce was short-lived, and the index continues to be well below the 2019 level. Citizens are suffering the consequences of inflationist policies.

The latest reading indicates that consumer confidence fell to a six-month low of 67.4, while expectations dropped to the worst point in half a year. It was not only a decline in expectations but also a reduction in the current conditions index to a new low of 68.8.

Persistent inflation is not a coincidence. It is a policy.

The money supply (M2) has bounced to March 2023 levels and has been rising almost every month since October last year. Furthermore, US government deficit spending has more than offset the decline in the Federal Reserve balance sheet. While the Fed’s balance sheet has shrunk by $1.5 trillion from its peak, the US government deficit remains above $1.5 trillion per year.

The money supply (M2) in the United States has bounced above March 2023 levels, while deficit spending offsets any Fed balance sheet reduction.