The Brutal Truth About Jerome Powell & Future Rate Cuts - David Friedberg

Summary

An All-In clip on the macro picture after September rate-cut odds flipped from a 25 basis point cut to no change. David Friedberg argues the real US story is the long end of the Treasury curve: the 30-year yield sits at 5%, the highest since 2007, and refinancing 36 trillion of debt away from its 3.3% average rate would push annual interest expense from about 1.2 trillion toward 2 trillion. He says the Fed can only cheapen the short end and that removing Jerome Powell would not fix a problem rooted in spending and taxation. Chamath Palihapitiya adds that the 30-year rose even while the Fed was cutting, so the deficit finally matters, though slower spending, extra revenue and faster growth could start a virtuous cycle of lower rates.

• September Fed odds flipped from a 25 basis point cut to no change.
• The 30-year Treasury yield is at 5%, the highest borrowing cost since 2007.
• 36 trillion of debt at a 3.3% average rate costs about 1.2 trillion a year in interest.
• Refinancing toward 5% would push interest expense to nearly 2 trillion a year.
• Fed policy moves the short end, while the long end prices fiscal risk.
• Friedberg: replacing the Fed chair does not address spending or taxation.
• Chamath: the 30-year rose while the Fed was cutting, so deficits now matter.
• Suggested path out: slower spending, consumption-tax revenue and deregulation-driven growth.