Freeberg, we have uh this idea that

there would be a couple of rate cuts and

maybe we get monetary velocity going

again. People will be able to take more

loans out, invest more in business. But

with the stock market tearing it up,

there's a lot of wealth being put into

the system with the big beautiful bill.

There's a lot of spending in there as

we've talked about here. Putting that

aside, it feels like the economy is in

really great shape. Chances of a rate

cut has now flipped. No change is now

the favorite option for September.

whereas a week ago the favorite option

was 25 bips. So this idea that we're

going to cut or the Fed's going to cut

that seems to be changing as well. So

your thoughts on the um the macro

picture here? So I'm not sure like the

firing of Jerome Pal necessarily solves

the US fiscal challenge which is rising

interest rates on the long end of the

Treasury curve. So, if you look at the

the 30-year Treasury yield over time,

and Nick, maybe you could pull this up

while I'm talking, but as of today,

we're at exactly 5% on the 30-year. And

you can see that this 5% yield, which is

what the market is demanding the United

States government pay in order to be

loaned the money to make the bill

payments that the US government has to

make every year is the highest it's

been. The borrowing cost is the highest

it's been since going all the way back

to 2007 as of today. And I think this is

the real story for the United States. We

have 36 trillion of debt. The average

interest rate we're paying on that debt

today is 3.3%. That's the average of all

the treasuries that the federal

government has issued, the Treasury

Department has issued to borrow the

money that it is using and has used to

pay all its bills. And if you look at

the 5% number, that's a 1.7% hike.

At 3.3%, which is the current average

rate we're paying across 36 trillion,

we're we have a run rate interest

expense. So just the money we're paying

each year and the interest of the

outstanding debt is $1.2 trillion a

year. And if this spikes up to 5% from

3.3, we're talking about nearly $2

trillion a year in interest expense. And

that number is only going to get bigger

as we borrow more money each year and

the loan balance goes up, the

outstanding debt goes up because we are

still running a deficit. The government

is spending more than it's making every

year. So the crisis that America faces

is a more profound fiscal crisis where

the rates that we're having to pay are a

function of what the market is telling

us. The market does not want to loan the

United States money over a 30-year

period for less than 5% as of today. And

so making adjustments to the short end

of the Treasury curve, making overnight

loans cheaper, which is what the Fed can

do, will stimulate the economy and make

more money flow easily because now

you'll be able to borrow money overnight

to do stuff like build a building and

then sell the building next week or next

month or take out a car loan and pay it

down and use your car to go drive for

Uber and grow the economy and other

things. So the theory is that if we can,

you know, drive rates down on the short

end of the curve, we'll grow the economy

such that we'll be able to make those

payments on the long end of the curve.

Um, but there comes a point where again,

you're only going to be able to move the

market so much until the more important

fiscal situations are going to be

addressed, which is

>> spending, taxation, and some of the

other key policy issues. So I think what

the market is saying is it's not as much

about Jerome Pal and frankly getting rid

of a prudent individual may be more

challenging than it is beneficial when

the real challenges facing the United

States need to be more hardily

addressed. So I think that's my kind of

take on this whole

>> can I yeah go ahead Gavin build on it.

>> So point number one the 30-year has gone

up since PAL started cutting rates. So

that is just empirical proof that what

David is saying I think is right. And

second,

the deficit has been a feature of

American politics dating back to Ross

Perau's,

>> you know, 1992

presidential run,

>> his independent third party run,

>> his independent third party run.

>> Here we go. But yes, but it the deficit

never really mattered because interest

rates kept going down such that even as

our debt grew, interest expense has kind

of a percentage of the government's

budget stayed relatively low. Now that

rates have gone up and don't seem like

they're,

you know, going down anytime soon, the

deficit does matter and it really

matters. And you can kind of run a a

couple of scenarios, but like pick your

pick your metric.

If the deficit kind of continues at

current levels and we were to refinance

the debt at the prices that uh you know

David was talking about,

you know, it's it's only a few years

before spending on interest is

significantly larger than spending on

Medicare and Medicaid or Social Security

or the military. So, pick something you

care about. But you know our current

course in speed it's it's in the not

tooistant future where interest expense

is the biggest line item for the

government and that is not healthy and

that's why the deficit finally matters.

It's just that rates are higher. But the

great thing is is there is a virtuous

cycle here. Has you close the deficit

rates should theoretically

come down

and then those both feed on each other

to kind of help the problem. And it is

possible. There's no silver bullet here,

but some combination of slowing

government spending, extra revenue, and

you know, tariffs are effectively, we've

never had a consumption tax here in

America, which I think is a good thing

because consumption taxes are very

regressive.

But the reality is like even when Obama

controlled the House, the Senate, and

was the most popular Democratic

president of our lifetime, I don't think

federal government tax receipts has a

percentage of GDP got above 18 19%. So

that's kind of the ceiling.

And it for income taxes alone, and

tariffs are really just a consumption

tax that kind of insense domestic

manufacturing. I mean, there's all sorts

of reasons they're bad ideas. You know,

David Ricardo, the theory of comparative

advantage,

100% correct. Free trade is a good

thing.

But introducing some sort of a

consumption tax, growing the economy a

little bit faster through deregulation

and slowing government spending.

>> I think there is a way out of this for

America.

>> Yeah. But it's important to find the way

because the deficit finally does matter

after really never mattering in my

political lifetime.