A little over a month ago, I pointed out two crises that aren’t getting the kind of scrutiny one might expect in an election year. Just because we’re talking far less about them than we are about hating Trump or socialism doesn’t mean our debt crisis and a losing war aren’t churning just below the surface. Like all impending crises, they can’t be ignored forever.

The Federal Reserve Board (FED) finally took minimal action, acknowledging the government’s longer-term bonds were yielding more than at any time in the last thirteen years. More than in 2022, when inflation was above 9%.-in fact, higher than at any time in the last 13 years. The Fed raised short-term rates by a whopping quarter point. While this is the first rise in years and shows a change of direction, it is the least it could do:

By reducing the amount of credit available, the Fed makes buying even more painful. In some cases, some consumers and businesses can’t borrow at all. Rather than increasing supply to arrest or lower rising prices, raising interest rates reduces demand. Less demand means less economic activity, slower growth, or, worse, a recession.

The quarter-point rise alone won’t change much. The rise in 10-year and 30-year government bond yields had already pushed up rates on mortgages and auto loans. The FED is just playing catch-up.

Still, President Trump has blasted the raise. He rightly sees it will only raise prices, and that further rises might slow the economy. No politician wants that, and Trump has always demanded lower rates no matter the conditions. He sent his trade advisor, Peter Navarro, to argue that rates should be down to one percent.

The problem is that the President tells us this is the best economy ever, but we will still run a two-trillion-plus-dollar deficit. If we run big deficits in good times, our $40 trillion deficit will keep growing rapidly. This situation means more and more Government debt on the market. With the looming shortfalls in Social Security and Medicare, the market can only see expanding supply, putting downward pressure on bond prices. Lower prices mean higher rates—plain old supply and demand.

These deficits come at a time when the Artificial Intelligence Revolution (AI) is consuming large amounts of capital, adding to pressure on the capital markets. AI will likely lower the cost of goods and services in the future, but right now, it uses gobs of capital.

In any case, the FED’s ability to affect the bond market is limited by its still-huge underwater portfolio of longer-term bonds accumulated through its previous actions. At the same time, interest payments continue to grow, adding to the deficit.

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Marc Thiessen, the Washington Post columnist and Fox News contributor, went apoplectic in a recent column over a Wall Street Journal article that pointed out President Trump was warned before he started the Iran War that it wouldn’t go well. The idea that someone leaked that the then-DNI Tulsi Gabbard and others cautioned against the move, without a plan to overcome the likely closure of the Strait of Hormuz, a limited stockpile of essential munitions, and limited capabilities, is near treasonous.

Thiessen argues that this was done to undermine Trump’s courageous move to stop Iran from gaining a nuclear weapon, and to take down its terrorist Regime. This spilling of confidential information by “MAGA disloyalists” undercut the President’s ability to prevent the dangers the Iranian Regime clearly tells us are their main goals: nuclear weapons and regional domination.

Thiessen’s ire, to my mind, is misplaced. The President wasn’t alone in thinking this might be a good time to consider taking down the Regime and putting the Iranian people in power. Israel had laid waste to Iran’s air defenses, and its economic mismanagement led to high inflation and water shortages, resulting in people protesting in the streets. We had already bombed and buried much of their nuclear project. The Regime had never been weaker. I readily admit. I also thought this might be the time to move.

The problem wasn’t that we shouldn’t have considered strong action against a weakened adversary; it was the inability to come up with a workable plan. Gabbard and others would’ve failed at their jobs if they hadn’t pointed out Iran’s likely response and where we were deficient. The objective was worthy, but execution is appalling:

Image of the U.S.S. Stark after being struck by 2 Exocet missiles

Thiessen might be better off asking how we ended up with our only card left to play being to put maximum pressure on the Iranian people in hopes the Regime might collapse. Silly me, I thought we were supposed to have their back, not reduce them to misery. The idea that unarmed people can overthrow their armed-to-the-teeth rulers is a fantasy. Possibly 30,000 or more unarmed Iranians recently lost their lives trying.

In any case, if these sanctions could bring the Regime to its knees, why did we go to war and expend so much of our munitions? Just use sanctions.

We’ve sanctioned Cuba and Venezuela, and millions of people left those nations to survive. Those remaining mostly live at subsistence level. The exception is those in, or close to, the ruling Regime. If there are any goodies to have, they get them. The rest are expendable.

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We’re entering the mid-term election home stretch, and it looks as if it will come down to which we hate more: Trump or Socialism. Polls show a majority of Americans dislike both. Younger voters abhor Trump. At the same time, older Americans feel the same way about socialism. Each party is expending resources to convince the populace which is more terrifying.

This state of affairs makes it easy to follow the campaigns. Thank goodness there are no other concerns we need to discuss before they become a crisis. After all, our exploding national debt is a long-term worry. Our losing the Iran war only confirms that foreign adventures always turn bad. Just stay at home. Like, that’s a possibility in an ever-shrinking world.

I don’t want to be a wet blanket, but there are signs that the debt crisis may be closer than we think. Are you aware that the U.S. government is about to sell 30-year bonds at the highest interest rate in a quarter of a century? Don’t feel bad; most people aren’t:

The current rate on the long Treasury bond yields more now than at the height of Quantitative Easing (QE) coming out of the Great Recession. It’s higher than when we had 9% inflation under Biden.

This is true even though the Treasury issues far fewer of these long bonds than short-term obligations. Generally, there is a ready market for long bonds from insurance and pension funds that need to match long time frames and commitments, and the Treasury accommodates them, but refrains from issuing more for fear it will raise rates the Federal Reserve has little or no control over.

The Federal Reserve can no longer affect longer-term interest rates because of the masses of longer-term bonds bought under QE to keep rates down in the past. Those bonds are now held at a loss. That’s right, our central bank is losing money. The new Fed chairman, Kevin Warsh, was no fan of the QE program that resulted in the first loss since the Fed’s first year in 1915, so it’s unlikely to repeat it.

The climbing long rate seems to signal future inflation problems. We are already paying more interest on our debt than we do for national defense. With the impending insolvency of Social Security and Medicare just a few years out, spending looks like it has nowhere to go but up. With most of the debt short-term, any further interest rate rise is reflected almost immediately in much higher payments.

Japan, with debt two and a half times its GDP, is further along a crisis path. Its currency came under attack, meaning a possible inflationary devaluation. In the past, nations under similar attacks either raised interest rates or sold reserves to buy and bolster their currency.

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You see an accident about to happen, but no matter how loud you yell, no one hears. Or maybe no one was listening. Even before the US and Israel started their attack on Iran, some foresaw the need for friends on the ground in that nation. Some suggested the Kurds as a good bet for establishing a safe area in Iran to organize, train, and equip the resistance. If others had a better idea for the armed overthrow of the ruling Regime, that’s fine, but without this basic strategy, just bombing would fail.

Once the attack unfolded, we had nothing-zilch on the ground. Worse, we were unprepared to counter the likely Iranian response—no adequate defense against the Regime’s large stock of rockets, and especially drones. When Iran closed the Strait of Hormuz, likely with mines, we had no minesweepers. To top things off, we went through so much of our very expensive ordinance that we may run out.

The next thing we knew, we had a ceasefire that left us short of all our objectives. We needed real regime change to have an Iranian government we could trust not to develop nuclear weapons, and the rockets to deliver them. No more pawns such as Hezbollah, Hamas, and the Houthis terrorize our area friends, especially Israel.

Now we have a Memorandum of Understanding (MOU) that has opened the Strait but also removes our counter-blockade. This situation puts us back to before the attack, but illuminates our failure to achieve any of our objectives. We’ll talk about Iran’s nuclear program over the next two months. Trump has conceded any restraint on ballistic missiles. If Iran behaves, we’ll return the money we seized and set up a $300 billion “reconstruction fund ” paid for by our Gulf friends.

With the opening of the Strait, oil money flows to Iran without sanctions. These funds will feed its terrorist network to threaten Israel and its neighbors, while it strengthens the Regime—the MOU depends on the end of hostilities between Hezbollah and Israel. Not part of the negotiations, Israel is still under pressure to abide by it. Yet it needs a buffer in Lebanon to protect its northern areas from constant attack:

While the US and especially Israel have gained nothing so far, Iran shows its dominance over the Strait, its ability to hit not only its neighbors, but targets as far away as Europe, money will increasingly flow into its coffers to finance its pawns, and drive a visible wedge between the US and Israel, while doing nothing on Iran’s nuclear program. This situation goes a long way toward Iranian regional hegemony. Any reasonable person would conclude Iran is coming out on top.

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