🚨How high is the interest on U.S. debt? — For every dollar collected in taxes, 23 cents goes to paying interest on past debts!

This is also why the market is becoming increasingly certain that the Federal Reserve will definitely cut interest rates in September, and that 25bp is just the starting point, and it may even be a direct 50bp.

Why? Because the fiscal capacity has been pushed to the limit:

1. Only interest expenses have exceeded $1.1 trillion annually, which is higher than the entire defense budget.

2. Tax revenue has declined amid economic slowdown, but the cost of debt refinancing is accelerating.

3. The average duration of the debt is only 5-6 years, which means that a large amount of old debt needs to be rolled over at higher Interest rates every year.

In such a structure, lowering interest rates is not merely a stimulus to the economy, but an inevitable action that will continue in the fiscal policy.

As the past becomes more expensive, the future market will become more financial engineering-oriented -

1⃣Bond market: The term premium will react more violently to fiscal pressure, resulting in greater fluctuations in long-term interest rates.

2⃣ Dollar assets: Periodically experiencing a trust discount, with its safe-haven attributes marked down.

3⃣Risk assets: The liquidity rhythm will be shorter and more urgent, and the market may move in an impulsive manner rather than a steady slow bull.

4⃣Cryptographic Assets: BTC/ETH will be viewed by more people as a hedge against financial distress; stablecoins and RWA play an extended role in financial engineering, serving as on-chain distribution channels equivalent to U.S. Treasuries.

Look, what we are witnessing may be the historical moment when the fiat currency system begins to show its limits!