Elliot Eisenberg Economic & Policy Blog |
TREASURY TRANSFORMATION Three structural forces are pushing up long rates: the budget deficit outlook, skyrocketing AI-related corporate debt issuance, and the changing nature of the Treasury buyer. In 2009, 40 % of foreign Treasuries holdings were in central banks, today it’ s roughly 12 %. Onethird of the shortfall has been made up by foreign private investors, increasingly dominated by hedge funds who finance their Treasury purchases by borrowing. What could go wrong?
RUSSIAN REACH The Friday File: The deepest hole ever drilled is the Kola Superdeep Borehole, drilled between 1970- 1989. It reaches 12.3km, where the temperature is 356F. It’ s located on the Kola Peninsula in Northwestern Russia, 155 miles north of the Arctic Circle. Despite its depth, it penetrated just 0.19 % of the way to the Earth’ s center. Reaching the center would require drilling another 6,359km- if only it were so simple.
DEFICIT DANGER While the US debt just crossed the $ 40 trillion mark, what matters much more is debt held by the public, and it’ s“ only” $ 32.3 trillion. The difference is intragovernmental debt. But even that number needs context. The critical number: the debt-to-GDP ratio, which, with 26Q2 GDP at roughly $ 32.5 trillion, is about 100 %, near levels last seen just after WWII. The real problem; the staggeringly large 6 % annual deficit.
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straight quarters. If companies were expecting future inflation, they would be building inventories to avert further cost increases— not to mention capturing the IVA revaluation in earnings. Conversely, in 2021 and 2022, corporations sharply boosted inventories for six straight quarters. That should have been a cue at the time that the inflation burst was not destined to be“ transitory.”
PAYROLL PLUNGE In CY2023, net job growth averaged 210,000 / month; in CY2024, 122,000 / month; in CY2025, 10,000 / month; and from 1 / 26 – 7 / 26, it’ s 61,000 / month. Job growth has clearly slowed, partly due to changing immigration policies. Other factors, including Boomer retirements and fewer births, no doubt play a role, but they’ ve been steadily ongoing for years. Most disappointingly, the dramatic slowdown shows that the native-born are not picking up jobs formerly performed by those no longer here.
DECEIVING DATA July retail sales rang in at a dismal- 0.6 % M-o-M, and, adjusted for inflation, were slightly worse at-0.7 %. Moreover, the“ control group” retail sales number, which feeds directly into the personal consumption segment of GDP, contracted 0.4 %. But don’ t despair. Retail sales have exhibited flat to slow growth since 4 / 21, after skyrocketing during Covid. Nonetheless, they remain on their pre-covid trend and total household spending continues growing steadily.
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global production, mostly arabica beans, a variety widely used in premium / specialty coffees. Coffee output is reported in 60kg bags of unroasted coffee. Brazil’ s production is 63 million bags. Vietnam is next at 18 %( 31.7 million 60kg bags), driven largely by robusta beans. Third place is held by Colombia( 12.5) and Indonesia( 12.4), both at 7 %.
GRID GUARDRAIL To solve rising electricity prices for consumers stemming from the growth of energy-hungry AI data centers, make data centers the first group subject to power cuts during grid stress. This will strongly encourage data centers to bring their own power and thereby protect existing rate payers from higher prices. It might also prevent existing power generating firms from profiting from higher prices by not increasing risk and building out capacity.
Elliot Eisenberg, Ph. D. is an internationally acclaimed economist and public speaker specializing in making economics fun, relevant and educational. Dr. Eisenberg earned a B. A. in economics with first class honors from McGill University in Montreal, as well as a Master and Ph. D. in public administration from Syracuse University. Eisenberg is the Chief Economist for GraphsandLaughs, LLC, a Miami-based economic consultancy that serves a variety of clients across the United States. He writes a syndicated column and authors a daily 70-word commentary on the economy that is available at www. econ70. com.
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INVENTORY INDICATOR The business sector has been liquidating physical inventories for five |
BRAZILIAN BEANS The Friday File: Brazil is the world’ s largest coffee producer with 35 % of |