#economics + #government

The immediate catalyst was the US Treasury’s decision to at least double its purchases of government bonds with longer maturities, from $2 billion to $4 billion a month with the aim of reducing longer-term Treasury yields, which have surged recently to highs last seen in 2007.

Bitcoin reacted almost immediately, rising nearly 6% on Aug. 19 before extending its gains. According to André Dragosch, head of research Europe at Bitwise, the Treasury announcement was the “major macro catalyst,” signaling a greater willingness to ease fiscal policy and contributing to a weaker US dollar.

“There are several drivers behind the recovery in bitcoin over the past week,” says Macellari, pointing to the recent White House crypto summit and potentially positive momentum on the Digital Asset Markets Clarity Act under consideration by the US Senate. “But the most significant driver is the debasement trade narrative coming back into the spotlight.”

Once prices started moving higher, leveraged short positions, which use borrowing to bet on the price weakness of bitcoin, were forced to close. According to Dragosch, last week there was a record amount of liquidated short positions, which added another layer of buying pressure, creating a classic “short squeeze”.

But the level of $80,000 remains the key test. CoinShares’ Butterfill expects bitcoin to remain within its current range unless the Federal Reserve provides clearer confirmation that the risk of further rate rises has disappeared, which “could provide the catalyst for a stable bitcoin breakout above the $80,000 threshold.”

Research by Harvard Business School Professor Alberto Cavallo illustrates the downward trend in the price levels for many retail goods, followed by an acceleration after tariff announcements. Prices on both imported and domestic goods have climbed modestly but steadily since March, even if the hike is still small relative to the size of the tariffs.

The researchers created indexes with daily prices collected by PriceStats, a private firm cofounded by Cavallo that provides online data for over 350,000 products sold by five major US retailers. The indexes allow them to track price changes in specific categories and from countries of origin. Overall, the prices of imported products have increased faster than those made in the US. An extended analysis, going back to January 2024, explores price changes of goods relative to their pre-tariff trend.

Current Tariff Rate: Consumers face an overall average effective tariff rate of 17.9%, the highest since 1934. After consumption shifts, the average tariff rate will be 17.4%. (If IEEPA tariffs are invalidated, the rate would be 9.1%.)

Overall Price Level & Distributional Effects: TBL assumes the Federal Reserve “looks through” the tariffs and allows prices to rise such that the tax burden is felt through prices rather than nominal incomes. The price level rises by 1.3% in the short run, representing a loss of $1,800 for the average household and $1,000 for households at the bottom of the income distribution. (Without IEEPA, the price level impact would instead be 0.6%.)

The 50 year mortgage is a scam. I’m just not sure if the administration actually knows that or not.

By the numbers: Consider someone taking out a $500,000 home loan. The current rate on a 30-year mortgage is 6.22%, per Freddie Mac. For these calculations, let's assume that a 50-year loan's interest rate exceeds the 30-year by the same margin that the 30-year rate exceeds a 15-year rate.

That translates to a 6.94% rate on the 50-year loan — which would then have a monthly payment of $2,985, only $83 less than the 30-year mortgage. Zoom in: In the early decades of the loan's repayment, the 50-year borrower's payments would almost entirely go to interest, paying down the debt much more slowly.

After five years, for example, the 30-year borrower would have paid off $33,481 of the loan balance, versus $6,707 for the 50-year borrower. After three decades, when the 30-year mortgage is fully paid off, the 50-year borrower would still owe about $387,000.