The Fed's $41 Trillion Problem: Why the White House Stopped Showing the Numbers
“Every budget deficit is part of the inflation, because they have to borrow the money from the Fed... the more money supply that’s being generated, the less your dollar buys.”
If you clicked in from a search about the U.S. debt ceiling, the Treasury's bond buyback program, or why the Federal Reserve might raise rates even as the White House pushes for cuts, you're in the right place. This is Between The Lies, a weekly financial education podcast from Perfect Spiral Capital, and this episode, the first with co-host Luke Tatum back after a break, is a roundtable-style breakdown of several stories from the same week, all pointing at the same underlying problem: the institutions managing U.S. monetary policy are increasingly managing the appearance of the problem rather than the problem itself.
What We Covered
The Treasury's bond buybacks aren't working. The Treasury recently doubled the size of its bond buyback program, a mechanism designed to support bond prices by purchasing existing government debt back off the market. Co-host Rob Brayton explains the basic mechanic on the episode: bond prices and yields move in opposite directions, so when the Treasury buys back bonds, it's trying to push prices up and yields down. The problem is scale, even a doubled buyback program is small relative to the total size of federal spending and the national debt, and the bond market barely reacted. Worse, the market had been pricing in an even larger buyback than what was delivered, which tells you something about how large these interventions would need to be to matter.
“White House omits debt projections as US borrowing nears $41.1 trillion ceiling... it’s kind of like how we revise the definition of the M2 money supply, or we revise the definition of recession. It’s kind of got that vibe to it.”
A 60% chance of a Fed rate hike, even as the administration asks for cuts. One of the more counterintuitive threads in the episode is the hosts' argument that a Fed rate hike right now would actually be the more honest, disciplined outcome, even though it would be painful for new borrowers. Decades of artificially cheap credit, the hosts argue, have trained an entire generation to treat near-zero borrowing costs as normal, when historically double-digit interest rates were unremarkable.
The debt ceiling story nobody flagged. This is the anchor of the episode. As reported in the news aggregation Luke cites on the show, the White House omitted debt projections from a recent report as U.S. borrowing approaches a $41.1 trillion ceiling. The hosts connect this directly to two other examples of redefinition-as-strategy: the revised methodology behind the M2 money supply figure, and the technical redefinition of "recession" in recent years. The pattern, as Rob puts it, is changing the scoreboard instead of changing the score, and the deficit spending behind all of it gets financed through the Fed, which means it eventually shows up as inflation, regardless of what label gets attached to it.
Tariffs, isolationism, and unintended consequences. The episode also covers a new policy restricting Canadian dairy, alcohol, and vehicle imports. Rob raises a specific tension here: American cattle farmers currently benefit from strong prices, but many rely on cross-border supply chains that make shipping cheaper and faster. A policy framed as protecting American producers may end up disrupting the same producers it claims to help, a pattern the hosts trace back to nearly every government market intervention discussed on the show.
“This is the tragic telling and retelling of the same tale where the government declares that they have solved the business cycle, and they will never have another depression or recession. And does that ever work out? No.”
Key Takeaway
You cannot influence Treasury bond buyback policy, Federal Reserve rate decisions, or what gets included in a White House budget report. What you can influence is the financial structure of your own household, building it in a way that doesn't depend on any of those institutions being honest about the numbers. That's the thread that runs under every story in this episode, and it's the starting point for the work Perfect Spiral Capital does with clients directly.
Related Episodes
Episode 043: The Yen Carry Trade and the Bank of Japan's Rate Hike Reckoning
Episode 041: China's Gold Accumulation and the Push Toward De-Dollarization
Episode 042: Berkshire Hathaway's Cash Pile vs. Mainstream "Hit $100K" Advice
“A bailout is simply throwing good money after bad. It is rewarding bad economic decisions.”
Ready to Build Outside the System?
Education is a starting point, not a strategy. If this episode raised questions about how debt monetization, inflation, or Fed policy affects your own financial position, that's exactly the conversation to have with Rob and Luke directly. Visit PerfectSpiralCapital.com/podcast for the full episode and a free toolkit to help you get started.
What We Covered
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The Treasury doubled its bond buyback program to try to support bond prices by increasing demand for existing government debt. According to the hosts, it didn't work, the market had actually priced in an even bigger buyback than what was delivered, and bond yields kept climbing anyway. The buyback is simply too small relative to the total size of the national debt and ongoing deficit spending to meaningfully move the market.
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As reported in the news story the hosts cite, the White House left projected debt figures out of a recent report as U.S. borrowing approaches a $41.1 trillion ceiling. The hosts compare this to other examples of redefining unfavorable data, like changes to the M2 money supply methodology or the technical definition of "recession," rather than disputing bad numbers, the strategy is to stop publishing them.
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Not necessarily, according to the hosts. While a rate hike would be painful for new borrowers and could slow certain investments, they argue it would also be a more honest, disciplined step after decades of artificially cheap credit. The pain would fall on new borrowing and speculative activity that depends on continued cheap money, not on people who already locked in fixed-rate debt.
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When the federal government runs a deficit, that spending has to be financed, and a significant portion of that financing flows through the Federal Reserve. That process expands the money supply. More dollars chasing the same amount of goods and services means each individual dollar buys less, which is the practical definition of inflation, regardless of whether official statistics reflect it immediately.
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The hosts frame this as a punitive trade policy aimed at pressuring Canada, discussed on the show in the context of Canada's growing economic ties with China. They note the restriction may backfire domestically: American cattle and dairy farmers currently benefit from cross-border supply chains that lower costs, and disrupting those chains could hurt the very producers the policy claims to protect.
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That's the claim in a Gartner report the hosts discuss, but they push back on the premise itself. Their argument is that most of the layoffs attributed to AI over the past few years were actually corrections to post-pandemic overhiring, not a direct result of AI adoption, meaning the "AI-displaced worker" framing may be describing a smaller, or different, group of people than the headline suggests.
“You have to have short-term pain for long-term improvement, long-term gain. Somebody’s gotta pull that thing and reset it and put the bones back in place. That’s the state of our economy today.”
Show full transcript
Intro — Luke Tatum Returns, New Roundtable Format [00:00]
Nicky P: Welcome everybody. I'm Nicky P, here with Luke Tatum and Rob Brayton. I know, it feels like it's been forever. We even missed a big milestone back in August — we've been doing the podcast for over a year. Went by with no parade, nothing, and that's terrible. But one of the beautiful things we get to do today is, after a long break, welcome back Mr. Luke Tatum. And we'd like to do that in a new way. We're revamping, testing the waters, seeing what works for you, what works for us. And given that the news is a complete and utter mess this week, we're gonna talk about a bunch of news items today and see what's falling off the wheels.
So welcome to the Between The Lies podcast, your weekly lesson on how to approach an uncertain world with positivity and balance. I'm Nicky P, here with my good friends and money brains, Luke Tatum and Rob Brayton from Perfect Spiral Capital, as they help us navigate the snares and pitfalls in a world of "trust me bro" economics. Stick around till the end for their free toolkit, and be sure to like and subscribe if you dig what we're doing. Gentlemen, how's the world falling apart in a good way today?
Luke Tatum: I always feel like you're gonna say "start your engines" every time you say "gentlemen." Today I think we have a grab bag of things. The main thing we're gonna talk about is the Treasury buyback of bonds. This is a crazy situation because the government does this — the Treasury buys bonds to try to support the price of the bond market. But they've recently doubled the amount of bonds they're buying back, and that's so small compared to the size of the spending and the overall national debt that it's basically ineffective. Rob was saying before we started that the market was expecting even more than doubling, which shows you how insane this whole thing is. It basically has not helped. And you couple that with a 60% priced-in likelihood of a rate hike from the Fed — a crazy situation. Rob, where do you wanna start with this?
Treasury Bond Buybacks and Why They Aren't Working [01:00]
Rob Brayton: It's a weird thing, especially if you're not used to how general markets work. The yield on the 10-year bond keeps increasing, and for those not familiar — if the price goes up, typically the yield goes down, and vice versa. Yields are great for people holding a bond, not necessarily for people buying, because of that inverse relationship. The reason the Fed wants people buying bonds is that it creates liquidity into the system. But you also have a situation where the market is expecting the Fed to do certain things, and in this case the market was anticipating the Fed would buy a lot more than it did — because cheaper money is what it boils down to, money they can leverage to try to create more yield and income.
It's apparently not enough to satisfy their desires when it comes to these bond buybacks. It's not a fun, sexy topic, but it really is something that impacts a lot of monetary policy, which does impact the average person. If deficit spending impacts inflation, that actually hits everyone's pocketbook. The more inflation there is, the more money supply that's being generated, the less your dollar buys. That's why this is actually important to you as an individual. We can't make drastic changes because we're not the ones in charge, but if we can think about how to operate differently within the parameters of the system we have, that gives us options — that's a lot of what we do at Perfect Spiral Capital for our clients.
The Yen Carry Trade and Controlling Your Own Household [05:00]
Luke Tatum: I'm glad we're talking about the bond market — it's maybe not sexy, but it is fun to get into. This makes a broader point about the sphere of control: we can't control what Washington, D.C. is doing, but we can control our own household. We've done episodes in the past talking about cheap credit in Japan — go watch those if you haven't. Why do people move money into Japan to borrow in yen and do business elsewhere? Because it's cheap credit. Real wealth looks for opportunities at a better price — it's an arbitrage thing. You don't have the ability to influence how cheap credit is in Japan or the U.S., but you do have the ability to change the environment your household operates in. That's what we do with our clients every day. Historically the U.S. has been a friendly place to do business, and there are certain expectations that come with that. The more the U.S. does to put a damper on that, the more we might see long-term repercussions.
Nicky P: I'm excited to have Luke back so I get to go back to being the dummy on the show. It sounds like this is one of the ways the medicine is finally coming home to roost. We manipulate and don't take the medicine, and this feels like proof we're getting beyond where we can do anything but take it. The system is failing because it just can't work anymore, and whatever we do now is dealing with moving toward where things are headed inevitably.
Why the System Can't Keep Kicking the Can [09:00]
Luke Tatum: Rob, I'm sure you'll have something to say once I mention this — one of the stories I pulled: "White House omits debt projections as US borrowing nears $41.1 trillion ceiling." We're hitting the debt ceiling again — not news, we always hit it. But to say "we're not even gonna show you where the projections are looking, because it's gonna look real bad, so let's just not put it in the report" — that's kind of like how we revise the definition of the M2 money supply, or revise the definition of recession. "No, we're not in a recession, because we changed the definition." It's got that vibe to it.
We crossed the $40 trillion mark last month. We've had cheap credit for a very long time — it's an agonizing process for the entire market to get one quarter of one percentage point higher in interest rates. There used to be 18% interest on things as a normal part of doing business.
Rob Brayton: Yeah, prime was that high at one point.
Luke Tatum: Right — not just credit cards, prime. People have collectively decided to forget that interest rates can be above a few points.
The $41.1 Trillion Debt Ceiling and the Vanishing Report [10:00]
Nicky P: Let's be honest, Luke — it doesn't take forgetting. You're talking about the boomer era. It hasn't been like that in our era. At no point in our adulthood has it been true that borrowing money had any real cost.
Luke Tatum: Right, and that is kicking the can down the road — a reckoning day that's been pushed out and pushed out, and the further it gets pushed, the worse it will be. You cannot deny reality on an ongoing basis and expect nothing to happen. This is the tragic telling and retelling of the same tale where the government declares they've solved the business cycle and will never have another depression or recession. Does that ever work out? No.
Rob Brayton: All it's doing is making that problem so much bigger. What the Fed's been doing is changing the reality by changing the definitions of these things, all while true inflation — the actual money supply — keeps exploding larger every year. Most people don't realize every budget deficit is part of the inflation, because they have to borrow the money from the Fed. We're running roughly a $2 trillion deficit, and that's only getting bigger while we hide it by changing definitions. At some point it has to implode, and the average person is the one left holding that bag. Our whole point is to be positive, but we have to know what's going on so we know what to do — there are ways to operate in a different system, and that's how we have to think differently about it.
Is a Fed Rate Hike Actually Good News? [16:00]
Nicky P: Here's something positive — markets see a 60% chance of a Fed rate hike even as the president is asking for cuts. It seems like the market is expecting the Fed to actually do its job, in the most nominal way.
Rob Brayton: A quarter-point increase.
Nicky P: Right, what we actually need is more like a 17% increase versus a quarter point.
Luke Tatum: Would that be awful? If prime was 20% tomorrow, would that be a nightmare for a lot of people? Yes, absolutely — but it would be amazing for someone who just locked in a mortgage at 6.5–7%, because they got in before it happened. It punishes new borrowing. A lot of things would have to get put on hold, and the whole game of the Keynesian model is to try to boost output and spending all the time. That can't always be the case — it's as foolish for a corporation to say "we'll always make more money this quarter than last" as it is for the government to assume growth never stops. You must invest, save, accumulate, and deploy capital in order to get profits. You cannot always make a profit.
Bailouts: Rewarding Bad Decisions With Good Money [18:00]
Nicky P: Even if everyone felt like they were constantly making good decisions, it's always belied by the fact that we have these things called bailouts — a bailout is simply throwing good money after bad. It is rewarding bad economic decisions. Until we stop treating that as something we should even do, it's always going to be a fly in the ointment.
Trump Bans Canadian Dairy, Alcohol, and Vehicles [19:00]
Nicky P: Keeping in the same vein, because the moral of the story today is always government intervention — Trump bans Canadian dairy, alcohol, and vehicle imports starting September 29th. I have no love lost for Canada, I just don't care much, it's a place. But my first question is: how much of those things do we actually import?
Luke Tatum: I don't know the stats offhand. I know there's a lot of cricket protein stuff up in Canada, and I'm glad we're not importing that. The isolationism angle — this was the slander always thrown at Ron Paul, that not wanting to intervene in the entire world makes you an isolationist. It's mercantilism, basically — withdraw everything within our own borders, produce all our own stuff, don't import anything. I'm not saying that's the goal, zero imports. But it's this reward-and-punishment system from this administration: you don't do what I tell you, therefore tariffs, therefore we don't import from you anymore. It's punishment for some infraction we're reacting to — and I say "we," but I mean Trump.
Nicky P: Well, it's certainly punishment for them sinking further into China's wheel of influence, becoming more of a vassal state. Does this overall help us? Rob, you were gonna add something.
Rob Brayton: It's interesting — I don't know why the president has to be so focused on this or that segment of the economy other than trying to strong-arm someone into doing what he wants. Beef imports to the U.S., the dairy side is super small, under a billion dollars — $430 million from the stats I'm seeing. Live cattle imports from Canada are around $2 billion. It's sizable, but I don't get "let's help American farmers" paired with cutting off one of their supply lines. A lot of beef cattle production happens in the northern states, and they're probably crossing the border regularly because it's physically closer and cuts shipping time. I'm not a farming expert, but I live in Wisconsin, there are a lot of beef farmers around here, and they actually like the high prices right now. Where high prices aren't helpful is at the supermarket for the average person. What actually caused that problem? Maybe the giant expansion of M2 over however many years. It's all these little distractions while the bigger thing keeps happening — and we have to wake up to that as a populace to do something about it.
Luke Tatum: Trump, the Trump administration — there's plenty of corruption, and that happened under Biden, under Obama too. You have to remove the rose-colored glasses and look at the fact that this is just how it's done — getting the side benefit of brokering deals for your estate, your dynasty. It's not about looking out for you, even if you're a beef farmer. You might get the benefit of being the flavor of the week for whichever industry is getting favored — rare earth mining, other companies — the U.S. government decides to grace you with a stake in a company. Cool for the moment, but then you get ripple effects. The market is disrupted any time the government takes any action — that's universal. Those disruptions ripple into the economy, and then you go "I need to prop up this thing over here" — but why does it need to be propped up? Because of the first thing. It's never a lasting benefit to anybody.
Rob Brayton: This has been going on a long time — it's not new. The solutions are relatively simple, nobody wants to do them because they're hard, and nobody wants to be the person who cut government spending by $4 trillion and dealt with people whining about lost programs. But what's the net upside a few years later? Massive for the average person. There's short-term pain when things are bad.
The Compound Fracture: Why the Economy Needs a Hard Reset [27:00]
Rob Brayton: Think about it this way — you break an arm, and you have a compound fracture. It hurts, it's bad, it looks bad, but to fix it you have to have short-term pain for long-term improvement, long-term gain. Somebody's gotta pull that thing, reset it, put the bones back in place. That's the state of our economy today. Somebody has to be willing to say "we have bones sticking out of the skin, we've gotta fix this." Someone's gotta be willing to do it. Problem is, nobody's been willing to, and I question whether that will happen — but that's a different conversation for a different day.
Nicky P: I'd argue they've actually made it so it can't even happen. I don't want to pretend other nations don't mean us harm — whatever you feel about the leadership in Iran, or the fact that they're in that position partly because of us, the bottom line is some of those actors would try to harm us because of how we've interacted historically. China wants to control the world economically, given the opportunity, for how they've been treated by us historically. So maybe some things do need to be dealt with because we've screwed things up so badly — the market doesn't function the way it should naturally anymore. I'm not sure I trust government to be the one to do that correction, though. People should pay attention and find their own ways to navigate markets, understanding it's a big game with big players who don't necessarily want you playing.
Luke Tatum: Quick comment — it's not landing a point in an argument about global politics to say "but China exists" or "but Russia exists." That's not an argument. It's easy to get into reactionary bait games where there's no actual discussion happening.
Nicky P: It's always amusing — you've got the general thesis, the Austrian thesis, and the "great game" guys who feel like everyone's playing 4D chess. You can't say it's not possible they're seeing a broader gameplay we're not paying attention to. It's a complicated system one way or another.
Gartner's AI-Rehiring Claim and the Real Jobs Story [31:00]
Nicky P: I did want to bring up one more piece of news: Gartner warns 30% of AI-displaced workers will need rehiring by 2029. I find it more amusing personally, because what we've learned over the past year is that there haven't really been "AI-displaced workers" — there were workers let go because companies overhired after the pandemic and needed an excuse to get rid of people. I'm curious what these AI-displaced workers actually are.
Luke Tatum: People are gonna latch onto whichever angle fits their side of the AI-bro versus anti-AI-bro debate. "AI didn't actually solve anything, so all these people will get hired back" — well, are they? At the same company, doing the same work? Probably not.
Nicky P: Production never came back up after the pandemic the way people hoped with the "raging economy" narrative — they just never needed those people again.
Luke Tatum: I talk about the video game market a lot — Sony, Microsoft, all those companies hired enormously and bought studios after 2020, betting on double-digit profit margin improvements every quarter forever. Obviously that's not gonna happen.
Nicky P: Unless they thought they could keep generating those unique situations indefinitely.
Luke Tatum: Yeah, I don't think Sony was doing that. Rob, anything on the AI hiring thing?
Rob Brayton: I don't think we need to go into it at this point.
Wrap-Up [34:00]
Luke Tatum: How have y'all been wrapping the show? I have my old script.
Nicky P: A very badly improvised version of your script is how it's been ending lately.
Luke Tatum: Okay, I'll take over. Thanks everybody for watching. Great to be back. Let us know what you thought — if this roundup format works, or if you'd rather a deeper dive into one topic. Either way, thanks for joining us for the Between The Lies podcast. Education on these topics and keeping up with the news is great, but what matters most is you and your own situation — your business, your family, your legacy. If you'd like to apply these principles to your own life, that's what we're here for. Call Rob, call me, book on our website — perfectspiralcapital.com. If you go to perfectspiralcapital.com/podcast, we have a free toolkit with resources to help you get started. We'll talk to you again next week.
Nicky P: As Mr. Marketing, let me rephrase that: education's great, action is better. Let this toolkit help you make that change. See you next week.
