The economy won't slow down and the debt won't stop growing so naturally everything sold off · Daily Briefing

In 30 seconds: September US Manufacturing and Services PMIs blew past estimates, reinforcing a strong economic backdrop, while equity markets saw Tech hit all-time highs and Financials sell off sharply amid rising rate fears. Luke Gromen and others argue the US faces an unsustainable debt spiral where rising interest costs exceed receipts, and the only viable exit is a gold revaluation to devalue debt-to-GDP before hyperinflation forces a default on Treasuries. US Treasury yields surged to near two-decade highs driven by strong economic data, higher oil prices, and a weak auction, with markets now pricing over 100 basis points of additional Fed hikes even as debate rages over whether tightening can contain fiscal-dominance-driven inflation. Gromen warns that Iran's Hormuz blockade poses an existential threat to the US Treasury market rather than just a military challenge, arguing the US is repeating the strategic mistake of costly Middle East wars that hollowed out its industrial base.

Services were even stronger at 58.7 versus expectations of 55.8 and a prior 56.5. The composite landed at 58.4, comfortably above the 55.3 consensus and the previous 56.0. Separately, the Richmond Fed Manufacturing Index adjusted for ISM methodology held at 50.8, remaining in expansion territory. The economy, in other words, is not cooperating with anyone who needs it to slow down. The labor market is telling the same story. Semis trade at a forward P/E of 20x, and unlike internet stocks in 1999 and 2000, whose earnings were non-existent, earnings today are booming. Options markets are leaning into it. S&P 500 three-month call skew has reached 1-year highs while put skew has fallen to 1-year lows, suggesting strong positioning for a year-end rally. Large-cap and mid-cap ETFs pulled in $20 billion in the week ended 9/18/26, while small caps saw the largest outflows.

With US debt/GDP at 120% and True Interest Expense already at 105% of receipts, the numbers leave very little room to maneuver. Proforma US Federal interest expense at 5% on $40T: $2T. Rising yields push the deficit higher nonlinearly, which forces the Fed toward choices that make the debt burden worse either way — cut rates and get near-term inflation, hike rates and risk an Argentine-style outcome. Price-insensitive foreign central bank buyers, led by China, stopped absorbing supply back in 2014. The proposed escape hatch is a gold revaluation. Without a revaluation, the US will not be able to compete with China and others, and the US will lose. Gold settled at $4,323.00, down 1.22% on the day. By this analysis, there is no way out now — only a question of which path plays out near term. US debt/GDP at 120% and True Interest Expense (Interest + Entitlements + VA) at 105% of US receipts mean destroying inflation the way Volcker did will drive hyperinflation as interest goes above receipts (print or default).

The same Luke Gromen driving US Debt Crisis, Gold Revaluation, and Dollar Endgame is also a factor in Surging Treasury Yields and Fed Rate Hike Expectations.

The Treasury market had a rough Wednesday. Losses in the US Treasuries market intensified on Wednesday as robust manufacturing and services activity, higher oil prices, and a weak 5-year Treasury auction drove yields across most maturities to the highest levels in almost two decades. The curve is telling a story nobody particularly wants to hear. The Fed sustained a cutting cycle during which long-term yields rose. The bond market, in other words, has been ignoring the Fed for a while now. The probability of a hike on October 28, the week before the midterms, sits above 50%, with one estimate putting it at 73%. The deeper worry is fiscal. Surging government bond yields are a "major concern" to countries' public finances given the mounting share of spending being consumed by debt interest. Stocks, bonds, gold, bitcoin: all not happy with the US economy running hot.

The same Luke Gromen driving Surging Treasury Yields and Fed Rate Hike Expectations is also a factor in Strait of Hormuz Blockade and US-Iran Geopolitical Risk.

The conventional framing of a Strait of Hormuz closure is military: carriers, minesweepers, escalation ladders. The more interesting framing, advanced in the March 3, 2026 edition of FFTT, is financial. The threat, in other words, is not that Iran sinks a destroyer. The threat, per FFTT, is that a prolonged blockade targets the Treasury market rather than US military forces. Trump and Bessent may be essentially ending post-71 reserve status the only way they can - by starting another ill-advised war so that neocons applaud the end of post-71 USD reserve status. The analogy is striking — the Confederate dollar hyperinflated to $0 after the Confederate central bank ran a QFD towards the end of the Civil War. Gold sat at $4,323.00 on 2026-09-23, down 1.22% on the day. Gold: $4,323.00.