Why Social Security will need to be Saved. The artificial emergency on the horizon. [View all]

[mikelewis]

Not many people really understand the Dollar and how it works. Lots of people know the U.S. Government doesn't print the money it uses, it borrows it from the bank. Think of the Dollar as more of the money you use after you've taken out a loan against your house. A credit against your expenditure is issued and that loan is spread out over so many years: 2,5,10 or 30 years depending on the type of loan or credit we need for that expenditure.

Those bonds are actually traded on the market and as the price of those bonds rise... the amount they pay out is less. As the bond price falls, the yield goes up making them more attractive... which raises the bond price which leads to dropping the yield and round and round it goes. It's confusing, I know... but it works and it works well... as stupid as it is, it's not the worst system imaginable.

Now, if you're clever, you can make a lot of money off of bonds. Even if you don't trade in them directly, you can trade in the EFT's that do which is pretty close to the real thing without need a gagillion dollars. So... the Bond Market. You're not supposed to be able to predict it. But... you can now! And it's going to be used as an excuse to slash social security to the bone. These rates are going to be used as a bogus excuse to cut benefits... that might not be what these tarriffs are totally all about but this will be one of the consequences. The will attack and gut social security because of what was just done to the bond market.

Loomer suggested 9/11 was an inside job... ok. People can argue that if they want... There is no Argument here. This was economic sabotage and it's going to be used to dismantle social security. Get ready
Modeling the Bond Market as a First Order Lag

How Tariffs Are Creating Measurable Shockwaves in the Bond Market
In most market cycles, financial systems react to a swirling mix of economic data, sentiment, and policy signals. It's messy. The inputs are inconsistent. And the bond market—especially Treasury yields—typically reflects that chaos, adjusting in ways that are subtle, delayed, or indistinguishable from noise.

But not now.

In 2025, a clear pattern has emerged. Treasury yields are behaving like a stretched system—absorbing large, deliberate shocks and releasing them in visible, predictable waves. This is no accident. It’s the product of policy-induced market manipulation. And tariffs are the trigger.

The Bullwhip Effect: A Visual Market Distortion
Think of tariffs like yanking hard on a rope. A small flick at the handle becomes a violent snap at the end. That’s the bullwhip effect—a concept from supply chain economics that applies just as well to finance.

When the U.S. imposes or threatens new tariffs:

Import prices rise, feeding into inflation.
The Federal Reserve is expected to respond—often with rate hikes or hawkish signals.
Investors move quickly, pricing in higher yields, especially on short-term bonds.

But this reaction doesn't end all at once.

Because tariffs are a policy input with delayed consequences, the bond market doesn’t just absorb the news instantly. It reacts in phases:

First, short-term yields jump, pricing in imminent action by the Fed.
Then, medium-term bonds adjust, as markets gauge the staying power of the tariffs and their downstream effects on growth and inflation.
Finally, long-term yields drift, not based on emotion, but on the evolving perception of whether the economy will slow or reaccelerate.

That’s a classic first-order lag system at work. The shock enters. The system absorbs it. The outputs adjust slowly, smoothing the violence into curves.

Why This Only Becomes Visible Under Extreme Policy Shocks
In normal times, bond yields move because of dozens of micro-factors: labor data, earnings, global demand, consumer confidence. No single input dominates. The signal is drowned in noise.

But these erratic tariffs are different. They are:

Sudden
Deliberate
Quantifiable

A 10% import tax is a measurable cost increase. It’s not speculative. It’s a fact. And the market, especially in 2025, knows that when tariffs rise, it triggers:

Inflation risk, pushing up yields
Fed action, shifting short-term rates
Political reaction, stirring uncertainty

So when tariffs are announced—or even hinted at—the bond market translates that input into a price curve.

But the real insight is this: the response follows a clear time pattern.

It’s not the fact that yields rise. It’s how:

The 2-year yield reacts within minutes
The 5-year shifts within hours
The 10-year and 30-year bend over days, forming a trailing average of the event’s energy

This lag reveals itself only when the input is powerful and directional. It’s like watching ripples on a pond. Throw in a leaf, nothing. Throw in a rock, and suddenly, the physics of the surface becomes obvious.

Tariffs as Predictable Chaos: Market Manipulation with Measurable Outcomes
Here’s the deeper implication: If the inputs are deliberate and the system’s lag is known, the market becomes partially predictable.

That predictability opens doors—for investors, policymakers, and critics. If a policymaker can:

Announce tariffs,
Cause a spike in short-term yields,
Watch the bond curve deform,
Then claim that “entitlements are under strain because of rising debt costs”...

They’re not reacting to the market—they’re using it as a narrative tool. In effect, they’re bullwhipping the market for political capital.

And that would be easy to miss if not for the fact that the bond market, for once, is responding like a mechanical system—dampened, delayed, but deeply responsive to energy inputs.

Conclusion: We Can See the Shock Now Because It’s Designed That Way
This is why the bond market has become so legible in 2025. The signal isn’t getting stronger. The noise is being removed by the brute force of policy.

Tariffs, deployed deliberately, act like measurable shocks. And for perhaps the first time in recent history, the U.S. bond market is not just reflecting them—it’s resonating with them, in slow, predictable pulses.

This is no longer a market reacting to sentiment. It’s a system absorbing force—one lagged yield curve at a time.



For a more indepth look at the math and physics behind how this erratic Tariff war is revealing the direction of the bond market:

https://qmichaellewis.blogspot.com/2025/04/modeling-bond-market-as-first-order-lag.html