The Endgame Has Begun
The Market Ear, Sunday, Sep 13, 2026
Excerpts:
The price of keeping the endgame going
Everyone knows the story. Governments have too much debt, deficits are too large and none of it can continue forever. What is new, or at least increasingly difficult to ignore, is the price of keeping the game going.
The debt accumulated during the cheap-money era is steadily being refinanced at much higher rates. Interest expense is exploding, deficits remain enormous and the bond market is beginning to demand a higher price for absorbing it all.
Herbert Stein famously observed that “if something cannot go on forever, it will stop.”
Nobody knows when. Nobody knows exactly how. But right now, the arithmetic matters more than ever.
Unbalanced
In the first 11 months of fiscal 2026, the US government collected $4.8 trillion — and spent $6.8 trillion. A $2 trillion hole, and we’re not even talking about a recession…..
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Paying the interest
The problem with borrowing $2 trillion a year is, surprise surprise, that you have to pay interest on it.
US net interest expense has now overtaken both defense and Medicare as a share of GDP.
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Double
US net interest costs are expected to double from ~$1trn today to $2.1trn by 2035, nearly 5% of GDP.
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The refinancing machine
Much of America’s debt still carries coupons from the cheap-money era.
As that debt matures, it is steadily being refinanced at today’s much higher rates. The fiscal pain arrives with a lag.
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Entitled – Cutting a few government programs won’t solve this.
Roughly 70% of US federal spending is driven by entitlements. Meaningful fiscal consolidation ultimately requires entitlement reform, higher taxes — or another way out.
Source: BofA
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