The Federal Reserve and Treasury leadership are painting a calm picture. Janet Yellen says there will be no financial crisis in our lifetimes. Kevin Hassett claims there is zero chance of recession. But the numbers are not backing that optimism. The first quarter of 2025 saw GDP contract by 0.5%. Unemployment ticked up to 4.1%. The current account deficit widened to $1.23 trillion. These are not signals of stability. They are warning lights.
The bailouts of 2023 were not a footnote. They were a full-page rewrite. Regional banks collapsed under commercial real estate exposure. Pension funds required emergency liquidity injections totaling $1.1 trillion. That bailout wave dwarfed 2008 in scope. The Federal Reserve deployed backdoor facilities to stabilize municipal debt markets. The Treasury issued short-term debt at scale, locking in low rates that are now costing taxpayers billions as refinancing hits higher yields.
Yellen’s decision to favor short-term debt maturities during the pandemic is now under scrutiny. Interest rates have climbed. The government is rolling over debt at 5.2% instead of the 1.3% it could have locked in. That delta is costing over $400 billion annually. The debt-to-GDP ratio stands at 123%. The fiscal room is gone.
Prepare for a depression😂😅 https://t.co/V0OlJcTyn2 pic.twitter.com/fa7pcsRfer
— The Great Martis (@great_martis) July 6, 2025
“The Democratic Party blew out the deficit in 2020.” – Scott Bessent
Does Scott have any fucking idea who was President in 2020?
— Spencer Hakimian (@SpencerHakimian) July 6, 2025
Hassett’s zero chance claim is not aligned with market forecasts. JP Morgan puts recession odds at 50%. Goldman Sachs estimates 38%. The New York Fed’s internal model shows a 30% probability. These are not fringe views. They are based on tariff impacts, consumer sentiment, and business investment trends. Trump’s tariff regime has pushed average import duties to 15.8%. That is the highest since 1936. Supply chains are adjusting. Prices are rising. Core inflation is expected to hit 3.4% in Q3 and possibly 4.2% by Q4.
The bond market is not buying the optimism. Ten-year Treasury yields are holding near 4.28%. That is close to the highest level since 2007. Investors are pricing in risk. Not just inflation, but policy missteps. The Federal Reserve is boxed in. It cannot cut rates without triggering inflation. It cannot raise rates without deepening the slowdown.
“There’s never been a better time to buy stocks.” – – Alan Greenspan, New York Times Business Section, January 4, 1973, one week before the start of a 45% decline.
Fed Chairman Powell: “I do not think the US is currently in a recession. There’s just too many areas of the… https://t.co/J8K8O65unj
— Tom McClellan (@McClellanOsc) July 6, 2025
Consumer confidence dropped to 93 in June. That is the lowest reading in 2025. Real wages grew 2.1%, but savings rates fell to 4.3%. Credit card delinquencies have risen for five straight months. The economy is not collapsing. But it is not expanding either. It is drifting. And the leadership’s public statements are not matching the data.
Sources:
https://reason.com/2025/01/10/janet-yellens-short-term-thinking-could-cost-the-u-s-big/
https://www.aol.com/finance/janet-yellen-says-america-lucky-162326345.html
https://www.stlouisfed.org/on-the-economy/2025/jun/financial-market-volatility-spring-2025
