Editor’s Note: In response to our recent Suite, by Monitor article, Challenge or Opportunity: The 10-Year Treasury and Fed Funds Divergence Leads Off the 6 Big Factors Facing Lenders in 2025, Dale R. Kluga provides a thought-provoking perspective on the broader economic challenges facing lenders and the nation as a whole. Kluga’s letter underscores deep concerns about the sustainability of our national debt and the banking sector’s unresolved vulnerabilities, offering a sobering counterpoint to the opportunities highlighted in our original piece.

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While we all appreciate the optimism of this article for equipment lenders, the reality is that both SMEs and consumers continue to deal with the brutal aftereffects of the post-Covid subsidies and other non-sustainable handouts.

Our financial infection has yet to be cured, we’ve only kicked the can down the road and our increasing national debt remains historically elevated. The banking industry is proof of our irreparable struggles with over $4 trillion of dangerous insolvency exposure to unresolved CRE and underwater fixed-income securities exposure, which has been largely ignored by the entire federal government and ineffective banking regulators for over three years.

Even our own Fed chairman has recently mis-characterized our economy as strong and viable despite its colossal transitory, post-Covid inflation blunder in 2021 and failure to acknowledge an honest and true assessment of our country’s unleveraged, true economic health.

Without a reality check and serious medical treatment of our overleveraged true economic health, our economy cannot ever fully recover and sufficiently resolve the effects of the inversion between the market-driven reality from an increase in long-term rates and the Fed fund’s confusing and pretentious divergence of lowering rates.

It all means that the real capital markets stubbornly refuse to acknowledge any resolution to our anemic economic recovery being attempted by the Fed. Sure, the remaining and weakened lenders continue to march on in the face of our banking industry’s unresolved insolvency exposure. But how much longer can any government money supply policy intervention refuse to resolve $4 trillion of banking insolvency?

The interest rate divergence is justified and unresolved because of one main reason, government bureaucracy that is politically motivated by both parties.

Bureaucrats refuse to acknowledge this truth and our unresolved economically leveraged situation will continue to stumble on with a low-grade economic fever despite dangerous and failed economic medical treatment administered by pretentious bureaucrats. Despite inappropriate medical treatment through failed money supply policy manipulation. To date, no self-preserving political party is willing to admit responsibility for our historic national deficits and all of our country’s related adverse economic baggage.

We will continue to experience additional volatile disparities and divergence between free market realities of our country’s true economic weaknesses and pretentious government policies that fail to cure our historic problems of solving excess spending funded purely by leverage and not growth of retained earnings through profits.

We are a debt-laden, leveraged economy that no lender in their right mind would ever approve under traditional, small business underwriting standards. Until we repay our national debts, grossly inflated by unsustainable government handouts, we will continue on the path of national insolvency, camoflaughed and funded by dangerous levels of national debt.

But we all already know that, don’t we?

Dale R. Kluga
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