cafeconomics

​Part I: The Economic Framework & Current Market Realities ​I. Layers of AI: The Upright Value Triangle & Wrapper Extinction ​Analyzing the economic gravity of the generative AI supercycle requires unpacking the distinct layers of the technology stack. In traditional software, value forms an inverted pyramid : cheap, commoditized base infrastructure supports high-margin application software at the top. Generative AI fundamentally inverts this structure into an upright triangle , concentrating profits at the bottom while compressing the top. ​ Semiconductors & Hardware (The Value Sink): Occupying the base, foundries, equipment makers, and chip designers command massive profits with gross margins around 75% . Extreme supply bottlenecks and Nvidia’s near-monopoly stranglehold on data center GPU clusters allow this tier to hold the entire rest of the stack economic hostage. ​ Infrastructure & Inference Cloud (The Battleground): The middle tier faces intense ...

For the past several quarters, the U.S. Treasury has run a quiet but consequential experiment in how a government finances a multi-trillion-dollar deficit: lean hard into short-term T-bills, hold coupon (note and bond) issuance roughly flat, and hope the gap gets filled later once conditions look friendlier for locking in long-term rates. Market participants call it the "T-bill skew." The logic sounds clean in a slide deck. In practice, it's a bet — on the Fed's path, on oil, and on the world's appetite to keep rolling over America's debt every few weeks without asking for more in return. As of this week, that bet is genuinely in play, not just theoretically at risk. The strategy, in plain terms Treasury debt comes in two broad flavors: bills (maturing in a year or less) and coupons — notes and bonds (2 to 30 years). When the Treasury issues more bills relative to coupons, it's choosing to finance the government with debt that has to be refinanced constant...