President Scott Bessent.

Scott Bessent has spent the last three weeks running one intervention after another on the American financial system. The yen. The bond market. And he’s shifting the narrative around roles, fundamentals, and expectations. Bloomberg recently referred to him as the “most interventionist Treasury Secretary in decades.” So today, we’re staging an intervention of our own. It’s time to have a heart-to-heart with Scott.

Scott, buddy. You’re not good at this. But guess what? You don’t have to do this. You can quit. People do it! Karoline Leavitt just did it—walked away from one of the most visible jobs in the building to go be with her kids, and everyone more or less nodded and said, sure, that’s healthy, that’s a life. You could do that. Nobody would stop you. Except I don’t think that’s what his shenanigans are all about. My guess is that you’re looking at someone who believes he is the top contender for the presidency on the Republican ticket. I’m not joking. But we’ll come back to that. First, let’s explain what he’s been doing because in the world of global finance, it’s pretty much malpractice.

Bessent has been futzing and tinkering about in the currency and bond markets, trying to flex his muscle and not getting the responses he’d hoped for. What cracks me up about the coverage of him is how the pundit class is trying to explain away his actions by saying he’s leaning on his experience as a currency trader and hedge fund guy. Because, ya know, he knows these markets inside and out, so he’s just reverting to his hedge fund instincts.

I certainly fucking hope not!

Let’s remember what those instincts actually produced. Bessent made his name as a currency trader under George Soros—genuinely, that part’s real. And he was good; he helped break the Bank of England trade in ‘92. Then he took that reputation and flew the nest to start his own fund—Key Square Capital—in 2016, with $4.5 billion behind it, including $2 billion directly from Soros himself. One of the biggest hedge fund launches in history.

And then he ran it into the ground. Lost or broke even four years straight, 2018 through 2021, while the rest of the finance world could not help but make money during one of the most historic bull runs in market history. By the time he shut it down to join the Trump administration, between losses and redemptions, his fund’s assets had cratered from a $5 billion peak to $577 million—a nearly 90% decline. Soros pulled his money out in 2018. That was his resume for the job he now holds. So no, I really hope “hedge fund instincts” isn’t the operating principle here.

But I digress.

The Treasury Secretary has several duties. Heads the IRS, manages systemic risk in the financial system in conjunction with the Federal Reserve, advises the president on economic policy, prevents money laundering, sets exchange rate policy, and, most importantly, manages the debt of the United States. That gobsmacking $40 trillion figure that was splashed across the screens all last week. (Separate episode on that in the works.)

Here’s 2024 Scott Bessent criticizing his predecessor’s strategy to manage debt in his own words:

“We’re now spending more on interest costs than our entire yearly defense budget...Secretary Yellen is financing at the front end of the curve…we’ve got to do something, because at a point there will be a problem. And it’s always very difficult predicting where it is...The U.S. is the reserve currency of the world, and...having the reserve currency is called the exorbitant privilege, and I think that we have abused the exorbitant privilege.”

Well, now that he’s in the chair, he’s not just following Yellen’s playbook, he’s running a freight train through it. And that matters for our discussion because the idea here is that he’s theoretically replacing expensive long-term debt with less expensive short-term debt, just like Yellen. Except that he’s lost control of both ends of the curve, so not only is he issuing the most paper we’ve ever issued, he’s also losing the cost battle on the debt. By leaning this heavily into short-duration issuance, he’s flattened the mystery and diversity that used to characterize how our debt gets absorbed, and instead created something closer to a single new market of short-term paper that has to be rolled again and again. With that in mind, let’s talk about his recent interventions.

You might have heard about this photo snapped by a reporter during a cabinet meeting recently.

“To Do: Buy Japanese Yen (JPY) $5 - $10 bil”

Most people write down people they have to call back, appointments, maybe even personal reminders. Scotty had to remind himself to buy five or ten billion yen, further clarifying that it should be Japanese yen with the symbol and everything because you can never be too careful. For reference, no other country issues a currency with the name yen.

Anyhoo, he did exactly that shortly after the photo was taken, selling euros from our reserves to purchase yen with the hope that it would backstop the yen’s decline. To be clear, this wasn’t about helping out the Japanese people, who are experiencing inflation for the first time in many years due to the declining yen. He did it because he needed to stop the yen’s slide, which could trigger the BOJ to hike rates in Japan to cool inflation. This matters to the United States because high rates in Japan could trigger something else—a massive repatriation of Japanese investment funds away from U.S. Treasuries. Japan is the largest sovereign holder of U.S. debt.

Bottom line: it didn’t work. Strike one, Scott.

Undaunted, he continued his interventionist ways with something the international community has called arrogant and reckless. He made a promise to ramp up Treasury bond purchases, buybacks in the low billions, in the near future. Two to four billion, give or take. In the grand scheme of a $32 trillion market, this is genuinely nothing. But the stated purpose was to bring yields down, because servicing our debt keeps getting more expensive. Here’s the thing: this is normally a Federal Reserve operation. It’s called yield curve control, and when the Fed does it, it can work for a while, before it turns inflationary. But Treasury doing it is a completely different animal. It’s activist. It’s panicky. And the market saw straight through it: rates dipped for approximately a nanosecond and then resumed climbing.

In other words, this also did not work. Strike two.

So here’s the underlying narrative problem. Remember that our entire global economy is built on the U.S. dollar as reserve currency, and our debt issuances release those dollars into the universe to make the engine of commerce happen. But there’s a cost to those dollars, and it’s priced in faith; the belief in the U.S. Treasury as a solid fiscal steward. So every one of these moves saps a little more faith in the United States’ ability to manage its own fiscal house. This guy is scoring own goals, over and over, and there was no reason to do any of this—not least because he is currently, and I do mean this in the crudest possible sense, screwing over the new Fed chair. The guy he personally fought to get seated, by the way.

Kevin Warsh has been making headlines of his own—announcing, essentially, that he’s done with what’s called “forward guidance,” a practice since Ben Bernanke was chair, designed to project stability through transparency. Losing this means no more previewing what the Fed is thinking; instead, the market gets to figure out where rates are going on its own, reading tea leaves instead of getting told directly. Nobody loved that answer. But fine—it’s his Fed now, his call.

And then numbnuts Bessent goes on television and says, in effect: rates are too high, but don’t worry, in a couple of months we’re going to spend a couple billion dollars to bring them down. That statement does two damaging things simultaneously: it undercuts Warsh’s entire stated communication strategy the week after he laid it out, and, it signals to the entire world, “yes, our house actually is on fire.” But don’t worry—he’ll show up with a garden hose in a few months and spray just enough to keep you walking on the embers.

So on top of being combative, petulant, and extremely arrogant about all of it, we can officially add “bad at the job” to Scott Bessent’s CV.

And all that was prologue for his really big moment in the spotlight, announcing an economic D-Day dubbed Operation Economic Outcast in addition to Operation Epic Fury (I’m screaming these like a pro wrestler as I write them). Devastating sanctions against Iran on top of the devastating sanctions Trump already put on Iran on top of the ones Joe Biden put on Iran, which were on top of the ones Barack Obama put on Iran, which shouldn’t be confused with the ones George W. Bush put on Iran, nor the ones that date back to Jimmy Carter, for that matter.

No. This time is different. This time it will work because Scott Bessent is really, really mad about it, and if anyone dares do business with Iran, he will bring the full weight of the U.S. motherfucking Treasury down on their heads. Unless, of course, that country is China. During his fire-and-brimstone speech befitting a military commander rather than a failed hedge fund dweeb, he stammered and skirted every question regarding China’s relationship with Iran. One, because he knows there’s nothing he can really do to hurt the other biggest economy in the world. Two, because he didn’t fucking think this through. And three, because he’s a loser.

Double Double

The world took notice when an Abu Dhabi investment firm scooped up $2 billion of the Trump family’s new crypto stablecoin, instantly making it one of the largest stablecoins in the world. Since then, the news around World Liberty Financial’s USD1 has been relatively quiet. It’s been in the ether that the president has somehow enriched his family to the tune of a couple billion dollars more than when he took office for the second time, but the mechanics behind it are lesser known.

So here you go.

Source: CoinGecko

Earlier this year when things were heating up around U.S. crypto legislation, USD1 went on a tear. The market cap for the Trump stablecoin has doubled since that first investment, and with every newly minted stablecoin, the family generates a handsome amount of fees.

That’s it. That’s the whole chart of the week. A reminder that this is the most corrupt president to ever hold office and if we don’t stop this batshit crypto legislation, he and his idiot sons will have the most powerful wealth-making vehicle in the world at their disposal.