Three days over three weeks. And right in the middle of that Venn diagram sits a realization you should probably understand now rather than experience the fallout later.
Some of this you probably know. The news media has been all over it.
They’ve just not really connected the dots to analyze and explain what it all really means to pocketbooks and personal wealth all over America.
Because it’s in that coming together—in the overlapping of that Venn diagram—where a bad moon is rising over some very bad juju. If I could somehow insert the Scooby Doo mystery music here I would…
Let’s start on…
July 31: The US Treasury, in a bit of a shady move, sold euros from its foreign reserves and used the proceeds to buy Japanese yen. Shady because the play undermined the euro as part of Treasury Secretary Scott Bessent’s rush to shore up the Japanese yen in an emergency intervention.
A less Machiavellian Treasury Secretary would have sold US dollars instead, or at least informed the Europeans what was going on. This Treasury Secretary did neither.
Bessent called the intervention a “signal of friendship”—just one pal helping another pal through a tough moment. Touching, really.
Or maybe there was an ulterior motive?
Per the Japan Times:
The U.S. side also wants to avoid a scenario in which Japan dumps U.S. Treasurys in solo interventions to defend the yen, which would drive U.S. long-term interest rates higher, analysts said.
You don’t see that side mentioned much in the US press because it highlights Uncle Sam’s debilitating weakness: Too much debt… but we’ll come back to that.
August 19: A truth that surprised precisely no one. The Treasury Department announced that America’s total public debt had crossed $40 trillion.
It took nearly 200 years for America to accumulate its first trillion.
It took five months to add the most recent trillion.
That same afternoon, Bessent coughed up another surprise: The Treasury Dept. would “at least double” the size of its bond buybacks for long-dated Treasury debt—those stretching 10 years to 30 years. Instead of $2 billion per buyback episode, Treasury will now buy $4 billion.
You probably know this, but Treasury does not have $4 billion.
So, it’s selling $4 billion on the short-end of the market—28 days to 1 year—to buy back all that long-term debt.
The reason: The world is losing faith in America’s fiscal incontinence. Interest rates on long-term debt spiked to levels last seen in 2001. Creating fake demand for long-term debt drives down the yield, which helps America better manage the out-of-control interest costs on the $40 trillion in debt.
Which leads us to…
August 21: That day, only two days after Bessent stepped in with extra moola for the bond market… the yield on the 30-year Treasury had climbed back above where it started before Bessent’s buyback announcement.
The market spent 48 hours thinking about Bessent’s move and decided, “Treas. Sec. is just running a shell game! If I’m gonna lend money to this profligate nation, I want a better return for the risk I’m taking.”
Three days.
In just three weeks.
Same message each time: The Treasury Department looks a lot like an American family juggling credit-card payments, the home equity loan, the mortgage, two auto leases, and a personal loan, all while still having to pay the rising cost of groceries and utilities.
You know where this ends for the family.
Which means you also know where this ends for Uncle Sam.
No stable country has to jump through these hoops to keep interest rates from collapsing the government’s ability to manage its financial obligations.
Every Treasury Secretary since Paul Volcker has understood the real job description. It’s not policy. It’s not politics. It’s confidence: Don’t let the world figure out how thin the ice is.
I’ve got some news for you: The world has figured it out.
At this point, Bessent’s only job is to hide the crisis to come while ensuring that it comes nonetheless.
Because it’s the only way out of this mess.
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