Where there is smoke, there is typically fire.
In his August 5th “X” post, viewed by over 1.5 million readers, Treasury Secretary blatantly accused the Wall Street Journal’s chief economics correspondent, Nick Timiraos, of being a hack.
Such an attempt to discredit a respected journalist such as Timiraos, who had just penned a story on the Trump administration’s unusual approach in supporting a cratering Japanese yen, is out of character for the Treasury Secretary.
Bessent is typically the calm, composed and calculated Yin to President Trump’s aggressively bombastic yang. And given that this departure (let’s call it in poker term’s parlance…a “tell”) relates to trouble with the Japanese yen that according to Gemini is typically a harbinger that signals deeper structural risks (in global financial plumbing which can lead to debt and equity market stress…) also means that attention is warranted on this subject.
Here is the snipe from Bessent, “One of the highlights of the Warsh Fed has been watching stenographers posing as journalists, like WSJ’s Nick Timiraos, reduced to reporting Fed backroom gossip or monetary analysis without being spoon-fed…”.
Sorry Treasury Secretary, I have been watching yen weakness in recent weeks from the side of my desk, but now you have my undivided attention, and I don’t like what I see.
The Real Reason Bessent is upset
Attached below is a link to Nick Timiraos’s now controversial article “Why Bessent Is Leaning on the Fed to Help Prop Up Japan’s Currency”
WSJ: Why Bessent Is Leaning on the Fed to Help Prop Up Japan’s Currency
Highlights of note in Timirao’s piece include:
…A little-used Federal Reserve backstop built for the 2020 dollar shortage is being put to a use it was never designed for: bankrolling Japan’s defense of the yen. Treasury Secretary Scott Bessent wants the backstop made bigger.
Japan said Monday it planned to draw on the facility, a day after Bessent publicly encouraged the Fed to expand it. The arrangement would let Tokyo raise dollars to halt the yen’s slide without selling the U.S. government debt that would otherwise pay for it.
At issue is a lending program created when the Treasury market faced severe strains at the onset of the Covid pandemic. Banks and companies outside the U.S. that had borrowed heavily in dollars found that funding drying up and turned to their own central banks for help. Those without access to the Fed’s dollar-lending network for close allies had one obvious source: selling Treasurys into a market that was already struggling to absorb them. The Fed facility let them borrow dollars against those holdings instead.
Japanese officials have indicated they will use the program to raise the dollars they sell for yen without liquidating the Treasury portfolio that would otherwise pay for the intervention.”
Timiraos goes further, “Washington’s (DC) stake in the yen runs through the Treasury market. When a country defends its currency, it buys its own currency and sells foreign reserves. Japan’s reserves are overwhelmingly U.S. Treasurys. A sustained defense financed the conventional way would mean Tokyo unloading them at a moment when the yield on the 30-year U.S. bond has risen to its highest level since 2007.
Said differently, a Trump administration that, according to Google Gemini, in aggregate, when including Trump’s first term, is responsible for almost 30% (we are not halfway through Trump’s second term…) of the nation’s $40 trillion national debt is trying to secretly borrow more money by unduly pressuring Warsh’s Fed.
Beyond gaudy gold plated statues in Washington, an unauthorized White House Ballroom and a $15 million botched and unnecessary reflecting pool project, lobster lunches at Hegseth’s Pentagon, it is estimated that the current administration’s illegal war in Iran has cost the nation in excess of $100 billion.
American Progress: costs of the Trump administration’s war in Iran
And while President Trump makes claims that over $13 billion has been extracted from Venezuela and additionally claims that more than 100 million barrels of oil have been secretly taken from Iran in addition to touting the government’s investments in Intel and other domestic corporations; the US national debt continues to aggressively grow while President Trump’s personal net worth has ballooned by the billions during his second term in office.
Beyond fiscal strain, the war with Iran has introduced additional burdensome and long-term costs for America. Unofficially, the US has lost the war in Iran and in so doing has lost material credibility as a protectorate of Israel and other “allies” in the Mid East, many of whom are significant holders of US Treasuries. This gets to the heart of Secretary Bessent’s above referenced “tell”. Domestic interest rates have been on the rise in recent weeks with the US 10 Year Treasury Yield eclipsing 4.6% and the 30 Year US Treasury Yield exceeding 5.17% as this note is being written.
Bottom Line
Please don’t take my word for it as to the US losing this illegal war with Iran at Israel’s behest (I adhere to Secretary of State Rubio’s unscripted explanation for this war at its outset).
Please see the attached Substack clip of Douglas Macgregor discussing the state of the war with Iran. It’s more than worth three minutes of your time. As an aside, the writer does not agree with Macgregor’s assertion that Ukraine is finished. In contrast, the writer sees the end of Putin sometime next year as he has lost control of his super power ability to hide such conflict from the citizens of Russia who awake from their collective experience with Stockholm Syndrome.
Substack: Douglas Macgregor on the war with Iran
Beyond Mr. Timiraos’s above referenced work, please also see Josiah Water’s “The Yen Intervention: Bessent’s Desperate Bid to Delay the Bond Reckoning Until After the Midterms” that connects the similar