Bessent's Treasury Buybacks are Inept and MIsguided

Treasury Secretary Bessent announced a second buyback of U.S. treasuries triple the size of the previous $2 billion and the bond market did not appreciate it with interest rates going up in reaction.  Bessent was defiant in his announcement asserting the bond market investors do not understand the fundamentals and he was going to rule the house.

Bessent has failed to learn from the first buyback that lowered interest rates for one day and then went back to where they were.  It was seen as stirring inflation fears and a misunderstanding of what drives bond market fundamentals as well as arousing international concern about the United States fiscal credibility.  The Norwegian Sovereign Fund reallocated out of U.S. treasuries into other U.S. bonds and mortgage securities.  The Dutch Central Bank withdrew gold out of the U.S. to London citing growing geopolitical risks.  This is what happens when the Treasury acts as if it does not understand all the drivers of treasury bond rates and that not all of those drivers are under the control of the Treasury.  

This misunderstanding and failure to understand all of the drivers of treasury bond interest rates was only intensified by the Treasury's prior intervention to support the Japanese yen which  the market and economists found incomprehensible.  While Bessent was fearful of a failure of the yen carry trade leading to the Japanese government selling U.S. treasuries driving interest rates higher and possibly leading to a currency crisis which could become contagious in Asia, he ignored the current increase in foreign domestic investment, the Japanese economy, bond market trading profit seeking fundamentals, and the AI growth driving demand for cash in the U.S. bond market.  In his recent announcement of the second bond buyback, he doubled down on how correct he was and he knew more than anyone else.

Bessent is acting as if he has drunk the Kool-Aid from the Presidential trough and the world does not find it comforting and raises doubts of the U.S. as a safe haven.

 

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Michael Pettis and China's Economy and and the Great Rebalancing in Global Trade

 Michael Pettis has published two articles recently with the first dealing with China's debt economy and how it has dealt with it in the past and the problems in dealing with it now going forward and a second article on China's trade surplus and the United States and European trade issues which are parts of the coming trade crisis and global rebalancing.

I think he makes a mistake in analyzing the United States abstractly rather than currently, because the Unites States no longer has a coherent rational trade policy.  The chaos TACO tariffs and failure to appreciate allies have been created by an age demented narcissistic making decisions on gut feelings while incapable of acknowledging reality and whether he is an emperor with or without clothes.

 The Unites States no longer has international credibility and the global bond markets know it. 

 

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Jackson Hole Federal Reserve Symposiun 2026 and Financial Innovation

 Here are the links to the various papers and handouts on financial innovation, tokenism, international monetary system as well as Warsh's opening remarks.

While none of the papers reached out and grabbed at my understanding of these issues, they are worth reading.

Most reporting has focused on Chairman Warsh's remarks which many interpreted as indicating future rate hikes are possible.  I found them to be equivocal floundering in what comprises the best set of indicators to determine appropriate action and particularly fuzzy with respect to the importance or use of forward guidance and transparency which he seems to dislike.  The markets disagree with him while taking the possible hike of interest rates seriously, particularly considering the comments of Federal Reserve regional presidents.

 Here is one article providing takeaways from Warsh's comments and and another international article which includes reporting on his reluctance to provide any forward guidance on rate hikes and how he inexplicably painted a rosy economic picture which is not consistent with recent economic data.

 

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Links in a Time of War and Corruption 8/1/26

Iran plays US weakness

China continues to arm Iran 

Russia continues to provide satellite targeting of US forces to Iran 

Depleting US interceptor stockpiles 

Propping SpaceX falling stock with financial products 

SpaceX earnings August 4 unleashing insider selling August 6

Decline and fall of a superpower 

Driving business to China 

Forced labor and chaos tariffs 

Blanche or money - which will Trump choose 

 Blanche, Trump-Epstein files, and the fraudulent fruits of tax immunity

Senate Finance Committee Republicans block killing fraudulent tax immunity 

The Boss wants His money 

Children do not need to eat 

 Prescription drugs are for people with money 

Great Chinese Oil Mystery 

 Russian Oil speaks Chinese

 

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The Blanche-Trump IRS "settlement" Is Collusion

    On 15-16 July 2026 during his Senate confirmation hearing, Todd Blanche repeatedly violated a court order which prohibited the use of the word "settlement" to be used  in any official hearing of any kind in describing the private resolution of a lawsuit improperly advanced in Federal Court by President Trump by non-adverse parties.  The order also found the resolution made without the knowledge of the Court was a collusion between non-adverse parties who had common goals.

    Additionally, Blanche also wrongly asserted that the resolution's addendum, which essentially gave Trump IRS audit immunity for any past tax returns of his, any of his over 500 business entities, and his two sons up to the date of the document, was common practice.  The IRS has never granted audit immunity.  The you can hope for is a resolution of "No Change", which means there is very little chance of another audit of that tax return --- unless evidence of fraud is later found.

    While politicians and pundits have focused on the unjustified $1.776 billion fund created by the Private Resolution which would be used for distributions to third parties unrelated to the case, because it is US government money being used for purely personal political purposes and has been called a "slush" fund, the Addendum is far worse and more ominous, because it gives the store away in not only

Chaos Tariffs Pass-Through Price Increases Continuing

 The Chaos Tariffs will see future price increases from 44% to 47% of  manufacturing and service businesses.

90% of the burden of tariffs have fallen on consumers and US firms.  How businesses pass-through tariffs to maintain steady profits has long been recognized and the pass-through in 2025 was predictable.

As the sequential roll out, waffling, and TACO approach to Chaos Tariffs, while profitable for Trump's "blind" trust day trading (21,000 trades in 2025), has demonstrated the cumulative effect of tariff pass-through on prices.

 The continued tariff policies, despite what the courts say, is consistent with fundamental dementia thinking.

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Space X stock VWAP almost underwater

 After five days Space X closed at $185 after a 20% decline and now has a volume-weighted average price of  $181.71 making the average post-IPO buyer almost underwater.

This stock is vastly over priced with an actual fair market value of $62.

If you have any etfs or index funds in your 401(k), IRA, or other investment accounts which track the Nasdaq 100, you are now exposed to Space X and increased possible market volatility. 

To refinance a bridge loan used to purchase xAI earlier this year, Space X is preparing to issue $20 billion in bonds, which would be one of the largest corporate debt deals in recent history. 

 

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