US Treasury Secretary Scott Bessent
addresses the press at the White House yesterday.
"The Old Barkers’ Con"
by Bill Bonner
Poitou, France - "Last week, we were ambling along through BubbleLand, a giant amusement park where everything was fake or fraudulent... Ultimately, all designed to separate the plain people from their money. Come the weekend, the circus cycle didn’t let up. A village ‘fete’ took place nearby - drawing in hundreds of local people. A makeshift buffet served a long line of diners.
Children bounced on bungees and trampolines. Dancers, young and old - wearing wooden sabots (clogs) and traditional Poitevin outfits - gave a demonstration of an old-time, leg-shaking, rug-cutting hoedown. And there were the marksmen, aiming for balloons in the hope of winning gaudy geegaws.
We remembered these small town circuses from our youth, but we had thought they went out of business years ago. Apparently not. The technology changes; the demand is eternal. There were a couple of news stories - dots - that were Big Top worthy, too.
First, Canada and the US got into a ‘war’ after polite negotiations on trade broke down. CNBC: "The U.S. imposed 50% tariffs on some Canadian goods on Saturday after the two longstanding allies failed to reach a trade deal, with each side accusing the other of derailing days of talks."
This is not really a big deal. The tariffs only affect about $20 billion in trade. But a blow-out or a small leak - either one can leave you with a flat tire in the middle of nowhere. Al Jazeera: "Canada to hit US with retaliatory tariffs as trade war escalates. Mark Carney says Canada will impose tariffs starting September 8 on imports of US steel, electronics and other products."
The other interesting story concerned the bond market. A bird got trapped in our library yesterday. It flitted from one side to the other...unable to find the open window. But despite being surrounded by Homer, Adam Smith, and Shakespeare...and despite spending a whole day there...it never read a single word.
And there was Scott Bessent. The poor sparrow announced that he was going to manipulate the bond market. Then, when bond investors refused to go along, he appeared to be trapped...unable to find a way out. We could suggest that he open Mises, Bastiat, or Rothbard. But what’s the point? He knows what he is doing.
Prices - including the price of credit - are primarily information. They signal the relationship between money available for lending and the demand for loans. It doesn’t really matter if the numbers are high or low. They just have to be true. But Bessent proposes to improve on the truth, by making the numbers lie. Bring the long-bond interest rate down, he reasoned, and mortgage rates would come down too.
This was not the first time the feds have misled home buyers. Their low rates made it too easy to borrow, 2003-2007, setting borrowers up for a Big Loss. As it happened, some four million Americans lost their homes.
Houses are not just places to hang your hat and feed the cat. They are also the collateral for the mortgage industry...which, in the crisis of ’08, owed huge sums to the larger commercial lenders. After house prices began to fall, in a matter of days, Lehman Bros, Indy Mac, and Washington Mutual took the big loss too; they went broke.
Goldman Sachs and other big Wall Street firms were next in line. But those institutions were not only financially savvy...they were politically savvy. They figured out how to turn Wall Street into a heads-I-win, tails-you-lose business. When the going was good, Wall Street reaped the profits. When they made mistakes, the public took the losses.
And so, last week, Bessent tried the old barkers’ con. Step right up. Bubble up the economy with fake money and fraudulent information (interest rates bent down to encourage borrowing). Then, when the Big Loss looms up, tell the public it is an ‘emergency’ and counterfeit some more money! President Trump was asked what he thought of Bessent’s ploy.
Reporter on the Bond Market: The yields have come back up since then. Have you talked to Bessent about another type of intervention?
Trump: The ultimate intervention is our military. And if we have to use that, we will.
Bomb Wall Street? Mr. Trump was probably having a ‘senior moment.’ Or a moment of penetrating clarity. When fraud no longer works, the feds turn to force. Bonds give way to bombs. Governments declare ‘emergencies’...and send in the marines. Bessent gave the bond market a push. Next will come the shove."
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