Dobro Turtlebane said:
Yes good point
I think Bessent's bond buyback flop sent the exact opposite signal to the market that he had hoped. Somewhere in the back of the bond market's mind they thought "there is some uncertainty here, maybe the Treasury has a plan and some tools to use to enact that plan." Then Treasury comes out wanting to finance the recapture of 0.02% of outstanding bonds, effectively removing all uncertainty. The Treasury has no real plan and no arrows in their quiver of they did have a plan. The credit risk is slightly elevated, and the economic risk is too
Treasury has no way to do anything here. His bond buyback was always going to fail.
Treasury and the Fed can tweak around the edges all they want but it's theater. And Warsh has now acknowledged this by publicly saying that they are going to dial back forecasting and let the bond market tell them what to do rather than the other way around. He's smart because he's putting the ball in Congress's court which is where it belongs at this point.
Thus, your only options left are to cut spending and/or reform the **** out of it and that's the job of Congress and the POTUS. And the short-term pain to do that is so great they will have to be forced at figurative gun point to do it.
