Trump PANICS with TREASURY EMERGENCY SCHEME!!

What the heck is Treasury Secretary. Scott Bessent doing? This was the. announcement that the US Treasury will. double the size long-term US government. debt buybacks following the rapid surge. in US Treasury yields. Repurchases of $2. billion will now be increased to at. least $4 billion, the Treasury said. On this news, if you. looked at the 30-year, 20-year, and. 10-year Treasury yields, they all of a. sudden went down uh very quickly when.

they were going up very quickly and. we'll talk a little bit why. You don't. want those going up very quickly, but I. put my guard up right away when people. start to talk like this. And when I see. massive market moves like that, and. sometimes it feels a little bit like a. manipulation. And so, I want to get to. the bottom of it. When I see language. like this, I go, "What are you really. trying to do here?" It says, "The US. Department of Treasury is increasing by. at least double the size of liquidity.

support buyback operations for. longer-dated nominal coupon securities, the 10-year to 20-year sector and the. 20-year to 30-year sector. The current. maximum size of $2 billion. per operation will be at least $4. billion per operation." It's then. explained as thus, "This increase in. buyback operation sizes reflects the. Treasury's desire to provide greater.

liquidity support in longer-dated. nominal sectors where there is. consistent strong sponsorship from. market participants as evidenced by the. significant volume of high-quality. offers Treasury routinely receives in. longer-dated buyback operations. So, when you hear that, you say, "How in. the world is an average American who is. paying a lot more for their gas prices.

right now or a worker who's paying a lot. more money for diesel on average $5.50. right now and that's going to think. trickle in a bad way down to the rest of. the economy by causing inflation to. surge. What the heck is going on here? And then we see on this news Bitcoin's. value is surging as well and is this. related and what the heck is going on? I. want to bring in Justin Wolfer's. Platypus Economics is his. channel on YouTube. Everybody subscribe.

there. He's also the chief economist for. the Midas Touch Network. Justin, great. to see you as always. I've been talking. about the Treasury yields increasing how. the 30-year was approaching 5.3%. We were talking about the 10-year. approaching 4.7%. and I had explained to our audience that. that also means that the Treasury. Department's going to be paying a lot. more interest or at the on the debt that. is out there and that's not a good thing.

and that's going to cause mortgage rates. to increase and impact us in a lot of. other ways as well. You're you're the. economist here. I just occasionally. pretend to be one on YouTube. What's. going on here? What's this move? It. appears to be signaling. You know, it. does seem like a move it's in billions. You know, we talk about billions and. trillions. but it appears to be sending messages. that the market is receiving and I also. wonder well, what are the American. people who are out there who are just.

trying to get by and work do a good. honest day's living and make some money. and support their family do in this. environment? >> And it's a very good day to have a chief. economist, mate, because there's a lot. going on. Some of which is really. important to people at home, some of. which is less so and some of which we. don't know. So, I'm going to put it. under three categories if I may and I'm. going to bite one off and then we'll go. back and forth on that and then come. back to the second come back to the. third. So, the first thing to think. about is.

what why is everyone talking about the. bond market to start with? Second question is what the hell is. percent actually doing and what's he. meant to do? And the third is what does. this signal to financial markets and the. implications for the broader economy? So, Ben let's start just get the first. thing right which is everyone's talking. about bond markets, why are they doing. that? Okay, the bond market it's not. where you go and sell. buy and sell James Bond figurines. It's. basically the bank where the federal. government goes to borrow money.

because the government at the moment is. spending a lot more money than it takes. in in taxes. You and I would go to the. bank instead what. what the federal government does is it. issues bonds basically it borrows from. anyone who's willing to lend to it. Everyone's talking about the bond market. because the interest rate that it is. charging to the US government is going. up very sharply. It was as low as one and a little bit. percent just after COVID. and now it's up to five and a little bit. percent.

That's a very very large rise. It could be that markets are worried. that inflation's about to take off but. that turns out not to be what's going. on. We can tell because we can look at. inflation index bonds. So, the big question is why is everyone. looking at these high interest rates and. why are these interest rates so high? And I think the answer rests on two. things. Basically. borrowing is like any other product. If. more people want to borrow the price of. borrowing goes up. And right now we have two groups that. are doing a lot of borrowing and that's.

led the price which is the interest rate. to go up. The first group is huge. investments as part of the AI rollout. Some people are convinced it's a bubble, some people are not. I think anyone who. thinks they know needs a dose of. modesty. But that's a big part of what's going. on. It's part of our economic future. The second part, which worries me more, is huge amount of borrowing from the US. government. And here, basically, the US. government's doing so much borrowing, there's not much money left to lend to. you and me.

Because of that, that's pushing interest. rates up. Why is the US government doing so much. borrowing? Well, at a mechanical level, the answer is we're running huge budget. deficits. An under-remarked fact right now is that. the US budget deficit is at the highest. level it's been in the post-war period. with the exceptions of COVID and the. Great Recession. Our deficits, said another way, are at. the sort of level that would only make. sense if we were at a moment of extreme. economic distress and needed a lot of. fiscal help. But we're not in extreme distress. Yet,

the administration has, you know, passed. very large tax cuts, hasn't pulled back. on spending at all. And any sort of. sense of responsibility has just gone. out the window. And that's a big part of. what's driving bond yields up. So, markets don't really believe that. the US government is looking like as. sound of a borrower as it once was. That's a big part of it. And then, why. does this matter to folks at home? Well, it matters because it shapes our. government.

If at the beginning of the year, the. first thing you got to do is pay last. year's credit card bill, and there's not. much left, that means fewer roads, fewer. schools, fewer police, fewer of all the good things government. is meant to do. Uh so, that's one part of it. The other. though is the government's in there. borrowing money, and it's borrowing, it's sort of lined up at the bank ahead. of you and me. So, it's pushed interest rates up, and. what that means is if you're trying to. get a mortgage right now, the interest. rate on that has gone up. If you want to. buy a car, the interest rate on that has. gone up. If you have credit card debt, the interest rate's gone up. So, these.

are factors that play out directly into. affordability. Can people get their paycheck to go as. far as they would like it to? And the. answer, of course, is. the bigger interest bill every month, the less cash you've got to get by. So, that's the big picture. I want to pause. on that, Ben. Make sure we're aboard on. that, and then we can talk about this. weird stuff Scott Bessent's doing today. >> I'm aboard with that. What's the. interplay though between the Fed, which.

we hear a lot about, and the Treasury? Who's actually buying the bonds? Where. do they Where do they come from? Where. are they being physically purchased. from? >> Okay, great. Um I love this because I. get to do a little bit of economics 101. and a little bit of today's news. Okay. So, look, if you and I want a loan, what. you do is you walk into the bank and you. say, "Here's the house I want to buy, and I want to borrow 80% of the value of. it." And you do some paperwork. Instead, and then that you write a. contract that says, "I will pay you back. $1,000 a month for the next 30 years.".

Or however much it is. The way a bond works is the Treasury, under Treasury Secretary Scott Bessent, sells off a piece of paper. The piece of paper says, "In a year's. time, I'll give you $100." There are. lots of different kinds of pieces of. paper. There's a different one that. says, "I'll give you $100 every year for. the next 30 years.". There's all sorts of different bonds, but basically, let's think about it. conceptually. So, it sells a piece of. paper, and then I might go and buy that piece. of paper for $95. So, I bought a piece. of paper for $95 that in a year's time,

I'll be able to turn up to the Treasury. and say, "I want my 100 bucks now." I. made a $5 profit. We'd call that a $5. interest We'd call that a 5% interest. rate. So, normally, it's the Treasury that. issues bonds. Now, you brought me to what was the. second of my issues here, which is. what's this big announcement from Scott. Bessent? Um so, the Sorry, let me go back. The. Treasury normally issues bonds, and it. manages our debt. Here's something else. The Fed runs monetary policy. Remember,

the Fed sets interest rates. The way it. does it is not by borrowing or lending. money for 10 years at a time. That's. what the federal government does. What. the Fed does is it manages the rate at. which one bank lends to another bank. for 24 hours. They're linked though, but that's what. the the treasure the Fed normally does. In really bad times, the Fed is worried. it can't get interest rates down low. enough. So, what it will do. is it will go and get engaged in. long-term bond mar uh the the market for.

long-term bonds. This is sometimes. called quantitative tightening or. quantitative easing. So, during a period of quantitative. easing, what the Fed will do is it'll. try and affect not just the overnight, the one-day interest rate, but also the 10-year interest rate. And. the way it will do that is it will buy a. lot of bonds pushing the price up, which. means pushing the interest rate down. So, you might That's why it's such a good. question. Wait, who's moving around. these Who's intervening in bond markets. right now? Kevin Warsh, the new Fed chair, has said. he doesn't like it when the Fed is.

monkeying around in long-term interest. rates. He's against it. The language he. he uses is, "I want to reduce the Fed's. balance sheet." Look, when the Fed goes. and buys long-term bonds, they have to. write it down on their balance sheet. So, he doesn't like monkeying around at. all. What was today's news? Today's news was. that the Treasury Secretary, Scott. Ascent, has said that he is going to. move from 2 billion a day to 4 billion a. day of buying and selling long-term. bonds. One thing to notice, two to four billion sounds like a lot.

In this market, it's not really very. much at all. The other thing to notice is what Ascent. is doing is very different than what. Kevin Warsh would want to do. This is. I'm going to pause here because there's. so many things here that could cause. confusion, but when you're ready for it, then I want to explain what it is that. that program's meant to do, and what we think Ascent is actually. doing with this uh getting in with. Treasury getting involved in the in the. bond market right now. >> Let's get to that next point, but it.

does seem he's managing Warsh's desire. not to be involved in this area by. sending at least a signal to the broader. market. to say, "Here's the vision that we have, and at least short-term, we got your back, short-term." The. problem that I see observing this. is long-term, which is something that. you and I talk about, that this is a. problem where the bucket gets kicked.

down in a bad way to who's going to have. to deal with this and unravel a lot of. this stuff that's happening that feels. you're a little bit robbing from Peter. to pay Paul, and you are taking the. long-term Treasuries out of the market. um to lower the prices, but you are. issuing a short-term fix with these. short-term bonds to lower the. longer-term yields down, which you still.

have a debt issue. You're still issuing. a lot of debt, and that's still going to. increase the deficit, and that's still. going to increase that $40 trillion. number we're approaching, but you've put. a band-aid on a broader problem, and. then who becomes the next president, you. deal with it. And so, anyway, that's. kind of my fear about what's happening. What What do you make of it? >> Yeah, so I want to start by apologizing. to everyone at home. I'm going to be. using my professorial voice the whole.

time. The reason I'm sort of going to. teach rather than talk. is the levels of complexity here mount. up so quickly that lots of people just. lose track of the whole story. They're. like, "Ah, the bond market, it doesn't. affect me." No, it affects you. I want to reinforce and and vehemently. agree with the thing that you just said, Ben, which is. the most important issue right now in. the bond market is the level of US. government debt is growing. That the. deficit is at a rate that at a level. that just doesn't make sense.

Our economy is doing okay. Part of the. reason is the spigots are open in a way. that. no previous president would ever have. engaged with. And it's the bond market's job to say, "Hey, are you guys actually serious. about about ever paying us back?" And. increasingly they're worried that maybe. they're not. That's the big picture. Hold on to that and everything else. today, all this complexity about the. bond market, it's all the footnotes. underneath it. But, we're a nerdy. audience here, so let's go to the nerdy. footnotes.

What. there is. a reason Let me tell you the program. that Scott percent increased today is. actually really small and really. uninteresting and not meant to make. news. Okay, so let me try and explain. We often talk about things like the. 10-year bond rate or the 30-year bond. rate, which is basically what's the. interest rate markets charge the federal. government for borrowing for 10 years or. for borrowing for 30 years. But, in fact, it's not quite that. simple. The government every month or so. issues new bonds. So, there's a bond.

which promises to pay the years of money. every year for the next 10 years, and. that bond began yesterday, or maybe it. was today, I forget which. And then next month they might issue a. different one. And so, there's not one 30-year bond. In. fact, there's a 30-year bond, there's a. 29.9-year bond, a 29.8-year bond, and. blah blah blah blah blah. There's. thousands of sheets of paper out there. that are basically IOUs from the. government. If you happen to own one of the And so, that makes it really hard for people in.

markets to have to think about the price. of thousands of different pieces of. paper all at the same time. And if you happen to own one of the. pieces of paper that not many other. people own, then there won't be many. people in the market buying or selling. And that kind of sucks because you might. need to get your money out. And so, what. the Treasury's job is to is meant to do. under this program is say, "In some of these. pieces of paper for some types of pieces. of paper, there's just not enough buyers. or sellers in the market. So, we're going to come in and just.

smooth things out so that everything's. okay even if there aren't enough buyers. and sellers in the market. There's lots. of buyers and sellers in some types of. pieces of paper, many fewer. And all. it's meant to do is just smooth things. out to ensure regular market. functioning. That's why people use words. like fix the plumbing. Okay, that's what. this program is meant to do. So, in a normal time, if Treasuries did. start to work under this program, I'd. just be like, "Oh, that seems fine. Um they're just fixing a few technical.

issues, putting a few Band-Aids on some. of the financial plumbing, everything's. all right.". >> [gasps]. >> But, this comes at a very unusual. moment. Anyone who's been watching the financial. press will know the most important news. story all week has been that bond yields. are rising. One possible explanation for that is. bond yields are rising for the reasons. we talked about. That there's a lot of. borrowing for AI analytic. borrowing by the US government and. markets are like supply and demand means. when there's lots more borrowing, the. price of borrowing goes up.

That raises the possibility that maybe. the folks over at Treasury and in. particular Treasury Secretary Becent. sees things differently. He sees these. bond yields have gone up and he's like, "Oh, hang on. I think the markets are reading it. wrong. I think they're worried about our debt. and they shouldn't be.". If that were true, I think Becent's on. the wrong side of that. And so, maybe what he's doing is. actually using this program that's just. meant to smooth things out. to try to actually push down those.

long-term bond yields. The the long-term. interest rates are the market trying to. send a signal to the government and this. is the government saying, "Stuff it. I disagree with you. completely." And this then comes back to. your opening question, then what is this. meant to signal? Well, it could be this is just a. something pretty boring trying to make. all the technical stuff work out right. Or it could be the Treasury saying, "I. don't care what's going on over at the. Fed. We are going to buy and sell. long-term bonds. So, we push down artificially push down.

long-term interest rates.". Notice, even if they succeed at that, that doesn't change the underlying. reality. The underlying reality is that. the US government has borrowed an. enormous amount of money. and markets are sending out warning. signals that that requires higher. interest rates. >> You know, I think about the plumbing. example. I think about the famous. cartoon, a leak in the dike, and. plugging the different but you know, the. the issue here. and you and I have talked about it. A. lot of the economic ebbs and flows are.

not necessarily related to what one. individual in the Oval Office and the. cadre around him is specifically doing. It's usually more reactive and doing. plumbing. What seems to be the. difference here is that whether it was. the tariffs against the world and then. we saw also at that period of time the. Treasury yields rising. When we saw the. catastrophic Currently, we're still in.

this catastrophic war. in Iran and it also seems to be rising. on also Trump's was rising throughout. but especially as Trump's plan seems to. be, you know, uh I'll use an economic. term which you don't necessarily want to. say in a war that you start laissez. faire which is just I'm going to. disengage. I'm not going to do anything and let's. just let the war resolve itself. I think. like you What do you mean.

you're going to do a free market war? What are you talking? You started the. catastrophic war. The Strait of Hormuz. is closed. Your plan now is nothing? And. that's what we're going to do. We can. trust you, United States. And there. seems a correlation to that. And so, what I see happening and what I don't. want to sound like a hyperbolic. alarmist, but I also looked at videos we. do and I say, "Wait a minute. Didn't we. just do another urgent intervention by.

selling euros and swapping it with yen?". And I said, "Well, well, let's check. back on that one cuz that's correlated. to the, you know, to war and. geopolitical affairs as all in Japan. Then I look there and I go, "Wait a. minute. The yen is falling again. That. $5 to $10 billion thing, you know, is. not working out." And so, we plug that. hole, we plug this hole, we plug, you. know, and it seems like there's a lot of. plugging taking place. And it's just. past this. leaking ship to the next person. I guess.

that's my broader analysis here of of of. what I see going on. I'll give you the. final word. Um but I wanted to give that. example, that metaphor, if you will, of. of what I see happening. >> Right. So, look, let me try and draw it. together and agree with you. So, the. most important thing for people to. understand is the US deficit is large, our debt is growing, it's growing in a. painful way that's pushing up interest. rates. That's the big story. The thing that this story has in common. with many of our past conversations like.

the yen intervention is. economics is complicated. But I don't. want to look anyone in the eye and say. it's too complicated for you, just trust. me, which is there's there are a whole. lot of difficulties. There are some. technical programs that do things that. are mostly uninteresting and under a. typical administration, you would sort. of trust the nerds to get it right and. it might make page 87 of the Wall Street. Journal, but most folks don't need to. know about it. There's one version of this current. story where the the intervention in bond. markets where that's what's going on.

But we see time and time again this is. an administration where they take powers. that have not really been fully granted. to them, say the trade war, and they use them for purposes that are, to be polite, idiosyncratic, or to be. more direct, that reflect the. president's weird sudden desires. They. use these powers in very, very unusual. ways. And with today's intervention, the. question is, is this business as normal. with the nerds doing what the nerds are. meant to do, and most folks at home.

don't need to worry about it, or is this. the Treasury taking a bold step to try. and get involved in a set of financial. markets that we usually leave alone to. the Fed? And the answer right now is that nobody. knows, and that fog of uncertainty. afflicts the bond market right now. It. afflicts the the yen exchange rate, and. it afflicts, I think, many, many aspects. of how folks are interacting with and. thinking about the government right now. >> And this is why I think the work you do. is so important at Platypus Economics.

It's why the role of having a chief. economist at the Midas Touch Network is. so important. Um, because to me this. information. is not just a fog of uncertainty, which. it is, amongst. groups of people who study this, it's a. fog of uncertainty. So, I think about. people who are just going to fill up. their tank of gas, or going to the bank. if they're lucky enough or fortunate. enough, although it's so hard right now. to even afford a home, but it could be.

the uh, what you're paying for your car. loan, or whatever it is, and you're. seeing these numbers, and they seem to. kind of be coming from somewhere, and it is these inaccessible forces that. allow the demagogues to come in and kind. of make up stuff, and tell you that this. is that they're the ones who are going. to fix it. But you could break it down. and say, "Wait a minute, y'all seem to. be the ones creating it." And so, that's.

why this is really important. Why I. wanted everyone to subscribe to Platypus. Economics and why I prefer this format. where we could talk in a professorial. way, but in an accessible way without. the yelling in 3 to 5-minute segments, without that, where we can give a full. picture and then build upon it. So, everybody subscribe to Platypus. Economics. Justin, chief economist at. Midas as well. Thanks so much. We. appreciate you. >> Great pleasure, mate. >> Everybody hit subscribe. Let's get to 7. million subscribers. >> Before you go, our book WTF America is.

available for pre-order now. It's the. story of how we got here and how we. fight our way back. To pre-order, scan. the QR code or click the link in the. description. Let's do this.