[Economy] Scott's Burn Rate
U.S.-Japanese intervention to prop up the yen: tens of billions that solved nothing and failed to stabilize the American T-bond market. Nice try Sec. Bessent.
Scott Bessent, Donald Trump’s Treasury Secretary, would have had to resign and be invesigated in any normal administration after allowing the publication of an obviously staged photograph—taken during a public portion of a cabinet meeting—of a notepad bearing a to-do list whose sole entry read: “Buy yen for $5 to 10 billion.” But, well, since when were there a normal adminstration? Ponder, will you.
The U.S. Treasury Secretary blithely trumpeted a foreign-exchange operation. He revealed both the direction and the scale of a monetary-policy intervention. By deliberately allowing his notebook to be photographed, the aim was clear: market manipulation without the U.S. Treasury having to state any specific policy or posture. Pausible denial, all at the expense of the confidence and credibility that are the twin foundations of any monetary policy.
The yen has collapsed in recent months to its weakest level against the dollar since 1986, trading near 164 yen to the dollar. This weakness stems from the interest-rate spread between Japan and the United States, compounded by concerns over the expansionary fiscal policy of Prime Minister Sanae Takaichi.
Last Friday, July 30, Japan and the United States thus conducted a coordinated yen-buying intervention—the first since 2011, and the first aimed at supporting the currency (rather than weakening it) since 1998. Seventy to one hundred billion dollars in a single day does not go unnoticed.
