scott Bessent former hedge fund manager current
Treasury Secretary to some he’s the adult in the room at the Trump administration to others he’s
the mastermind behind Trump’s agenda scott’s recent success in negotiating a trade deal with
China has put him in the spotlight more than ever before and if you listen closely to what he says
you might just find out what comes next what’s next and that’s why today we’re going to tell
you what Scott has been saying what he’s been doing and what it means for the markets this is
a video you do not want to miss about 2 weeks ago Treasury Secretary Scott Bessent participated in
back-to- back congressional hearings hosted by the House Committee on Associations and the House
Financial Services Committee respectively for context those hearings happened literally hours
before Scott departed to Switzerland to negotiate a trade deal and anyone who listened to those
hearings would have known what came next but of course not many people have time to listen through
almost 5 hours of mostly empty political questions and answers which is why we did it for you and for
the sake of time and our collective sanity we’ll just give you the highlights from these hearings
in today’s video and if you want to listen to the full hearings we’ll leave links to them down
below but be warned you may lose a few brain cells in the process now the opening statement
that Scott gave in both hearings was basically identical and incredibly significant first and
foremost Scott asked the politicians present to work together to pass Trump’s spending plan
as soon as possible so that the debt ceiling can be raised before the clock runs out for
reference the debt ceiling means that the US government cannot issue any additional debt and
this is a problem because issuing more debt is essentially the main way the US government funds
its spending and this includes paying off old debts which is pretty crazy when you think about
it now to bring you up to speed the debt ceiling was hit back in January and if it’s not raised
the US government could potentially default not surprisingly a few politicians asked Scott what
the so-called X date was put simply they asked him when the US government will run out of money
and default and what’s surprising is that Scott refused to provide a straight answer and this
is surprising because he gave one to the media shortly after in case you missed the news the
US government is currently estimated to run out of money sometime in August per a letter that
Scott sent to politicians following the two hearings and this is a problem because Congress is
typically away in August for their summer recess that’s right politicians get recess it’s wild in
all seriousness what this means then is that the US politicians need to pass a new spending bill
before their August recess specifically August the 4th now for those who don’t know Trump’s
so-called one big beautiful bill was formally revealed earlier this month and is currently
making its way through Congress notably if you’ve been keeping up with our coverage of the
US government’s debt situation you’ll know that we warned there could be problems passing Trump’s
spending bill due to the so-called Freedom Caucus a group of politicians who want to see massive
cuts to government spending early reports suggest that this is a big risk and it could result
in either a reduction in fiscal spending or a default newslash but neither of the two would be
good for the markets or for the economy for that matter and by the way guys if you’re enjoying this
video so far then let it be known by smashing that like button down below you may as well also want
to subscribe and ping at the notification bell to make absolutely sure YouTube sends you our
next one but back to Scott’s opening statement again the first thing he focused on was trying to
get Trump’s spending package passed but obviously uh politicians are going to want something
in return particularly the Freedom Caucus specifically they want other revenue sources to
offset things like more tax cuts as you might have guessed additional federal revenue is one of
the primary reasons why the Trump administration has been pressing on tariffs so hard the goal is
to effectively use tariff revenue to pay for all the stuff in Trump’s spending bill and this is
why Scott also focused on tariffs in his opening statement now at first glance you might think that
tariffs are counterproductive because they amount to attacks on consumers after all that’s what the
media has constantly been saying but upon closer inspection however you realize there’s a lot more
nuance to this especially when you combine it with other factors the main one that everyone has been
missing in this regard is deregulation which was yet another focus of Scott’s opening statement
as we mentioned in our recent video about Steven Moran’s plan deregulation can practically offset
the costs of tariffs which are likely to be passed on to corporations now for those unfamiliar
all the inflationary fears around tariffs fundamentally assume that corporations will pass
on the costs of tariffs to consumers and when the economy is strong this is exactly what they do
and some of them will actually take advantage of the situation to hike prices much more than the
tariffs actually demand as you’ve probably noticed though the economy isn’t that strong and that’s
because consumers have been pulling back on their spending in fact the corporations have noted in
their recent earning calls that they’ve had a hard time passing on higher costs to consumers with
some like Walmart saying that they would swallow the cost of tariffs to try and even gain market
share never mind the offsets that currencies can provide as well in other words the tariffs
pay for Trump’s spending bill and corporations pay the cost of the tariffs in theory this would
result in less profits for corporations which is probably why the corporate media has been freaking
out about tariffs in practice though the costs of tariffs that corporations must pay will be offset
by lower taxes and less regulations logically the former assumes that Trump’s bill will pass as for
the latter Scott revealed during his hearings that the US government is working to cut regulations
as quickly as they can and that the benefits of these will start to reflect in the economy in
Q3 and Q4 of this year what this means then is that corporations could continue making massive
profits despite the tariffs later this year and particularly now that it’s becoming clear that
the tariff rate on most countries will only be 10% and FYI these 10% tariffs do not apply to the
final product you buy on the shelf but the price that the company pays when they purchase the
product from their supplier using iPhones as an example they only cost Apple around $500
to make and a lot of that cost is not in the manufacturing and this means that hypothetically
a 10% tariff rate means it will cost Apple $550 to make an iPhone not that big of a
deal funny enough though Apple is reportedly considering raising the prices on iPhones later
this year they’re likely waiting to see whether they can get away with forcing the consumer to
swallow the cost with some luck deregulation will offset these costs and there will be no need
to increase prices at Apple oh I didn’t see you of Government Efficiency aka Doge as most of
you will know Doge is an initiative by the Trump administration to cut wasteful government
spending that was headed by Elon Musk what you may not know though is the extent of the fraud that
they discovered uh something that Scott revealed during his first hearing specifically during his
exchange with House politician Ashley Hinsson she asked Scott to give an example of the wasteful
government spending that Doge had cut scott gave a jaw-dropping answer and that’s that one-third of
all outgoing payments from the Treasury Department did not have a certain tracking code in plain
English it’s possible that up to a third of all US government payments were just disappearing
somewhere into the void now Scott explained that this is the reason why no government agency
can pass an order onethird of all their spending is unaccounted for if that wasn’t insane enough
Ashley asked Scott who these payments were going to and he said that he could not say as a not
so fun fact Elon claimed in an interview with Joe Rogan that if Doge was to cut 100% of all
the wasteful government spending that he would probably be killed sounds like he wasn’t joking
news flash this suggests that some very powerful interests have been receiving US government money
speaking of which Scott revealed another crazy thing during his first hearing during his exchange
with House politician Rosa Delara she asked Scott a bunch of questions about a pending bill to more
closely track the investment flows between China and the US a bill that apparently has bipartisan
support scott’s answer was very odd and he even seemed to be reading off a script the only time
we saw him do that in response to a question and what’s even more odd is that just as her time
was running out Rosa made a comment implying that Elon was allegedly preventing the bill from
progressing to a vote and this is interesting because our research suggests that Elon has some
uncanny connections to China and you’ll know this if you watched our most recent video about
Dogecoin and that reminds me the only crypto comment that Scott made during his first hearing
was in answer to a question about the Treasury’s stance on central bank digital currencies or
CBDC’s this question came from House politician Chuck Edwards which makes sense given that he
has an anti-CBDC bill scott answered by saying that the Treasury is supportive of privately
issued digital currencies but not publicly issued digital currencies including CBDC’s and what’s
fascinating is that he explained this is because launching a CBDC would be a sign of a weakness
and as it so happens he’s technically correct if you’ve been keeping up with our coverage of
CBDC’s you’ll know that their primary purpose is to protect the currency of the country that’s
issuing the CBDC put differently CBDC’s are a way for countries to prevent their citizens from
adopting other currencies which is only something you would do when your currency is weak not when
it’s strong in this sense it’s subtle shots fired at the EU’s digital euro but back to the crypto
scott had a lot to say about crypto during his second hearing which makes sense given that there
are so many pro- crypto politicians in the House Financial Services Committee unfortunately not
all politicians are pro- crypto and some of you may have heard that anti-crypto politicians staged
a walk out in protest of a vote over a pro crypto bill due to Trump’s crypto connections and this
was underscored by House politician Bill Hazinger who asked Scott how important it is that the US
remain a leader in digital assets scott’s answer was jaw-dropping not only did he say that it’s
important for the US to remain a leader in digital assets but research conducted by the Treasury
Department found that stable coins could create up to $2 trillion of demand for US government
debt now to put things into perspective there are currently around $250 billion worth of stable
coins in circulation and they’re mostly backed by US government debt specifically short-term US
bonds when you consider that the primary demand drivers for stable coins are crypto trading and
DeFi borrowing a $2 trillion stable coin market cap therefore foreshadows exponential growth
in the crypto market the caveat is that the Treasury Department stable coin forecast predicts
$2 trillion of stable coins by 2026 but the catch is that the stable coins won’t pay interest
and if they do pay interest then stable coins could become much larger though a specific number
wasn’t given what was given though was the size of the market for short-term US bonds which stands
at around $6.4 trillion and this means that the Treasury Department is foreshadowing a scenario
where 10 to 30% of all short-term US bonds are being purchased by stable coin issuers by 2030
note that this range assumes continued growth in short-term US bonds as well as the possibility
that stable coins would earn interest anyways this begs the question of what the Treasury Department
would do with all this extra money they’re making from crypto dgens and the answer seems to be
bond buybacks and that’s because House politician Frank Lucas asked Scott whether the Treasury
Department was planning on expanding its bond buyback program and Scott answered yes which is
extremely significant given these circumstances you see in late April the Treasury Department
announced that it would quote evaluate a broad range of possible enhancements such as changes
to maximum purchase amounts buyback operation scheduling and frequency security eligibility
and maturity bucket composition and that last bit is key what it suggests is that the Treasury
Department could keyword could do something like issue large amounts of short-term bonds and use
the proceeds to buy long-term bonds and this would have the practical effect of lowering long-term
bond yields which would lower long-term interest rates and stimulate the economy and the markets
it would arguably be almost identical to the Fed’s famous QE program under normal circumstances this
would be easier said than done because you’d need a big buyer of all the short-term bonds to make
this secret QE possible but against a backdrop where stable coin supply is growing exponentially
and issuers are buying short-term bonds hand over fist to back their tokens it suddenly becomes
a very easy thing to do but I’ll remind you that this is all hypothetical for the time being
what is very real is the stimulative effect that the Treasury bond buyback programs are having
right now buying back older bonds and replacing them with newer bonds has the practical effect of
making it possible for holders of these bonds to take on more leverage resulting in an increase in
liquidity around the margins and this is something that BitMX co-founder Arthur Hayes noted in a
recent presentation which we’ll leave down below for you to come back and watch later now I’d be
remiss if I didn’t mention the most amusing part of Scott’s second hearing and that’s when one
politician asked Scott who the president was in 2024 scott answered quote “It’s believed that it
was Biden.” A reference to the fact that President Joe Biden was clearly in cognitive decline in
2024 the politician was absolutely furious and all Scott did was smirk maybe he is the mastermind
after all and this brings me to the big question and that’s what all of this means for the markets
and the answer ultimately depends on whether the Trump administration can successfully execute the
stuff that Scott outlined in his testimony tariffs to pay for Trump’s spending plan deregulation
to pay for the tariffs and stable coin growth and bond buybacks to keep the bond market stable
during this turbulent transition period believe it or not but the tariff part seems to be working
as intended and that’s because tariffs brought in almost $70 billion of federal revenue in April
much higher than the Congressional Budget Office had estimated meanwhile inflation in April fell
much lower than estimated per the recent CPI print we can debate whether these trends will continue
but the fact of the matter is that higher thanex expected tariff revenues are excellent news
for negotiations around Trump’s spending plans politicians can now point to these increased
revenues as proof that they can afford to cut taxes and whatever else deregulation is where
things get a little bit tricky because any positive effects associated with it are likely
to come with a lag per Scott’s own testimony and this means it’s possible that the economy could
continue to weaken in the interim just because corporations will be eating the cost of tariffs
without reprieve and take a second to consider that this is likely to result in less capital
expenditure and less hiring it’s safe to assume that Scott is hyper aware of this possibility
which is why the Treasury bond buyback program has taken center stage in recent weeks as we learned
earlier these bond buybacks can help increase liquidity around the margins which should help
keep the economy and the markets afloat what’s needed though is proper QE style intervention
which you’ll recall could be done if there’s enough stable coin growth the Treasury could issue
hundreds of billions of dollars of short-term bonds to back these stable coins and use these
proceeds to buy long-term bonds and bring down long-term interest rates and this would be a more
direct injection of liquidity that boosts the economy and the markets anyhow the key takeaway
is that Scott has lots of tools at his disposal and the success in his recent negotiations with
China suggests that he knows how to use these tools and this is expected given that Scott once
famously broke the Bank of England with George Soros the real question is whether Scott has the
power to fix the Fed or rather to play the role of the Fed since the Fed isn’t keen on playing
ball this remains to be seen but the expanded bond buybacks by the Treasury are evidence
that Scott is slowly headed in that direction it’s easy to forget that we’ve been in an
environment of fiscal dominance since late 2022 the Fed doesn’t matter nearly as much as it did
when it comes to the economy the markets and even interest rates it’s all up to the Treasury now and
Scott has stepped up to the plate so far Scott has been hitting home runs and chances are this will
continue if all else fails Trump could just take control of the Fed and force them to do what he
wants and you can learn more about that in our latest video on it right over here and if you’re
not subscribed to the channel yet you can do that right over here this is Nick signing off thank you
very much for watching and I’ll see you again soon
