Treasury Secretary Scott Bessent has effectively challenged the bond market to a fight, telling traders, “I have asymmetric information. I am the house now,” and that they can “bet against him if they want.” Treasury has expanded its buyback operations for long-term government bonds, increasing purchases to as much as $6 billion per operation after Bessent originally promised to at least double the normal size. The stated purpose is liquidity, but the market understands what Washington desperately wants: lower long-term interest rates because the cost of financing more than $40 trillion in government debt is becoming a serious problem.
Bessent should know better than almost anyone that governments ALWAYS lose when they attempt to fight the market. He worked alongside George Soros and Stanley Druckenmiller when they famously took on the Bank of England in 1992. Britain attempted to defend the pound inside the European Exchange Rate Mechanism, traders understood that the price could not be maintained, and the government eventually capitulated on Black Wednesday. Druckenmiller has now publicly criticized his former protégé for attempting to suppress Treasury yields rather than dealing with the fiscal problem creating the pressure in the first place.
I have explained countless times that governments cannot manipulate markets indefinitely, and neither can central banks. The Plaza Accord in 1985 was supposed to manipulate the dollar lower, and when policymakers later decided the dollar had fallen enough, they produced the Louvre Accord in 1987 and tried to manipulate it in the opposite direction. The market continued moving and confidence in central bank control collapsed into the 1987 Crash. The Swiss National Bank later insisted it could defend the franc’s peg against the euro, and I told them directly that they could not. The market ultimately overwhelmed them as well.
I know this game personally because I spent decades sitting on the opposite side of these people, both as a trader and as an adviser called in during international crises. When Bessent was part of the Soros operation attacking sterling in 1992, I was advising the British government and warning them about what the “club” was doing. I went head-to-head with these same types of players in the markets because their strategy was always based upon manipulating price while mine was based upon TIME and PRICE.
In 1997, major players tried to manipulate silver against me and lost because the trend was not on their side. Governments and central banks also called me during the 1987 Crash, the 1989 Japanese collapse, the Asian Currency Crisis, and later China, because they wanted to understand what capital flows were actually saying. I learned long ago that it makes no difference whether you are a hedge fund with billions, a central bank capable of creating money, or the United States Treasury. You can push a market temporarily, but you cannot force global capital to obey you indefinitely. The market is bigger than ALL OF THEM, and the moment they begin believing otherwise is usually when they get themselves into trouble.
The bond market is far larger than any politician. There are roughly $32 trillion of publicly traded Treasury securities, yet Washington seems to believe several billion dollars of buybacks can intimidate traders into accepting yields below what the market demands. Treasury announced operations as large as $6 billion, and yields moved HIGHER because traders had expected even more. That alone should tell them what they are dealing with because once government announces that it is defending a price, the market immediately tests how much money it is actually prepared to spend defending it.
Government debt has exceeded $40 trillion, annual deficits remain enormous, the Treasury must continuously issue new securities simply to finance existing spending, and higher interest rates increase the cost of servicing the debt. Investors see the deficits, inflation, energy prices, geopolitical risk, and endless supply of new government paper and demand a higher return to hold it.
Government wants the privilege of borrowing without accepting the market price of borrowing. Politicians spent decades accumulating debt while interest rates were artificially suppressed and assumed they could continue indefinitely. Now the bond market is beginning to impose the discipline that Congress refuses to impose upon itself. Instead of reducing the deficit, Washington’s instinct is naturally to blame the market and search for another mechanism to suppress rates.
Bessent is playing a dangerous game because the Treasury does not possess unlimited money. If it wants to buy long-term bonds, it must ultimately obtain the funds somewhere, whether by drawing upon government cash or issuing other debt. You cannot solve excessive government borrowing by rearranging the government’s own liabilities and pretending the underlying debt disappeared.
This is precisely what politicians never understand about markets. A government can manipulate a market temporarily because it has enormous resources, regulatory authority, and sometimes a central bank capable of creating money. What it cannot do is repeal supply and demand. Every intervention eventually encounters the underlying economic reality, and the larger the distortion becomes, the more violent the adjustment can be when government finally loses control.
The Treasury market is sending Washington a message that Congress refuses to hear. Investors want greater compensation for financing a government that continues borrowing without any credible plan to stop. Bessent can buy bonds, threaten traders, increase buybacks, and declare that he is “the house,” but the United States government is not bigger than global capital. Washington’s debt problem is causing the bond market to demand higher interest rates, and Bessent is trying to fight the symptom instead of eliminating the debt and deficits causing it.
