00:00I guess the first obvious question is, it hasn't happened in about 15 years or since 1998, so longer than
00:06that.
00:07Why is the U.S. involved? What was the U.S.'s stake in this?
00:11Yeah, exactly. 1998, the last time they intervened in the same direction here.
00:17I think that this is all about self-interest.
00:19You know, you have Scott Bessent and you have Donald Trump out there saying that they're doing favors for friends
00:25or maybe they're doing this in the interest of global stability in the currency markets.
00:29I don't know. What I see here is an administration that promised to get borrowing costs down,
00:36promised to get mortgage costs down, and they're heading into a midterm election with 10-year yields around the highest
00:44in 18, 19 months.
00:46That's a problem for them.
00:48And, of course, they're going to be concerned when you see the largest foreign holder of treasuries
00:53holding a portfolio of around $1.1 trillion of these things going out and selling treasuries on the open market
01:02so that they can intervene to prop up this currency.
01:07So the U.S. is getting involved and saying, gosh, isn't there another way that you can go about this?
01:14I think that's what's really going on here, Scarlett.
01:17Right. They don't want Japan to start dumping treasuries when they're selling dollars to buy yen to support the currency
01:23market.
01:24A lot of people are saying this is a short-term fix, that it won't last without something more fundamental
01:29changing.
01:29What would be that thing?
01:31Yeah, I certainly feel that way.
01:33I feel that both Japan and the United States here are reaching for those short-term fixes
01:39because they don't want to take their economic medicine.
01:41For Japan, it needs to sort of get on with it, and the Bank of Japan needs to raise rates.
01:47You know, at the short end of the curve, rates are still meaningfully negative in real terms.
01:54It's time to get on with it, Scarlett.
01:56And, you know, back in the United States, this is also sort of a chewing gum fix
02:02for the things that it doesn't like about the yield curve.
02:05You know, the only thing to do here is to be a little bit fiscally more responsible
02:14and maybe don't go around as a, you know, geopolitical interventionist spooking the energy market like this
02:23if, in fact, your priority is bringing down longer-term yields, Scarlett.
02:30Yeah, you mentioned that the U.S. wants a lower borrowing cost to bring that 10-year yield down.
02:34And what other ways has the White House acted to support treasuries to keep a lid on yields?
02:39Yeah, well, this is exactly why I say they seem to be obsessed with these short-term
02:44sort of plugging the hole with chewing gum kind of remedies.
02:48So you had the Genius Act, right, where the idea is that you're going to have increasing treasury demand
02:55coming from the stablecoin ecosystem.
02:59You have what they have done with issuance.
03:03You were talking about this earlier, really going heavy on the issuance of bills at the expense of longer-term
03:10issuance.
03:10You're hoping that longer-term yields don't rise too much from the supply factor and other things as well.
03:18And so all of these are sort of gimmicks.
03:21They all feel very gimmicky to me.
03:23But what we're not doing is addressing way too high fiscal deficits
03:28and avoiding these geopolitical entanglements that are clearly going to upset the energy market
03:35and clearly going to upset inflation expectations.
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