UPDATED: THREE MEN, THREE JOBS, ONE CURRENCY — THE FED DECIDES THE PRICE OF MONEY SEPTEMBER 16 — YOU'RE NOT AT THAT TABLE
On July 29 Warsh told reporters the Fed was getting out of the business of telling markets what it would do next, and that it was already working. Yields were “materially higher across the Treasury curve,” he said, and then: “Market participants are learning to play the ball, not the referee.” Three weeks later the Treasury walked onto the field. On August 19 it announced it would at least double its buybacks of longer-dated bonds, from $2 billion an operation to at least $4 billion, running September 9 through November 4. Bessent's stated reason: the yields “don't reflect the underlying fundamentals.” The Fed's September meeting falls on the 15th and 16th, inside that window. Whatever the Fed decides about the price of money on the 16th, the Treasury will be in the market that same week buying the long end back down. On Monday Trump asked for cuts. The same Monday, Bessent — who ran the search that produced Warsh — argued you do not raise rates into a supply shock. Three men, three jobs, one currency, and each of them certain the number is his to set. Now notice what is missing. There is no version of this where the price gets discovered instead of assigned. Warsh prevails and a committee set it. Bessent prevails and a buyer with no spending limit set it. Trump prevails and an election calendar set it. You do not get a vote in any of the three, and nobody is going to call and ask. Bitcoin has no chair, no secretary and no president. Nobody can double the supply because they decided it does not reflect the fundamentals. There is no meeting to pull off.
UPDATE, 3:30 PM ET. Bessent says we have this wrong. He told CNBC on Tuesday that “Warsh and I are on the same page on bonds,” and Breitbart argued on August 27 that the two men are not at odds at all. Fair enough. On the same day he also said you do not raise rates into a supply shock, which is a thing you only say to a man who might. Same page on the long end, opposite pages on the 16th. Either way it changed nothing. Twelve days after the Treasury doubled its buybacks the 10-year touched 4.78%, its highest since January 2025, and Brent is up five percent at $95.13. The jobs report lands Friday and CPI lands on the 11th, both inside the buyback window. The market is not reading the press releases.
UPDATE, Wed Sep 2, 9:45 AM ET. The argument went public and the market is pricing straight through it. CME's FedWatch now puts a September 16 increase at 68 percent, against the 57 percent we reported on August 30. On Wednesday two economists put their names to the case against it. Mark Zandi of Moody's Analytics: “Monetary policy 101 says when there is a supply shock, don't respond.” James Thorne of Wellington-Altus called it “a growth shock dressed up as inflation” and a policy error. That is Bessent's August 27 argument, now coming from men with no seat at the table and nothing to win either way. West Texas crude sits near $90 against roughly $70 at the start of July. Bitcoin traded near $76,500 through the morning, down about 1 percent on the day. Notice what the question has quietly become. It is no longer whether a hike is right. It is whether the Fed will do the thing that three separate camps, for three separate reasons, have now said out loud is a mistake. You still do not get a vote.
UPDATE, 3:30 PM ET. Bessent says we have this wrong. He told CNBC on Tuesday that “Warsh and I are on the same page on bonds,” and Breitbart argued on August 27 that the two men are not at odds at all. Fair enough. On the same day he also said you do not raise rates into a supply shock, which is a thing you only say to a man who might. Same page on the long end, opposite pages on the 16th. Either way it changed nothing. Twelve days after the Treasury doubled its buybacks the 10-year touched 4.78%, its highest since January 2025, and Brent is up five percent at $95.13. The jobs report lands Friday and CPI lands on the 11th, both inside the buyback window. The market is not reading the press releases.
UPDATE, Wed Sep 2, 9:45 AM ET. The argument went public and the market is pricing straight through it. CME's FedWatch now puts a September 16 increase at 68 percent, against the 57 percent we reported on August 30. On Wednesday two economists put their names to the case against it. Mark Zandi of Moody's Analytics: “Monetary policy 101 says when there is a supply shock, don't respond.” James Thorne of Wellington-Altus called it “a growth shock dressed up as inflation” and a policy error. That is Bessent's August 27 argument, now coming from men with no seat at the table and nothing to win either way. West Texas crude sits near $90 against roughly $70 at the start of July. Bitcoin traded near $76,500 through the morning, down about 1 percent on the day. Notice what the question has quietly become. It is no longer whether a hike is right. It is whether the Fed will do the thing that three separate camps, for three separate reasons, have now said out loud is a mistake. You still do not get a vote.
UPDATED Wed Sep 2, 9:45 AM ET · CNN · Thu Aug 27 · + CNBC (LATER) Tue Sep 1 · + FEDERAL RESERVE + U.S. TREASURY (PRIMARY) · + COINDESK (LATER) Wed Sep 2 · + CNBC (LATER) Mon Aug 31