Economist Peter Schiff has criticized President-elect Donald Trump‘s decision to pick hedge fund executive Scott Bessent as the new U.S. Treasury Secretary.
What Happened: According to his post on X (formerly Twitter), Schiff took a jibe at Trump and quipped that Bessent should be called the “Secretary of the Debt” instead of “Secretary of the Treasury.”
Schiff said the new Treasury Secretary’s job would be “to continue the Ponzi,” because Trump has promised tax cuts during his tenure.
Reducing tax collections could lead to higher government borrowings in the debt market, however, Trump remains confident that his proposed task force DOGE or the Department of Government Efficiency would successfully reduce “wasteful spending” without the need to borrow more.
As Treasury Secretary, Bessent will replace outgoing Secretary Janet Yellen, overseeing financial institutions and combating financial crimes at a time when the national debt has ballooned to $36 trillion.
It’s not just the ballooning deficit that is a cause of concern – the interest payments on this debt set the alarm bells ringing.
Billionaire investor Ray Dalio warned that the U.S. may have to resort to monetizing its debt, similar to Japan’s approach. This could lead to depreciated currency values and lower bond yields.
“I see a big depreciation in the value of that debt through a combination of artificial low real rates, so you won’t be compensated,” Dalio said.
The government has already spent $1 trillion on footing the interest bill on its national debt this year.
Why It Matters: The role of Treasury Security has been previously criticized by other economists as well. Gordon Johnson, chief executive officer and founder at GLJ Research, recently said in a podcast that there is constant intervention by the U.S. Secretary of the Treasury, Janet Yellen along with Federal Reserve's Chairman, Jerome Powell, whenever there is a spike in the benchmark yields.
"In early 2024, the Fed cut its pace of quantitative tightening by $30 billion a month, which is just the amount they were letting roll off. And recently, Janet Yellen announced that she is going to buy $4 billion in U.S. Treasury bonds per week. There is just constant intervention by these entities whenever the yields start to spike. It's them trying to disallow any dysfunction or rather I would argue functioning in the Treasury markets."
In October, Bessent assured that a new Trump administration would support a strong dollar, countering previous suggestions of a weaker dollar to boost exports. According to betting markets, Bessent was a frontrunner with an 82% probability of securing the nomination. His appointment could significantly impact Wall Street and the crypto sector.
Scott Bessent’s Holdings As Per 13F Filings
The latest third-quarter 13F filing from Bessent's Key Square Group fund shows that they have liquidated all their holding in the September quarter.
In the second quarter, the fund had a highly concentrated portfolio, with equal investments in two banking-focused ETFs: the SPDR S&P Regional Banking ETF KRE and the SPDR S&P Bank ETF KBE, each making up 50% of the fund.
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