Treasury Secretary Scott Bessent seems to have cooked up a scheme to keep a "cash spigot" flowing, one that may wreak havoc on the international economy if it backfires, according to a new column.
The Guardian's editorial board argued on Wednesday that Bessent's plan to buy up a large volume of Japanese Yen may help stabilize markets in the short term. However, they warned that it is likely to lead to a massive issue if the plan goes sideways.
"This is less a rescue of the yen than an attempt by Scott Bessent, the U.S. Treasury secretary, to preserve a cash spigot that benefits the U.S.," the editorial reads in part.
The editorial board explained that Japan's currency has become a "global funding utility." Bankers borrow yen, sell them for dollars and buy higher-returning US assets, notably tech shares. Rising American stock markets support collateral and investment," they wrote.
But that seems likely to unwind as President Donald Trump's war in Iran continues to push inflation up, which may cause Japan to respond with "aggressive rate hikes." That would shrink the yields investors earn, and make repaying global debts even costlier, potentially setting up a worldwide recession, according to the column.
"A currency correction could quickly become a Wall Street rout," the editorial warned.
Bessent seems to have some experience in these deals, according to the editorial. It noted that he once helped MAGA villain George Soros make more than $1 billion by trading against the Yen.
This time around, however, it seems like Bessent is trying to rewrite the rules of the game, the editorial added.
"Margaret Thatcher famously said that “you can’t buck the market," the editorial added. "Mr Bessent is saying you can – as long as you rewrite its rules."