Source: Liberty Times

The unpredictable policies of the Trump administration are like a runaway horse, continuously roiling global financial markets. Not only have they caused dramatic fluctuations in U.S. Treasury yields, but they have also triggered severe warnings from the IMF regarding global financial stability. This has left investors deeply concerned about the fiscal outlook and policy direction of the United States. The market urgently needs a rider who can steady the reins, and Treasury Secretary Bessent seems to be the person capable of shouldering this hope.

Foreign media reports indicate that at the heart of this storm, the erratic tariff threats from the Trump administration and its pressure on the Federal Reserve continue to roil global asset prices.

If we consider who within Trump's inner circle best understands market discipline, Bessent, with his hedge fund background, is undoubtedly the top choice. Bessent once served under Soros and personally experienced the historic "shorting the pound" operation in 1992. At that time, the Soros Fund successfully bet on the British government being forced to abandon its currency peg mechanism based on an assessment of economic fundamentals.

Many investors believe that this experience shaped Bessent's deep understanding and respect for market forces, providing an indispensable perspective based on market reality within the Trump administration.

In the face of ongoing market pressures and concerns over the U.S. fiscal situation—where the total debt is nearing GDP, and annual interest expenditures even exceed defense spending—Bessent is actively using his "toolbox" to maintain stability.

Since April, Bessent has demonstrated a series of proactive interventions and market-soothing actions. His "toolbox" includes not only technical measures but also crucial moments of policy influence and market communication, such as advising against tariff storms, orchestrating a "pause" in tariffs on April 9th, publicly speaking to stabilize bond market confidence, forcefully resisting Trump's intervention to maintain the stability of the Fed, and publicly stating his intention to reduce the deficit to 3% of GDP by the end of his term. Through these combinations of measures, Bessent aims to strike a balance between executing the president's agenda and allaying market concerns. The effectiveness and sustainability of his actions are receiving high market attention.

Despite expectations placed on him due to his market background and reportedly growing influence, Bessent is undoubtedly walking a perilous tightrope.

U.S. Treasury Secretary Bessent (Reuters)

He faces an almost impossible task: to faithfully execute Trump's sometimes radical and capricious economic agenda, including provocative tariff policies that trigger market shocks, to maintain the president's trust and his own political capital; while simultaneously playing the role of "firefighter," working to calm markets unsettled by these policies and repair damage to the U.S. fiscal outlook and policy credibility.

These two roles are inherently contradictory, requiring Bessent to achieve a delicate balance between political loyalty and market realities. A misstep could result in painful losses for the U.S. economy and its investors.

This "tightrope-walking" predicament means that Bessent must not only handle crises created by Trump, such as the market crash following the tariff order on April 2nd, but also constantly maintain relations with the president, as the Treasury Secretary's influence and position hinge on presidential trust.

Bessent must prove that he can effectively implement the president's will and communicate and operate in ways acceptable to the market, fulfilling the role of the U.S. "chief bond salesman" and maintaining investor confidence in the massive U.S. Treasury market.

In this era of great uncertainty, Bessent, with his extensive market experience and reportedly increasing internal influence, has indeed become the key figure many investors see as able to counterbalance Trump's impulsive policy tendencies.

However, pessimists argue that this may just be "putting lipstick on a financial pig." Regardless of how many technical tools Bessent uses or how many hidden "put options" exist in the market, they cannot eliminate the deep-seated structural risks facing the U.S. economy, including worsening fiscal deficits and debt burdens, difficult-to-control inflation expectations, and most importantly, Trump's deeply entrenched unpredictability. These risks are like dormant volcanoes, ready to erupt again at any moment.

For now, the market remains the judge. The U.S. government needs to continue financing its massive deficits at reasonable costs. If Bessent fails to effectively soothe the market and investors completely lose faith in the U.S. fiscal trajectory or policy stability, then soaring borrowing costs or a failed Treasury auction could push the U.S. into a genuine fiscal crisis.

Whether Bessent can successfully walk this tightrope in this high-stakes balancing act is not only tied to his personal reputation but also affects the nerves of the global economy. If he is ultimately sidelined, New York and London investors may need to start preparing for the worst-case scenario.

Original Article: https://www.toutiao.com/article/7497869676140085795/

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