Dear Fellow Traveler:
Can’t say I feel like spending tomorrow morning on this… so I’m sending it now.
We have a busy week with inflation readings and NVIDIA on Wednesday.
So… Treasury Secretary Scott Bessent had a busy day… and every August 24 is now Scott Bessent Day. Make it a federal holiday, because I’m not sure this guy has slept in months… It is the same day in history that Mount Vesuvius erupted… and it feels that way about the dollar system and what comes next for our financial system.
That’s not a BRRRR…
That’s a seismic eruption… from two places at once.
There were two announcements today…
One announcement threatens to cut nations off from the dollar… And the other suggests that the Treasury might have a bigger than expected war chest to start buying bonds.
This afternoon, we got the details on “Operation Economic Outcast…”
This is a sanctions campaign against Iran that Bessent compared to D-Day, setting a line in the sand on the good guys against the “bad guys” in the future of finance.
Operation Economic Outcast… it places sanctions on five different channels that Iran works with other nations on.
We’re now talking digital assets, gold, technology, shipping and aviation.
Bessent set deadlines for everyone, and he’ll take action if any deadline passes.
It’s all very familiar if you’ve been reading Me and the Money Printer… It’s further weaponization of the dollar system… and remember that the Treasury controls the pipes to the entire global dollar system…
Or… put differently… the city’s water goes through one area of utility pipes… all owned by Treasury. So, don’t comply… and you’ll get your water cut off…
And it’s not really even a threat to Iran’s water… it’s a threat to yours, quickly.
Bessent even went so far as to tell Iran’s soldiers what happened when the Berlin Wall fell and the paychecks stopped arriving. This is psychological pressure, and it’s happening around a global payments system.
After the news, Brent crude dropped about 2.5% on the day, and it all happened on the day that the toughest sanctions ever hit the airwaves. Crude oil prices had been running all last week. This became a sell-the-news event for oil. What a market…
CNBC then reported the other side of the Treasury story… The government’s checking account at the Fed is called the Treasury General Account (TGA).
This account has built to about $940 billion. It’s now a huge sum that Bessent says the Treasury can use to finance larger bond buybacks. In addition, the Treasury can do all of this without issuing more short-term Treasuries.
Last week, Bessent tried to nudge the markets with a few subtle tweaks around plans to buy back bonds. The target per operation went from $2 billion to $4 billion…
The idea is pretty simple. The Treasury Department can buy back long-dated bonds, and those purchases can be financed with new Treasury issuance, including shorter-term bills. This doesn’t pay down the debt… and it doesn’t fix anything significant in terms of what happens next with the debt.
The TGA is a different animal… one that can boost liquidity in the financial system. If the Treasury buys bonds out of this account at the Fed, the account declines and bank reserves start to rise. The Federal Reserve isn’t buying the bonds, and this isn’t Quantitative Easing (QE).
But there is one important part of how the financial system works that looks really familiar. What does QE do? It increases reserves in the banking system, just as their Reserve Management efforts starting in December 2025 did as well. The drawdown of the TGA can do the same thing directionally through buybacks…
It’s a different mechanism and a different leadership, but it leads to one direction on reserves, which again makes us ask WHY is all of this necessary while stocks are at all-time highs, and we’ve been reassured that everything is just fine. Again, I’ll remind you that Japan remains a major problem… and it’s no coincidence that we intervened on their currency, as their capital heads home for the first time in a generation, and we’re continuing this process of trying to make the sellers go away.
For right now, Bessent’s statement feels a lot like a form of forward guidance, and a warning to the market. It’s an effort to make the short-sellers think twice… and $940 billion is a lot of money that could be used to buy back bonds…
For people who think that guidance doesn’t matter, consider basic wording and how leaders decide to take action.
Imagine tomorrow Trump stands up and says “U.S. researchers are six months away from curing cancer permanently.” Without any other information, shares of every little oncology biotech stock might tank.
But imagine the same scenario, where Trump says the same thing… and then notes they plan to work with the top biotech names in the nation as they can help deliver treatments and identify ways to accelerate this cure. Watch as a large number of small-cap biotech names surge just on the speculation… and the announcement.
Just the possibility of the TGA being spent on bonds is enough to influence rates in another direction… The markets really care most about the liquidity lever that could be a huge dose of hundreds of billions of dollars, without a single vote from the FOMC.
Now… I want to stress that no one committed to buy anything, and Reuters said that there’s a $166 billion buffer that is being helped because of tariff refunds (courtesy of a court order).
That said, Bessent has just reminded everyone that the use of the dollar is a privilege.
Everyone knows this… And it’s not an accident that gold is having a very strong month. Gold doesn’t need permission to clear. I’ll cover more of this in the morning if anyone has any questions over at Money Printer Pro’s 8:30 morning show.
Stay positive,
Garrett Baldwin
Slightly off topic: Remember how you learned to memorize the names of the Great Lakes when you were in school? Yeah, the acronym HOMES. If they change the name of Lake Ontario to Lake America, won't the new acronym be SHAME?
The only question now is; what will be the grey or black swan before this market can fully reset and start going higher again.