Scott Bessent Is Not Our Economic Savior
It’s not clear that Bessent is in charge of other economic policies. Back in October, he told the Financial Times that he did not believe that, if elected, Trump would try to devalue the currency. “I believe that if you have good economic policies, you’re naturally going to have a strong dollar,” he said. But Trump had said already on X: “As your President, one would think that I would be thrilled with our very strong dollar. I am not! The Fed’s high interest rate level, in comparison to other countries, is keeping the dollar high, making it more difficult for our great manufacturers like Caterpillar, Boeing,…..”
After Trump won the election, he installed as chairman of his Council of Economic Advisers Stephen Miran, who explicitly called for devaluing the dollar in a much-discussed November memo, and as recently as last week repeated that commitment. Bessent said at his confirmation hearing that tariffs strengthen the dollar, and that a (then-hypothetical) 10 percent everything tariff would cause the dollar to appreciate by four percent. I questioned Bessent’s zany precision at the time, but even I never expected Trump’s tariffs to weaken the dollar. Yet that’s what they did (inadvertently) as a result of being applied so haphazardly as to weaken international confidence in the United States’s stability. The dollar has depreciated against other currencies 8.5 percent since Trump’s inauguration—not because the U.S. is in control of the global economy, as Miran’s famous memo presumes, but because the U.S. can’t control even its own economy.
It’s much the same with the bond market, which was in bad shape before Trump imposed the tariffs and is in worse shape now. How is that possible? It’s axiomatic that when the stock market tumbles, people move their money into bonds, which are more secure. But that didn’t happen during the tariff-induced stock drop (which may not be over). Instead, there was a bond sell-off because, as the Brown political economist Mark Blyth told The New York Times, “The whole world has decided that the U.S. government has no idea what it’s doing.” It’s worth noting that this is happening even though neither Trump nor Miran has yet carried out threats to give Treasury bondholders a haircut.
