The Rise of Scott Bessent: A New Era for the US Dollar
Janet Yellen’s tenure as Treasury Secretary was marked by massive stimulus packages, inflation, and a belief that the US economy was left in a “good place.” However, her replacement, Scott Bessent, is set to take a drastically different approach.
Bessent is a US hawk who advocates for decoupling from China and maintaining the supremacy of the US dollar as the world’s reserve currency. His policies aim to weaponize the dollar through economic sanctions, ensuring global demand for the currency remains strong. But is this strategy sustainable?
The Dollar’s Dominance: A House of Cards?
Bessent's plan hinges on the US dollar remaining the global reserve currency. If the dollar loses its status, the US economy could collapse like a house of cards. To prevent this, Besson is pushing for all global transactions—even between countries like Saudi Arabia and India—to be conducted in USD.
However, this strategy is fraught with risks:
Global Trade Shifts: As the US imposes tariffs and decouples from China, fewer dollars will flow into the global economy, creating scarcity.
Foreign Debt Holdings: Foreigners hold 33% of US debt, but this percentage is under threat as BRICS nations buy more gold and G7 allies like Japan sell off their holdings.
Currency Crises: A stronger dollar could trigger currency crises worldwide, forcing governments to dump US debt.
The Global Tariff War: A Costly Gamble
Bessent's policies are set to spark a global tariff war, with the US imposing a 20% global tax and a 60% tariff on China. While this might strengthen the dollar, it will also lead to:
Higher Inflation: US households could spend an additional $6,000 annually due to rising costs.
Economic Hardship: Mortgage rates are rebounding, and a credit card crisis is already raging.
Retaliation: Other countries may retaliate, further escalating trade tensions.
China’s Recession: Fact or Fiction?
Besson claims that China is in a severe recession, with a -4% disinflation rate. However, China’s GDP grew by 5.4% in the latest quarter, driven by domestic stimulus programs. For example, China’s trade-in program has boosted consumer spending by $180 billion, showing resilience against US tariffs.
This disconnect highlights a critical question: Is China a collapsing economy or a formidable rival? Underestimating China could backfire on the US, especially as Beijing continues to invest in infrastructure and clean energy.
Europe’s Self-Inflicted Wounds
While the US and China battle for economic supremacy, the EU is digging its own grave. By banning Russian LNG and expanding sanctions, Europe is driving up energy costs and crippling its industrial sector. France and Spain, which rely heavily on Russian LNG, will bear the brunt of these policies.
This move not only harms Europe but also benefits the US and China, its industrial competitors. Without a viable energy alternative, the EU’s economy is at risk of further decline.
What Does This Mean for You?
The coming years will be marked by:
Structurally Higher Inflation: Prepare for rising costs of living and economic uncertainty.
Dollar Sanctions: The US may force the world to support its bond markets, further straining global relations.
Global Economic Shifts: The balance of power is shifting, and the US dollar’s dominance is no longer guaranteed.
Conclusion
Scott Bessent’s policies could either save or sink the US economy. As the world braces for a financial apocalypse, it’s clear that the stakes have never been higher. Will the US maintain its economic supremacy, or will its strategies backfire? Only time will tell.
