Global Bond Market IN CHAOS As Bessent DESPERATELY FLAILS — Transcript

Full transcript

1. 0:00One of the funny things about these
2. 0:01financial charts when it comes to like
3. 0:03oil prices and interest rates is when it
4. 0:05they go up, the charts get rendered in
5. 0:09green. So, you're like, "Oh, this is
6. 0:10great. This is a little boost. This is
7. 0:13going great for us." A lot of green uh
8. 0:16with the uh with Japanese bonds, the 10
9. 0:18and the 30-year and also uh oil prices.
10. 0:21But spoiler, probably not so good for
11. 0:23you. Uh let's start with B1. Th this is
12. 0:28a kind of great global debt unraveling
13. 0:31uh that we're witnessing. So that that
14. 0:33green you're seeing over there basically
15. 0:35uh record jump on the uh Japan um 30
16. 0:3830-year note climbing over uh 4% just
17. 0:43massively increasing um borrowing costs.
18. 0:46And what what it also does is when the
19. 0:50Japanese 30-year now you can get if you
20. 0:53know it's it's it's fluctuating a little
21. 0:54bit but right there you get about 4.2%
22. 0:562%. What that means is if you're an
23. 0:58investor and you have French or German
24. 1:02or American bonds that are getting less
25. 1:04than that, you sell those and you go buy
26. 1:08the Japanese ones. So now what happens
27. 1:12over then over in the US and the France
28. 1:14and Germany, those bond prices go down.
29. 1:16This is one of the things they'll teach
30. 1:18you in the finance 101. when bond prices
31. 1:21go down, interest rates go up because
32. 1:23it's you need to then entice people
33. 1:26basically uh with a little higher
34. 1:28interest rate to to uh to get them in.
35. 1:30Uh we can put up B2 uh the 10-year bond.
36. 1:34Um I like when they compact these charts
37. 1:36a little bit.
38. 1:37>> Yeah. Makes it look uh rather dramatic.
39. 1:39>> Basically, a a green wall of the
40. 1:42interest rates just shooting um straight
41. 1:44up. Always always always comforting. uh
42. 1:48and we put up uh B3 as I was saying
43. 1:51these these things you know rebound
44. 1:53around uh the world. So this is Reuters
45. 1:56reporting. So Japan's 10-year yield hit
46. 1:573% for the first time since 1996. Um uh
47. 2:02as the as the route hit uh bond prices
48. 2:05driving up yields in major economies
49. 2:06around the world. Yields hit their
50. 2:07highest in 15 years in Germany and their
51. 2:10highest since 2008 in the UK. In the US
52. 2:13the 10-year yield rose 3.8 8 basis
53. 2:16points to uh 4 almost 8% putting it in
54. 2:20range of its highest levels uh since
55. 2:22since 2023
56. 2:23>> co comedown
57. 2:25>> um you can put we can put up drop sites
58. 2:27so if people want to get this this next
59. 2:29one I think is before uh if people want
60. 2:31to go dive dive deeper into this um the
61. 2:36the the entire economy is kind of being
62. 2:38shaken
63. 2:40uh by effectively by oil prices and
64. 2:43we'll we'll get into that in in a second
65. 2:46that that's why this is going on but not
66. 2:48to worry put up B5 Scott Bessant which
67. 2:52one one of his delightful quotes I don't
68. 2:54think we are in any kind of a dire
69. 2:56situation
70. 2:57>> this is yesterday
71. 2:58>> at the G20 which is being held right now
72. 2:59in Asheville North Carolina in the
73. 3:01United States
74. 3:02>> and so uh
75. 3:05the reason we're focusing on Japan here
76. 3:06is not just because they had the biggest
77. 3:08breakout yesterday but also because
78. 3:10Besson himself kind of kicked off this
79. 3:13insane round of uh financial
80. 3:18tumult by intervening to try to defend
81. 3:24uh the Japanese yen so that there
82. 3:27wouldn't have to be a sell off of US
83. 3:29Treasury bonds by uh the Japanese
84. 3:32government to support their own
85. 3:33currency. So he threw a ton of
86. 3:35>> American you threw a ton of dollars into
87. 3:37the Japanese economy
88. 3:39>> and it it you know here we are. You can
89. 3:44ar ar ar ar ar ar ar ar ar ar ar ar ar
90. 3:44ar ar ar ar ar ar ar ar argue what maybe
91. 3:45we would have been here a week ago if he
92. 3:46hadn't done that but all of those
93. 3:48billions of dollars you know flushed
94. 3:50across the globe. Um and we got to this
95. 3:54position anyway. we now just it's very
96. 3:56it's similar metaphorically uh to our
97. 3:59war in Iran like we so we've shut off
98. 4:02all of our munitions and now our stocks
99. 4:05are that much lower and we're still in
100. 4:06the exact same place if not a little bit
101. 4:08worse off um than we were before and all
102. 4:11of this is coming back to energy prices
103. 4:14which
104. 4:14>> are filtering through the economy. the
105. 4:17the a Asian countries are, you know, oil
106. 4:21obviously is a global commodity, but um
107. 4:23Asian countries are more reliant on oil
108. 4:26and other petroleum products that flow
109. 4:28through the straight of Hormuz than we
110. 4:30are just because of the geography of the
111. 4:32of the situation. And so, you know, as
112. 4:37the it's and it's interesting how it
113. 4:38works. Um, as
114. 4:42as prices rise because of the increasing
115. 4:45cost of gas and diesel and oil
116. 4:48>> and prices rise across the board, that
117. 4:51is registered as central bankers and and
118. 4:55al and you know, financial analysts as
119. 4:57inflation because it is prices rising.
120. 5:01But think about it. It's not COVID like
121. 5:03inflation. It's not it's not inflation
122. 5:05because there was too much spending, you
123. 5:08know, if you want to take it from a
124. 5:09right-wing perspective. It's not
125. 5:10inflation because
126. 5:13>> um you had, you know, a COVID lockdown.
127. 5:16It's inflation because there's less oil
128. 5:18and because there's less supply of oil,
129. 5:20still same amount of demand for it,
130. 5:23prices are going up. And so then the
131. 5:26central banks are going to try to
132. 5:27respond by trying to crush what what
133. 5:30they call demand destruction. So they're
134. 5:31going to try to okay, we can't increase
135. 5:34supply. It is what it is. We got a war
136. 5:36about this. So let's h let's make sure
137. 5:38there's less demand. And for there to be
138. 5:41less demand, we have to slow down the
139. 5:44economy.
140. 5:44>> Yeah.
141. 5:45>> We have to throw people out of work,
142. 5:46give people fewer hours, cut their
143. 5:49wages,
144. 5:50uh make things make borrowing
145. 5:52>> make it hard to buy.
146. 5:53>> Yeah. make it make make borrowing and
147. 5:55credit uh more difficult for businesses
148. 5:56to get so that there's just less
149. 5:59economic activity and then people will
150. 6:01try to buy less oil because they have
151. 6:03less money
152. 6:04>> and then you keep prices down but think
153. 6:06about that
154. 6:06>> less less construction less investment.
155. 6:09>> Yeah. You're trying to financially
156. 6:10engineer your way out of a problem that
157. 6:11is obviously just physical. There aren't
158. 6:13enough tankers of oil getting through
159. 6:14the straight of Hermuz because we had
160. 6:16anou and we decided not to abide by it.
161. 6:19Um and so
162. 6:22so people who hold bonds
163. 6:25see that the European Central Bank next
164. 6:28week is expected. I think there's a 95%
165. 6:30certainty they're going to raise
166. 6:31interest rates. Uh the analysts think
167. 6:34that the Japanese central bank is going
168. 6:36to raise interest rates. So then because
169. 6:39they expect those interest rates to go
170. 6:40up,
171. 6:42uh they think that the bonds that
172. 6:44they're holding will then be
173. 6:48they'll they'll go down in price because
174. 6:49interest rates go up, bonds go down in
175. 6:51price. So they sell them. Get rid of
176. 6:54these bonds because these are dogs.
177. 6:56>> Mhm.
178. 6:56>> Need to need to get rid of get get these
179. 6:58off my books. And that then kind of
180. 7:02drives the cycle a little bit faster,
181. 7:05pushes the price down, pushes interest
182. 7:06rates up in anticipation of this of
183. 7:08these coming uh rate hikes. And so in
184. 7:11order to rescue this like broken
185. 7:14economy, we're going to make the economy
186. 7:15worse. Like that's literally the
187. 7:17>> it's solution.
188. 7:19>> It's crazy because just this time last
189. 7:21year, Trump was pushing for Kevin Worsh
190. 7:24specifically to go into the Fed and take
191. 7:26interest rates down. and he gave the
192. 7:28speech in Jackson Hole that suggests
193. 7:29he's going to raise interest rates.
194. 7:30Yeah.
195. 7:31>> What I mean he none of the people around
196. 7:34him would think he should do otherwise
197. 7:36because this is just the autopilot way
198. 7:38we've managed the economy for the last
199. 7:39whatever hundred years. But this is
200. 7:42exactly what Donald Trump wanted to not
201. 7:44happen. He wanted to come back in, get
202. 7:46interest rates down, have a booming
203. 7:48economy, even better than he felt was uh
204. 7:51reflected in his first term. And so much
205. 7:53so that he was expending significant
206. 7:55political capital going after Jerome
207. 7:58Powell. Yes.
208. 7:59>> Like significant political capital
209. 8:01>> trying to prosecute him.
210. 8:03>> Yes. And like not that it matters too
211. 8:05much to him, but breaking all of the
212. 8:06established norms about how the
213. 8:08president when just really since the
214. 8:10Nixon era or I guess the Carter era, but
215. 8:12like breaking all of these norms about
216. 8:14how the president talks to the head of
217. 8:16the Fed and here he is because he
218. 8:19decided to launch the war. It's the
219. 8:21opposite of what he was hoping to happen
220. 8:23at this time a year ago. And there's no
221. 8:26light at the end of the tunnel
222. 8:27whatsoever. He's trying on the supply
223. 8:29side. We can put B6 up. This is a a drop
224. 8:31site post. So funny
225. 8:33>> where he said, "We are unleashing
226. 8:35American energy dominance on True
227. 8:37Social." And drop site writes, "Trump
228. 8:40declared that the White House was
229. 8:41unleashing American energy dominance in
230. 8:43a post after he met major oil refiners
231. 8:45at the White House on Tuesday. said
232. 8:46yesterday, hoping to find a way to
233. 8:48expand capacity and lower surging fuel
234. 8:51prices, which threaten higher inflation
235. 8:52and lower economic growth. Participants
236. 8:55at that White House meeting included
237. 8:57Marathon Petroleum, Philip 66, Chevron,
238. 8:59Delic US holdings, PBF Energy, Valero
239. 9:01Energy, and others. According to the
240. 9:03Financial Times, they promoted
241. 9:05deregulation. The White House did
242. 9:07exemptions from bofuel requirements for
243. 9:08small refineries. And you guessed it,
244. 9:11increased Venezuelan crude supplies as
245. 9:13ways to lower costs. So now they're
246. 9:16betting on Venezuela, Ryan.
247. 9:18>> Yeah. And and so he brought in all of
248. 9:20these oil executives, which is
249. 9:23reminiscent of uh Biden once in a while
250. 9:25during his um tenure. He was trying to
251. 9:28jawbone very gently and quietly. And I
252. 9:31wish he would have done it a lot more.
253. 9:32>> People jaw boning.
254. 9:33>> People were joking that he was like next
255. 9:35he was gonna like uh if you remember
256. 9:37jawbone the guys whose job it is to
257. 9:39change the numbers on the actual like
258. 9:41sign outside the gas station. Come on.
259. 9:44Come on, Jack.
260. 9:45>> Come on, man.
261. 9:46>> But, uh, the Financial Times and its
262. 9:49coverage of it includes a a photo of a
263. 9:52diesel selling for 7.45 a gallon in
264. 9:55that's California. A little, you know,
265. 9:56it's pricier out there. Um, but there
266. 9:59there is no kind of rural economy
267. 10:03in the United States that works at 7.45
268. 10:0645 a gallon for diesel because diesel is
269. 10:09what goes into and so you know tractors
270. 10:12you know the trucks like major equipment
271. 10:15like the
272. 10:16>> everything Yes. And we're now heading
273. 10:19into the fall, which is um you know,
274. 10:22planting season for some uh crops and
275. 10:24harvest season uh for others. And you're
276. 10:29going and that's you're and the inputs
277. 10:30for fertilizer and diesel for this kind
278. 10:33of surge of of energy intensive activity
279. 10:37are breaking the back of uh communities
280. 10:41all across the country
281. 10:42>> farms.
282. 10:43>> Um for for what for Iran has already
283. 10:48said they don't want a nuclear weapon.
284. 10:49Like what what why are you losing your
285. 10:52farm?
286. 10:53>> What for? The average AAA's average
287. 10:57diesel price across the country right
288. 10:59now is 569.
289. 11:02>> Better than 749.
290. 11:03>> A year ago it was 369.
291. 11:06>> Right.
292. 11:08>> Two two buck increase over the course of
293. 11:11the year which is having all the ripple
294. 11:13effects that you just described around
295. 11:14the world not just here.
296. 11:16>> Yep. But uh Trump um he's he yelled at
297. 11:20the gas guys. So,
298. 11:22>> and he has he owns Venezuela now.
299. 11:24>> He owns Venezuela. He's also said that
300. 11:28he's going to top off the strategic
301. 11:31petroleum reserve with Venezuelan oil.
302. 11:35Like, we tried that before. It didn't
303. 11:37work. It It's too heavy. It doesn't
304. 11:41doesn't work with the caves that we use
305. 11:43for our reserves. Like, it's just can't
306. 11:46do that. And also they produce about
307. 11:48what 1.5 million barrels a day uh and
308. 11:52because of this massive uh disinvestment
309. 11:56that you're not turning that up next
310. 11:58week like with massive investment you
311. 12:01could turn it up in a year maybe.
312. 12:04>> Mhm.
313. 12:05>> Even then it wouldn't be able to fill
314. 12:07the strategic petroleum reserve.
315. 12:10>> So
316. 12:10>> it's it's not even a short-term
317. 12:12solution.
318. 12:12>> Just just delusional.
319. 12:13>> Yeah. It's not even a short-term
320. 12:14band-aid.
321. 12:15>> Yeah. It's like, what do you mean we're
322. 12:16going to like A you we can't actually
323. 12:19pump more next week. B it doesn't work
324. 12:21in our petroleum reserve.
325. 12:23>> So all you can do is try to decrease
326. 12:24demand,
327. 12:25>> right? Which means you need less money.
328. 12:28Like they believe that you have too much
329. 12:30money that you're spending in the
330. 12:32economy. And so they're going to try to
331. 12:35engineer it such that things cost more
332. 12:37for you and you have less money and less
333. 12:40work, less labor.
334. 12:41>> So that then you travel less, you use
335. 12:45fewer resources and that drives down
336. 12:47prices of things
337. 12:50>> which is why Mike Johnson did not want
338. 12:52to answer that question about the war
339. 12:54when he was asked. We covered that
340. 12:56earlier in
341. 12:57>> which is why it's good. Our first month
342. 12:58is free
343. 12:59>> at breakingpoints.com.
344. 13:00>> That's what this is actually about
345. 13:02though. That's you thought the free
346. 13:04month subscription trial was just us
347. 13:07being benevolent.
348. 13:08>> We're actually trying to reduce
349. 13:08inflation.
350. 13:09>> Yeah. Well, we we do our part. Uh,
351. 13:11speaking of the political ramifications
352. 13:14of all of this, let's move on to the
353. 13:15midterms.
354. 13:16>> Hey, if you like that video, hit the
355. 13:17like button or leave a comment below. It
356. 13:19really helps get the show to more
357. 13:20people.
358. 13:21>> And if you'd like to get the full show,
359. 13:23ad free and in your inbox every morning,
360. 13:25you can sign up at breakingpoints.com.
361. 13:27>> That's right, get the full show. Help
362. 13:28support the future of independent media
363. 13:30at breakingpoints.com.