The US Treasury has been buying back at least 4 billion dollars of long-term bonds per operation since May 2024, failing to durably lower long-term yields. Unlike the Fed’s quantitative easing, these buybacks do not create money: they are financed by issuing short-term bills, which now represent over 20 percent of negotiable debt. Scott Bessent faces an unsolvable equation: federal debt exceeding 40 trillion dollars, deficits around 6 percent of GDP, and a term premium at its highest level since the early 2010s. Against this backdrop, capital is flowing toward gold and Bitcoin, whose annual supply of 1,000 tonnes and 164,000 BTC respectively cannot be altered by any auction or advisory committee. JPMorgan analysts have named this movement the debasement trade, a gold plus Bitcoin basket played against the erosion of sovereign currencies.
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