Reassurance is rarely needed when confidence is intact, so the fact US treasury secretary Scott Bessent felt obliged to insist the US “is never going to default” was alarming in itself.
His comments followed JPMorgan Chase CEO Jamie Dimon’s warning that a “crack” in the bond market “is going to happen”.
US debt as a share of GDP will likely exceed its 1940s peak in the coming years, but that’s not investors’ only concern. There’s also the Trump administration’s uneasy relationship with economic norms – in February, president Donald Trump suggested the US may have less debt than reported due to fraud – and its willingness to think the unthinkable across many fronts.
That mindset found a kindred voice in former UK prime minister Liz Truss, who recently resurfaced in the Washington Post to offer advice to Donald Trump and blame her own implosion on the “entire Davos elite”.
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Accusing markets and global institutions of conspiring to “bully policymakers”, she claimed her downfall was driven by a “globalist economic establishment” opposed to tax cuts and economic freedom, and complained Boris Johnson was ousted “with a view to installing the former Goldman Sachs banker Rishi Sunak”.
Far from being run by an elitist cabal, bond prices are shaped by everything from central banks to pension funds and ordinary savers. The “dastardly goal”, as the FT’s Edward Luce dryly put it, “is to invest in a safe asset”.
If bond markets are uneasy, the cause may be less shadowy conspiracy and more about what’s now thinkable.
