Treasury Secretary Scott Bessent recently offered a comprehensive assessment of the U.S. economic trajectory, emphasizing that while 2025 laid critical groundwork, the real momentum is expected in 2026. He noted a modest fiscal contraction for the year, with the budget deficit narrowing from an estimated $2.0 trillion to $1.78 trillion—down from $1.8 trillion—marking a slight but meaningful improvement. This sets the stage for a projected $200 to $300 billion reduction in the fiscal gap over the calendar year, equivalent to 0.7% to 1% of GDP. Nominal growth is approaching 6%, helping lower the deficit-to-GDP ratio, which peaked at 6.8% the prior year and is now trending toward the mid-fives. Bessent expressed confidence that by the end of President Trump’s term, the ratio could stabilize with a leading digit of three, enabling debt reduction.
On trade policy, Bessent defended the administration’s use of tariffs not merely as revenue tools but as instruments of national security. He cited instances where elevated tariffs prompted negotiations with China, Mexico, and Canada on fentanyl trafficking, resulting in measurable declines in overdose deaths. When Beijing threatened to restrict rare earth exports globally, the U.S. response of a potential 100% tariff quickly brought Chinese officials to the negotiating table. Bessent argued that critics underestimated how China’s volume-driven economic model would persist despite tariffs, allowing the U.S. to leverage them strategically without triggering sustained inflation.
Regarding revenue projections, he acknowledged that tariff income will likely decline over time as trade rebalances and manufacturing reshoring boosts domestic tax receipts from payroll and corporate earnings. While long-term forecasting remains uncertain, the direction—toward reduced reliance on tariffs and stronger internal economic engines—is clear. A pending Supreme Court decision on executive tariff authority under IEEPA could reshape this framework, but Bessent stressed that the core issue isn’t revenue but national leverage. He dismissed concerns about data integrity following the October government shutdown, noting that while some Bureau of Labor Statistics figures relied on imputation, independent analyses aligned closely with official inflation trends.
Bessent also critiqued the Federal Reserve’s prolonged quantitative easing, calling it a driver of wealth inequality by inflating asset prices accessible primarily to the wealthy. He referenced Governor Stephen Myron’s recent remarks and Karen Petrou’s research to argue that the Fed’s balance sheet expansion and regulatory overreach post-financial crisis distorted credit access and exacerbated disparities. He advocated for a return to more traditional monetary discipline, where fiscal responsibility and central bank credibility reinforce each other, similar to the Bundesbank model.
Looking ahead, he emphasized that restoring affordability involves both price stabilization and rising real incomes, which have increased about 1.8% since the new administration took office. Key cost drivers like rent and gasoline are showing signs of retreat, aided by immigration enforcement and falling oil prices. On bond markets, Bessent highlighted strong global demand for U.S. debt despite shifts in Chinese holdings, attributing investor confidence to improved fiscal stewardship and macroeconomic resilience.
— news from singjupost.com
— News Original —
All-In Podcast: with Scott Bessent on Fed, Tariffs and 2026 Economic Vision (Transcript)
Happy to review the year. Talk about next year. There’s a lot going on. I would categorize 2025—we had some important victories, some important policy announcements, some important movement. But as I described it, 2025 was setting the table and especially on the economy. I think the feast and the banquet is going to be in 2026. n nTo start with, the budget deficit, we didn’t get much credit because it came out during the shutdown. The U.S. fiscal year is on September 30th. We had a slight fiscal contraction for the year. Wasn’t much, but much better than the $2.0 trillion that was estimated. We came down from about $1.8 trillion to $1.78 trillion. So a contraction nonetheless for the calendar year. n nWe’re making great progress. And just to put it in context, Biden administration, they blew things out trying to get Vice President Harris elected in the fourth quarter. So last year, 2024, 40% of the government spending occurred in the fourth quarter as they had the unsuccessful or their unsuccessful attempt to convince voters that they weren’t in a world of hurt. n nI forecast that we will have approximately a $200 to $300 billion fiscal contraction for the calendar year, which is between 0.7 to 1% of GDP. We’re going to end the year with nominal growth close to 6%. So we will be bringing down the deficit to GDP. I believe it peaked at 6.8% for the calendar year, previous year, and we’re going to be in the mid-fives. n nSo it’s a very good start on an important journey. And I’ve said that I would, by the time President Trump leaves office, that we would like to have something with the three in front of it which will stabilize the deficit to GDP, which is the important number, and enable us to start paying down debt. n nTariffs as National Security Tools n nCHAMATH PALIHAPITIYA: Scott, it seems like the tariffs have had an enormously positive impact. It’s given you a lot of tools in the toolbox to work with. Why do you think so many people got it wrong? A lot of people I’m sure that you’ve known and worked with in your prior life as a hedge fund manager. What did they get wrong? What did they miss that you were able to see? n nSCOTT BESSENT: Well, a couple of things. I think people didn’t have an open mind. They became the “Trump tariffs,” which immediately a large cohort, whether it was government officials, industry people, the general population, because President Trump wanted to do it, it must be bad. n nI said the other day, “President Trump cured cancer, but it caused dandruff.” Then people would say, “Well, you know, President Trump has caused a dandruff epidemic.” n nAnd look, there’s a lot of orthodoxy that hasn’t worked. If we look back early 2000s, letting China into the global trading system, that they would become more like us. And there was a point, and I’m somewhat sympathetic to the people who believe that, but by 2013, when Xi Jinping came in and great writers like Elizabeth Economy, who had been of that view reversed and said, “He’s a different kind of cat, it’s no longer going to be Chinese policies with capitalist tendencies. It’s just going to go back to hard communism, Leninism.” n nAnd I just think that it was a failure of imagination. I’ve said several times, people, and maybe we’ll talk about it today, when people ask me, “What are you looking for in a Fed chair?” It’s someone with an open mind. n nIf we go back to the 1990s, Alan Greenspan did a magnificent job because he had an open mind that the Internet office modernization boom was going to create a productivity bonanza for the U.S. economy. And he let the economy—he let it rip. And we had an incredible economy, paid down a tremendous amount of debt that by 1998, 1999, with a combination of Clinton administration having gotten religion, Newt Gingrich and his policies, there was talk at the end of the 90s that there might not be enough government debt to meet the needs of the financial system, which is the opposite of what we have now. n nSo again, I would—part of it was just anything the president does must be wrong. Part of it was a failure of imagination. And there’s some very good studies coming out now that are showing why everyone has been wrong, that the measurement problems on the increase in goods prices. n nThere’s a study from, not a friend of the administration, the San Francisco Fed, with 150 years of data. I would refer everyone to that. This shows that tariffs do not cause inflation, that they’re actually disinflationary. n nDAVID FRIEDBERG: Has anybody read that study, Scott? Has that been, I would say, a part of the conversation in the administration now that there is this new revenue stream for the federal government, there’s an opportunity to cut taxes and cut other sources of revenue for the federal government and that could potentially accelerate the economy. n nBut balancing that question against the importance of cutting the deficit, how do you think about the balance between using tariffs as a mechanism for reducing the tax burden on the economy versus using the tariffs as an incremental revenue source for the federal government to start to reduce the deficit and pay down the debt eventually? n nSCOTT BESSENT: David, before I answer that, another thing I want to go back to is President Trump and one of the reasons for the success of the tariff policy, or I’ll give you two reasons. n nOne is that President Trump has used them for national security. So the tariff policy has become part of national security. He was able to use the tariffs to negotiate trade deals. When he ratcheted up some of the tariff levels to 35%, 49%, 50%, even 145% with the Chinese, it brings people to the table. n nIn the spring, the president put fentanyl tariffs on Mexico, Canada, China. They’ve all come to the table to help and partner with the U.S. Government to end this scourge on our people. We’re seeing fentanyl deaths drop because of the good efforts of China. We made a good faith move and decreased their fentanyl tariffs by half, down to 10%. So that’s been national security. n nSame thing on October 8th when Beijing announced that they were going to put a worldwide export license on any product that had 0.01% of Chinese rare earths in it, which would have ground the Western trading system to a halt. President Trump was able to threaten 100% tariff and the Chinese immediately came to the table. n nThe other thing that I would say, so that’s all national security. The other thing that I would say that people missed, that I was convinced of, is that the Chinese business model is based on volume, it’s based on employment, it’s based on a five-year plan. And I think everyone neglected the idea that despite the tariffs, the Chinese were going to keep producing, that it’s one of these—they may lose a dollar on every product, but they make up for it in volume. n nForecasting Tariff Revenues Through 2028 n nCHAMATH PALIHAPITIYA: Can we forecast these tariffs through 2028? Or do you think that we have to have moments where whether it’s the Supreme Court who’s opining on one body of language versus another may change your course? But do you feel confident that we can forecast these revenues now out through the balance of President Trump’s term? n nSCOTT BESSENT: Well, I think that I think the revenues are a combination of revenues. So the ultimate goal of tariffs, the revenue collection, I think of in a way is a payback for the imbalances that have gone on over the years. But over time, the real idea is to balance trade and reshore manufacturing and bring our economy into balance with our trading partners. n nSo what should happen is over time, tariff income will come down and U.S. tax receipts will come up, whether it’s from factory jobs or more manufacturing and through higher payroll taxes. So we will start off at this very high level, then we will rebalance and come up. So I think it’s difficult to know the timing. We know the direction, we know the destination, but the timing is difficult. n nOn tariffs versus increased domestic tax revenues. What I can say is when I got into the investment business in the 1980s, there was always a focus on trade and how much were we making in the U.S. and again, that everything made outside of the U.S. is a decrease in U.S. GDP. So as we bring it back, I think we’re going to start looking more at the content of trade versus domestic manufacturing as a component of GDP acceleration. n nThe Supreme Court Challenge n nJASON CALACANIS: As we wrap tariffs, we have a Supreme Court ruling coming in January. What happens if that goes against the administration? n nSCOTT BESSENT: Well, I don’t think it’s against the administration. I actually think it’s against the American people. And it will be again, as I said, it will be a hit to national security. And the revenues aren’t the focus here. The revenues aren’t the focus. The revenues can be replaced. But all the things that President Trump has been able to do using tariffs on the national security side will be jeopardized. n nJASON CALACANIS: Would you be able to just work with Congress on them? That seems to—how the Constitution seems to be how the Constitution was designed is that the Congress would have this authority, so why not just work with them? Is that the fallback plan? n nSCOTT BESSENT: Well, why would you say Congress would have what authority? n nJASON CALACANIS: Well, the Constitution has tariff control, so that’s at least my understanding of the U.S. Constitution. And I think that’s why there’s a Supreme Court case, correct? n nSCOTT BESSENT: Well, they will see, the president has the right under IEEPA, the four licenses that we’ve also seen. I was at the Supreme Court. And for your viewers, a bucket list event should be going to see a Supreme Court hearing. It is, in terms of any institution that is the closest to what our framers designed and kind of jumped into business in 1789. It is probably—it is surely the closest to what you would have seen at the court. They’re very convivial with each other. n nJASON CALACANIS: Yeah, I listened to it. It’s quite compelling content. n nSCOTT BESSENT: Yeah. And to be there in person. Not my political leanings, but Justice Kagan was just an intellect of towering impressiveness. I came away thinking, I am glad that Justice Alito is not my father. n nCHAMATH PALIHAPITIYA: Because? n nSCOTT BESSENT: He is smart, he is bombastic. And when he got the knife into a couple of the plaintiffs in a line of questioning, and he moves it around quite a bit. But one line of questioning in this that one of the plaintiffs agreed on was—and it was either from Justice Alito or Justice Kavanaugh was, “You were telling this court that the president, United States can do 100% embargo, but he cannot put on a 1% tariff.” And the plaintiff said, “Yes.” n nDAVID FRIEDBERG: Yeah. And that ruling is coming out in a few months. n nJASON CALACANIS: It’s January or February expectation. n nSCOTT BESSENT: Yeah, January or February. And, Jason, to your question, I don’t know what the ruling is going to be. My guess is everyone—I think that framing is very important in any issue. And I think the framing thus far has been very poor because it’s viewed as zero or one. It’s up, down. And my guess is it will be more nuanced. n nHaving been in the room, for instance, I think many in the media were at a different hearing than I was at. So when Justice Barrett, Coney Barrett said, “If we undo this, it’ll be a mess,” that was viewed as just, “It will be a mess,” as opposed to—I believe she was actually leaning toward looking for a reason not to undo it because it would—the refund. She was referring to the refunds. n nThe president has absolute ability, or the executive branch has absolute ability through 301s, 232s, and something called 122s to raise revenue on trade. So using the IEEPA is not a stretch of that authority. n nJASON CALACANIS: n nOkay. So I think the question, and I really appreciate the introspection here on year one and the optimism for year two, Wall Street, the tech industry, we’ve absolutely loved the results in year one. My portfolio has surged. So that’s fantastic. Thank you probably beyond my expectation. n nBut Main Street is particularly displeased with the Trump administration’s first year. Your net approval rating is the lowest on two key issues. Inflation, net approval rating down about 30% on average since the summer, and on the economy, 18% net negative. And so this is quite paradoxical, obviously, since Trump was elected and considered historically very strong on those two specific issues. n nSo my question to you is, are the American people wrong? Or maybe did President Trump set expectations too high during the election or do you just need more time to execute and you’re asking the American people humbly to give you more time? n nSCOTT BESSENT: n nI think it’s C because as Vice President Vance has said, we didn’t get here overnight. We inherited a mess. And I think 2026 is going to be a very good year for the American people, for Main Street. n nAnd what we are not going to do is what the Biden administration did and many commentators, whether it was Greg Epp in the Wall Street Journal, the toxic Paul Krugman who seems to have been booted from the New York Times and is relegated to Substack, or the former vice chair of the Fed, Alan Blinder. And they said, “Oh no, you don’t understand how good you have it. Eat your grit, drink your grog, have your bread, peasants. We’ll give you a little more that you.” It’s a vibe session and we’re going to explain to you why you have it really good. n nWe understand that the American people are hurting. And I think the way to think about it is there is a price level that things appreciated to during the Biden administration. Then there is the inflation level. The price level has gotten very high. I think cumulative CPI during the Biden administration was 21, 22%. There’s a Wall Street firm called Strategic Research. They do something called the Common Man Index. And it is what do working families need? Gasoline insurance, the autos, mostly used cars, rent, staples. And that appreciated by about 35%. n nSo people are seething over the high price level. And as we saw in the inflation print this week, inflation is starting to turn down. And affordability, affordability is two parts. It is getting the prices under control. Some things we can decrease. Gasoline is coming down substantially. I would expect that it would come down much more. Oil is down substantially. Gasoline follows it with a lag. n nRents are down and we are now seeing the effects of what 10 to 20 million undocumented people coming into the country did for rents. This mass unfettered immigration for D and C rent levels was through the roof. There’s a study from Wharton that shows that 1% population increase in a city leads to 1% rent. So we can see why rent went up that if the migrants are going home we are now seeing rents are down about 5%. I think that trend will continue again. n nThe inflation numbers are starting to roll down. I think that they will. And then the other side is real incomes which I think are starting to accelerate. Real incomes are about up about 1.8% since President Trump took office. And that’s back to the Main Street question. n nJASON CALACANIS: n nSo just one quick follow up there and I’ll give it back to my compatriots. We need more time. This is not a one year project is going to take two or three years and we’re not going to gaslight you. And the numbers are looking good. n nOn that note, we had the shutdown October numbers were not complete. There’s a bunch of reports now and hand wringing over those numbers. I think maybe you could address it which is the BLS filled in a lot of the non survey data sources with some zeros and potentially the criticism now or the concern on Wall Street and from analysts is that maybe this 2.7 number is over optimistic. Maybe you could address people’s concerns. And can we trust you with the numbers I think is what Wall Street’s saying. n nSCOTT BESSENT: n nWell again it’s amazing when a good number comes out then it switches to that. And Jason, just let me tell you, every Wall Street predictor in Bloomberg was wrong. So what do you do when you’re wrong? You blame the measurement, you blame the data. n nAnd there’s always a lot of imputed data in any of these numbers. That’s why we get revisions. And I’m looking at, I was looking at the numbers and paradoxically the two things that I think are coming down the fastest which are rent also it’s known as the owner occupied funding or owner occupied rent that was actually up on the month. I believe it is turned negative. n nAnd then the other thing that was up was energy and gasoline which we can is an observable event that those prices have decreased substantially from September, October. So I actually think it was a pretty accurate number. n nJASON CALACANIS: n nSo you’ve checked into that the BLS numbers from October, you feel confident they put those placeholders, they put those assumptions incorrectly. You feel confident in that. n nSCOTT BESSENT: n nLook, the BLS is problematic. We’ve seen that the whole time. I have no reason to believe that this is any robust than any other data series. And I would say with Rent with energy, that those are very large components that have turned down substantially that actually recorded a gain for that measurement period. n nThe Fed’s Role in Economic Inequality n nCHAMATH PALIHAPITIYA: n nJust to build on that, we had people on our team go and run our own analysis, both using interpolation and other data points, and we get to exactly Scott’s numbers and frankly on the margin, sometimes slightly better. So I think the trend is very much what you and Kevin Hassett have been talking about in the last couple days. n nSCOTT BESSENT: n nAnd gentlemen, I would also point you to Fed Governor Stephen Myron, who came from CEA. He’ll be going back to CEA probably in February or March, delivered a very robust speech at Columbia either a week or two ago, and he made some very interesting measurement points on inflation. n nSo one piece of the inflation component is financial services. And that goes up based on whether the stock market’s up. n nCHAMATH PALIHAPITIYA: n nThat’s right. n nSCOTT BESSENT: n nWhen in fact portfolio management costs have come down, that it is showing an increase in costs. So that back to Jason’s question on BLS, how robust are the numbers? I think there are a lot of changes that could be adjusted to give us a better picture. n nCHAMATH PALIHAPITIYA: n nLet’s stay on the affordability topic. And I would like to go to this essay you wrote, which is incredible. “The Fed’s New Gain of Function Monetary Policy,” which you wrote in the International Economy. We’ll link to this article. A lot of it goes to how the Fed in many ways has exacerbated the sense of inequality and the actual factual inequality. n nBut before I ask you that narrow question, Scott, can you help our viewers, just take a step back and give us a little bit of historical context on the Fed itself. So we had a central bank in the 1700s. In the 1800s, Andrew Jackson got rid of it. It came back in the early 1900s when we established it then versus what it’s doing today. And you studied this carefully. Can you help us understand and contrast and compare how it started versus how it’s going? n nSCOTT BESSENT: n nSure. So Fed was created in 1913 as a response to the panic of 1907, which people, most people don’t know about. It made the crash of 29 look like a day at the beach. n nCHAMATH PALIHAPITIYA: n nKnickerbocker crisis. n nSCOTT BESSENT: n nThe Knickerbocker crisis and just a domino effect within the financial system. There was no central bank. Bank of England is a very old central bank and had been functioning well. JP Morgan actually had to personally step in in the crisis. And it was deemed that there should be a mechanism for the government to be able to either wind down, provide liquidity and have a greater control in the economy rather than private operators. n nFor much of its history, Treasury had a seat at the table on the Federal Reserve. Post World War II, that stopped. And then if we look at more recent history, what happened after the great financial crisis, we saw this paralysis in the economy. I think a huge part of it, which has been part of my regulatory agenda here at Treasury this year through the Financial Stability Oversight Council is undoing the poorly thought out crisis legislation. n nBut what the crisis legislation did and look after financial. I studied and taught at Yale the history of financial crises. There’s always retribution. And you go from a lax regulatory regime to an over constricted regulatory regime. So coming out of the traumatic GFC for 10 years we had this over constricted regulatory regime where the Fed was deemed to be the only game in town. n nSo imagine one example would be a home in North Florida that sold for $500,000 in 2006. All of a sudden people are handing the keys back. It is now $150,000. Great buy, great affordability. But because of the new financial regulation and the incentives that the banks were in some cases rightly taken to the woodshed for bad behavior. But there was no incentive to give credit at the bottom. n nSo what happened? The asset owners, people with money, were able to accumulate assets. We saw very poor growth during the period during the Obama administration. And the Fed kept rates low for very long. But what the Fed engaged in, starting I believe was October 6th, excuse me, March 6th or March 8th, 2009, was the Fed began what we call QE or large scale asset purchases. They went in the market, started buying long bonds. n nAnd the theory of the case there is you create liquidity, you take safe assets out of the market, long duration safe assets. And then the people who receive that money would buy more risky assets. Ben Bernanke famously said when he was asked what’s the purpose of QE? He told everyone, “Go buy equities.” Well, not everyone could buy equities. n nSo we ended up with this two tier economy where either you were an asset holder or you weren’t. And the Fed probably kept or definitely kept QE going for too long. And I called the Fed “the engine of inequality.” And someone said to me, would you believe that the Fed is responsible for economic equality in the system? And I said, absolutely not. That is not one of their mandates, but they shouldn’t be exacerbating it. And they were the leading cause of it. n nThere’s a fantastic book by Karen Petterou. I know Karen Petterou very well. She’s center left maybe. n nCHAMATH PALIHAPITIYA: n nYeah, not your politics for sure. n nSCOTT BESSENT: n nNot my politics, but her book, “The Fed, the Engine…” n nCHAMATH PALIHAPITIYA: n nHer book is excellent. n nSCOTT BESSENT: n nYeah, “Engine of Inequality.” So we just kept pushing up these asset prices and then we got Covid and markets became disorderly and the Fed did exactly what it should do. It came in, it stabilized the market. But for some reason they decided that they needed to continue this QE right up until I think February, March of 2023. And they were in essence financing this massive debt increase, $7 trillion that we saw during that period. n nSo as a long way of saying the central bank has become much more involved in the economy, I think a lot of people don’t understand. We’ve gone from what used to be fairly straightforward rate setting mechanism to now we have kind of this three headed beast at the Fed or this very complex calculus that I don’t think anyone really understands, myself included. You have rate setting policy, you have balance sheet policy. So the Fed has a very big balance sheet now. And then you have regulatory. n nCHAMATH PALIHAPITIYA: n nWell, there’s a part of your article which was stunning to me where you describe how the budget of the Fed works and effectively when you understand that there’s a part of the Fed which acts like a hedge fund and effectively is taking risk and the revenues that they generate are used to subsidize their operations. Can you explain that for folks? Because I didn’t fully realize that that was happening. n nSCOTT BESSENT: n nYeah, well again the Fed should make money. Fed typically used to make money and would remit money back to the Treasury. Back to David’s question on the budget deficit. The Fed was sending back about 0.3% of GDP through. We have seigniorage, which is the float on the currency. There are other operations. n nBut then they started QE and no one told the Fed that you’re not supposed to buy high. So they paid a high price for bonds, low interest rates and their arbitrage. The Fed’s losing about $100 billion a year now. n nTreasury Rates and Main Street Access to Credit n nDAVID FRIEDBERG: n nIf you look at one of the key drivers of Main Street’s satisfaction with their economic standing, it’s the price of debt, the ability for them to buy a home, to buy a car, to extend their lives. And we’ve got the 10 year treasury sitting, I think 4.2% to 4.6% right now in terms of the rate. n nAnd I guess this may be a question that brings in two other issues, the fiscal issue and the economic issue. Is that a reflection of the state of the fiscal affairs of the federal government, the state of the economy, both or the state of markets selling off bonds. And doesn’t the Fed have an important role to play in bringing those rates down and making rates accessible for Main Street? n nThe Fed’s Role in Inflation and Fiscal Policy n nSCOTT BESSENT: n nWell, I think what the Fed did, unfortunately, they took modern monetary theory from—I say they went from MMT, modern monetary theory, to MMP, modern monetary practice. So the Biden administration issued all this debt and the Fed bought it. And there’s a very good study from MIT that’s come out that shows in a way that only PhDs at MIT can be very precise, 42% of the great inflation was caused by the budget deficit. n nAnother 17% was caused by the increase in inflation expectations, which I think you could tie back to that. So you’ve got almost 60%, David, that was caused by the spending of the inflation. And I think, again, to go back to my earlier point, I think what we’re not getting credit for here is that if we can stabilize the budget deficit, even bring it down, that that will contribute to disinflation. n nIf I think about central bank credibility in my career, probably post-World War II, no central bank had more credibility than the Bundesbank up until the advent of the euro. But they controlled the German—they worked with the German government, and they would work with each other, hand in hand. The Bundesbank would say, “If you give us the fiscal control, if you are not prolific, if you give us the reasonable fiscal balance, we will work with you. We will pave the runway to allow you to decrease spending, we will decrease interest rates.” And I think that’s something we could be doing here. n nJASON CALACANIS: n nI’m glad that you too are confused by the Fed’s actions, Secretary Bessent, because I read your article and while I understand the mandate to get to 2% inflation, why it’s 2%, not 3, I’m curious about your take on that because it did a little bit historical archaeology. I understand somebody in New Zealand came up with the 2% target, as opposed to 2.5 or 1.5 or 3. Let’s put that aside for a second. n nThe thing that I think most Americans don’t understand and the second mandate, full employment, robust employment, that seems pretty easy to understand for all of us. But this qualitative easing and how they purchase and which assets they purchase and why seems to have a massively distorting effect on the economy, at least according to your essay and some of the other sources you cite in this essay, which we have in the notes for people to read. n nWhat should we be doing with this QE at all? If you had your druthers and you could just swipe a pen here and clean this up, would you just get rid of the QE portion of what they’re doing? And how do they pick—like how do you pick whose corporate debt you buy? Are you buying Nvidia’s and Uber’s and Google’s because those are great companies or Microsoft’s, or are you buying Ford’s or struggling companies or struggling airlines? How are those decisions made and should the American people be buying those things and why? n nLarge Scale Asset Purchases and the Fed’s Toolkit n nSCOTT BESSENT: n nYeah, so Jason, a lot to unpack there. Absolutely, large scale asset purchases should be part of the so-called central bank toolkit. But I think if we go back and look at COVID, which was a real test, the Bank of England had the best model. The markets became unhinged, they stepped in for a period—I can’t remember whether it was 30, 60 or 90 days—they stabilized markets and they were the buyer of last resort, which is classic theory for what a central bank is supposed to do. They’re supposed to provide liquidity. They’re supposed to open a window where financial institutions can pledge collateral and do it that way. n nAnd I’ll just point out that when the bond yields were quite high, the Fed did buy quite a bit and they would actually have a large profit if they stopped during that period. Instead they continued on when we were near the zero bound. And what we’ve ended up with here is they pushed the asset price up, the interest rates were low, many people couldn’t buy a house during COVID. But now the interest rate has normalized and we’re just in a much more normal period for interest rates. But we’re not in a normal period for asset prices because so many people still have the 3% mortgages from COVID. n nAnd back to your question on what should the Fed buy? Traditionally, the Fed, since large scale asset purchases began in 2009, they just bought government bonds. They choose the duration. They switched during COVID because, look, there were estimates we were going to have a 20, 30, 40% GDP decrease. So they were buying indices of high yield bonds, of corporate bonds to stabilize the market. n nI think what you’re alluding to, Jason, is also during that period in conjunction with Treasury, there were bailouts and that’s done by a facility that is negotiated between the Fed and the Treasury called a 13(3) facility. And you identify strategic industries that may be struggling. It would not have behooved anyone for the airline industry to go belly up because of a virus that turned out to be quite transitory. So again, I think these are emergency powers. I think they should have them in emergency. But I think the duration went on much, much too long. n nGlobal Appetite for U.S. Bonds n nDAVID FRIEDBERG: n nIf you’re now in the bond sales game, Secretary Bessent—I mean, you’ve been on the other side of the market, but now you’re selling the bonds—what do you see in terms of appetite for U.S. bonds? Has China disappeared? Are they still selling down? Are there other buyers emerging? And how does broader capital markets look to U.S. debt in this moment? n nSCOTT BESSENT: n nWell, it’s like John Maynard Keynes said, a lot of economics is a beauty pageant. You’re just picking who do you think is going to win. And the U.S. became the worldwide winner last year. We had the best performing bond market, best performing market since 2020. And I think that was for a combination of reasons. One was the fiscal progress we made. And everyone went from “the tariffs, they were a