In a provocative essay, Arthur Hayes examines the bold strategies of Scott Bessent, who is poised to attempt a monumental shift in U.S. economic policy akin to actions not seen since World War II. Bessent’s vision involves placing the Federal Reserve under the direct influence of the Treasury, allowing for a substantial restructuring of the U.S. economy through aggressive monetary manipulation.
Hayes outlines Bessent’s plan to transfer credit creation from the Federal Reserve and private equity firms to regional banks. The intent is to saturate the financial landscape with new debt and an influx of money, an effort aimed at reversing the current trajectory of the United States from a leading global empire to merely another economically strong nation.
Historical context is provided as Hayes recalls how in 1942, the Treasury enforced strict caps on short- and long-term yields, creating a lending environment that benefitted smaller banks. Bessent seeks to recreate that framework but intends to harness contemporary methods rather than wartime imperatives. This revamped approach, described by Hayes as “QE 4 Poor People,” is motivated by a desire for populist control over economic levers.
Former President Donald Trump is reportedly aligning the Federal Reserve with Bessent’s ambitions by influencing appointments to the Federal Reserve Board of Governors (FBOG) and the Federal Open Market Committee (FOMC). As Trump aims to install loyalists within the FBOG, they could potentially lower interest rates on reserves. This could lead to a flood of credit, compelling the FOMC to respond by reducing the federal funds rate, thereby facilitating Bessent’s overall strategy.
Central to the operation is the anticipation of the 2026 elections, which Hayes notes will serve as a critical point for reshaping the Federal Reserve’s governance. The FOMC’s rotating districts—comprising influential banks in New York, Cleveland, Minneapolis, Dallas, and Philadelphia—are expected to nominate candidates who align with the objectives of increased liquidity and lower interest rates. This strategy aims to ensure the FOMC remains favorable to the plan of expanding monetary supply through treasury purchases.
The ramifications of this policy could be extensive. As the Treasury would have the capacity to issue debt without escalating interest costs, the fiscal deficit could be mitigated. However, this scenario carries risks, primarily concerning the value of the dollar. A weaker dollar, while advantageous for American exporters facing competition from nations like China, Germany, and Japan, raises concerns about inflation and long-term economic stability.
As political pressures mount with the approach of the midterm elections in 2026, the urgency to implement this plan accelerates. Hayes predicts that over the next five years, the Treasury will need to issue a staggering $15.32 trillion in debt to manage annual deficits along with upcoming rollovers.
Reflecting on the implications for the cryptocurrency market, particularly Bitcoin, Hayes proposes that each trillion dollars in new credit could dramatically elevate Bitcoin’s value. While he asserts that Bitcoin may not reach the projected $3.4 million by 2028, he believes its price will significantly exceed current levels, anticipating a bullish trajectory driven by extensive monetary expansion.
This evolving financial landscape, driven by aggressive government intervention and the reshaping of financial institutions, poses critical questions about the future economic architecture of the United States and the role of digital assets in that equation.
