Newly appointed Treasury Secretary Scott Bessent has been making waves and headlines during his brief stint as the country’s top economic official.
Bessent has been forced by his own policies to become more of an activist, as the U.S. 30-year Treasury yield reached a nearly two-decade high of 5.34% earlier this month, Reuters reported.
That prompted the Treasury Department to announce that it would at least double its liquidity-support buybacks for bonds maturing in 10 to 30 years, while also doubling the cap from $2 billion to at least $4 billion per operation between Sept. 9 and Nov. 4.
The market’s reaction to the move was predictable, temporarily lowering yields before they immediately rebounded days later.
Treasury 10-year bond yields were sitting at 4.64% at last check Tuesday, Aug. 25, ahead of its pre-announcement levels, according to CNBC. Meanwhile, the 30-year yield was 5.174%, hovering near pre-announcement levels, CNBC also noted.
James Sullivan, JPMorgan’s co-head of global fundamental research, recently compared Bessent’s plan to “paying your mortgage with your credit card.”
While it doesn’t take an MBA to know that Bessent’s short-term relief play would backfire, billionaire investor and former Bessent colleague Stanley Druckenmiller wrote an op-ed this week pointing out the folly in Bessent’s approach.
Stanley Druckenmiller takes aim at Bessent’s bond liquidity approach
U.S. economic policies have been under scrutiny recently as the national debt ballooned to $40 trillion for the first time.
Perhaps most distressingly, the debt was just $20 trillion in 2017, meaning it has doubled over the past nine years, Committee for a Responsible Federal Budget confirmed. U.S. debt first reached $1 trillion in 1941.
It is a pattern of kicking the can down the road that markets are correctly rejecting, investor Stanley Druckenmiller said in his Wall Street Journal opinion piece this week.
“I have spent five decades trading on a simple premise: Markets aggregate information no committee possesses, and prices are how that information reaches decision makers,” Druckenmiller said. “The long-term Treasury yield is the most important price in the world. It is also the only fiscal disciplinarian the U.S. has left.
“The market’s verdict was swift and correct: This wasn’t liquidity management, it was price management — and a mistake far larger than $4 billion suggests.”
Druckenmiller knows Bessent well. The two worked together at the Quantum Fund and Soros Fund Management. But that didn’t stop Druckenmiller from pressing his former colleague about his bond liquidity play.
“Suppressed long rates sugarcoat the interest-cost projections, shrink the apparent urgency, and let incumbents assure voters the debt is someone else’s problem,” Druckenmiller wrote.
“Return buybacks to their stated purpose: small, scheduled, off-the-run liquidity operations announced at quarterly refundings, never off-cycle responses to yield levels. Term out the debt honestly and pay the price the market sets,” Druckenmiller said.
“A credible fiscal package would do more for the long end of the curve than a buyback program 1,000 times this size.”
Investor Stanley Druckenmiller criticized Treasury Secretary Scott Bessent’s bond liquidity strategy.Chip Somodevilla / Getty Images
Druckenmiller op-ed criticized for AI use
While Druckenmiller took aim at Bessent’s recent policy decision, online sleuths took aim at Druckenmiller’s op-ed by running it through AI-detection tools.
“Sorry, but this is the most obviously AI-generated op-ed ever,” said Joey Politano on X (the former Twitter). Politano’s newsletter offers “data-driven insights on economics and business.”
“It has ‘it’s not X, it’s Y’ construction in both the first two paragraphs,” he said. “Panagram (AI detection) has it as 100% AI.”
When reached for comment about his use of AI for the op-ed, Druckenmiller didn’t think there was an issue.
“There’s a reason I moved from an English major to being an economics major,” Druckenmiller told Notus. “I’m not embarrassed by it … I write everything using AI now for the same reason I use a calculator when I do math problems. I don’t know why this is relevant. My name is on the piece. It’s my message.”
Politano wasn’t impressed.
“One of the most prominent finance billionaires submitted this? The WSJ just ran it? Are there no standards anymore?” he asked.
While the Journal’s internal guidelines state that “work that includes AI inputs is reviewed by a journalist before publishing,” it did not immediately return a request for comment about whether Druckenmiller’s op-ed runs afoul of its editorial guidelines.
Notus points out that earlier this month, Harvard professor Ricardo Hausmann published a guest column in the Financial Times about President Donald Trump’s tariff war and was also called out by the public for obviously using AI.
FT later added a note saying, “It has come to our attention that AI was used to condense a longer draft of this column prior to submission to the FT and our own editorial involvement. The FT editorial code of conduct specifically prohibits the use of AI in the writing process.”
