德鲁肯米勒批评贝森特购债计划：政府对抗市场必败

Bloomberg Audio Studios, podcasts, radio, news. This is Bloomberg Business Week Daily. Reporting from the magazine that helps global leaders stay ahead with insight on the people, companies, and trends shaping today's complex economy. Plus, global business, finance, and tech news as it happens. The Bloomberg Business Week Daily podcast with Carol Masser and Tim Stenbec on Bloomberg Radio. Billionaire Stanley Ducken Miller out with some harsh words for Treasury Secretary Scott Bessett.

Ducken Miller writing in a Wall Street Journal opinion piece, quote, "Governments defending prices against fundamentals always lose. The only variable is how much they spend before conceding. The US shouldn't put itself on the wrong side of that trade. Not with the most important price in the world and not when that price is trying to say the one thing Washington most needs to hear. Let the bond market speak. Draen Miller's comments coming off the back of Treasury last week announcing an increase in purchases of longdated bonds.

It's a move that markets are interpreting as an attempt to push down yields. We knew there was one person we wanted to talk to about this because it was just a year ago that he had the Bloomberg Business Week cover story about the Treasury Secretary. You can see the cover right there if you're watching us on TV or on YouTube. And for that story, he interviewed Stan Ducken Miller. That's Eric Shatzer. He's the editorial director of Bloomberg New Economy.

He joins us here in the Bloomberg Business Week studio. Eric, I want to get into Drunken Miller's history with the Treasury Secretary with George Soros. Sure. Before we do that,

why is it such a big deal that he went to the Journal with this opinion piece? Well, first of all, the journal is the place that Stan Ducken Miller typically goes if he wants to make a public statement. So, that part of it is not unusual, but he does not do this very often. So, pay attention when he does. And why do we pay attention to Stan Ducken Miller? Because few people would argue that he is the best investor in modern history.

Never a down year when he was running Dukane Capital Management. He was George Soros's chief investment officer. um he hired Scott Bessant in 1991. He sent Scott Bessant to England. It was on the basis of information uh partly on the basis of information that Scott Bessant was providing working for Soros Fund Management in 19 in the early 1990s that Ducken Miller and Soros decided to bet against the British pound. They shorted it and broke the Bank of England.

And it is that fundamental truth that governments defending prices against fundamentals always lose that was proven there and which Drunken Miller argues will once again be proven here. So take us to today and well actually to last week because

okay so we we we do need for the benefit of many to review what sparked right this disagreement at the very least

or this right post from from Stan Den Miller which by the way

you cannot not look at as anything but a harsh scolding

right the mentor publicly admonishing his protege Okay. Um, and I would also add for those who haven't read it, go and read it. If you're lucky enough to have a Bloomberg terminal, it's simple. NHS space WSJ. Put in Drunken Miller as a keyword. It'll come up. You can, of course, read it in the Wall Street Journal. You would you will look long and hard to find a piece of writing this savage and this devastating. I mean that.

So last week, the Treasury announces that it is going to double the size of its long-term bond buyback program from $2 billion to $4 billion. And then Bessant doubles down effectively and says, "Well, we might spend more than $4 billion." And Dereken Miller says $4 billion understates the gravity of this mistake. And I have for my own purposes broken it down into four component parts. This is how Den Miller dismantles the argument behind a long-term bond buyback program.

Number one, it's unwarranted. There is no crisis. Yes, yields are rising, but that is the market functioning the way it is supposed to function, right? Pricing in the growing risk of two things. One, inflation or more inflation. We have some already obviously. And two, the growing possibility of a US government default. This is what the bond market does. This is not March of 2020.

Mhm.

This is not the 2022 crisis in UK guilts, right, that cost Liz Truss her job as prime minister. Um, there were, as Dr. Miller points out, no failed auctions, no dealer balance sheet seizure, no forced unwinds. Number two, it's hypocritical. Who was more critical of quantitative easing? Maybe some people, but few more vocal and more aggressively so than Scott Bessant. And Dereken Miller points out that this is effectively a version of QE.

And so what you have what the other thing he hated about QE was that Bessant that is he made the case that it was a a blurring of the lines between fiscal policy and monetary policy. And here you have the Treasury Department, the Treasury Secretary usering the authority of the Fed chairman. Number three, going back to this idea of fundamentals, it violates one of the cardinal laws of the financial universe, right? Governments will always lose when they try to fight fundamentals.

Again, I mentioned that this is exactly what Dereken Miller and George Soros proved when they bet against the Bank of England. And as Dereken Miller says, this is another useful quote to draw from this essay. Once markets believe Treasury is defending a price, every rise in yields becomes a test of official resolve and the operations must grow to survive the tests. Well, that raises an inevitable question. If it's a fight effectively between the policy maker and the market, how much ammunition does the policy maker have?

Not enough ammunition to defeat the market.

Well, it raises the question, and this it's this the the journal piece doesn't go into this, but it raises the question about why the Treasury Secretary would do such a thing right now. You describe it essentially as out of character given his past comments, and I think it's fair to say given his hedge fund history as well. Why? Why do something like this?

Well, uh the most obvious answer to that question is that it's becoming awfully expensive for the federal government to issue long-term debt.

The federal government needs to finance its deficit and its debt. And doing so means issuing Treasury bonds. Well, issuing treasury bonds when your yield is at 470 is a whole lot more expensive, a whole lot more costly to the government and ultimately to the US taxpayer than it was when yields were at 370. Uh we could do the math, but it's the let me just put it in Ducken Miller's words. The real problem is the fact that the government is running an outsized deficit.

In fact, the real the so the nominal rate of growth, right, is approximate. And he says that that historically is an accommodative circumstance. If anything, the market should be pricing yields higher because it fuels, you know, that financial accommodation or economic accommodation fuels inflation. And the reason this is the most read story on the Bloomberg and the reason that this is transfixing Wall Street is because of the implications and this is the fourth reason that Den Miller cites or at least my interpretation of his reasons uh is that it's hazardous.

Right? The long-term Treasury yield as Stan says is the most important price in the world. And furthermore, it is underpinned by central bank independence. the independence that was enshrined in the 1951 Treasury Fed Act. It is the bedrock of global financial markets. And Stan says again in this piece, US policymakers built the wall between debt management and price management for a reason. This intervention, he is specifically referring to the buyback program.

This intervention starts dissolving it. So, it's not just like we need to think about this in something other than just