A Cage Fight on the White House Lawn

Monday, September 14th, 2026

Bill Bonner, from Poitou, France

‘I am the house now.’

—US Treasury Secretary Scott Bessent

Source: Grok

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On the Rushmore of financial giants is Irving Fisher, who announced a ‘permanently high plateau’ for stocks...just before they fell into a ditch in 1929.

There is also Ben Bernanke, who told home-buyers not to worry because, ‘we’ve never had a housing decline on a nationwide basis’ just before the nationwide housing collapse in 2008.

Bernanke deserves a second spot. He warned Congress that ‘If we don’t do this, we may not even have an economy on Monday’...urging the pols in Congress to bail out the biggest, richest gamblers on Wall Street, putting the losses instead on innocent taxpayers.

And now, we have the jackhammers working on a new face – that of US Treasury Secretary Scott Bessent, who calmly announced last week that he is the ‘house’ now. But is this the house that couldn’t decline...or the one that crashed to the ground?

Bessent’s proximate target was the Japanese yen exchange rate. He seems to think he can choose it as though he were setting a thermostat. But the remark has much more ambition in it. Bessent implies that he should be able to control the price of dollar...and the mortgage rates paid by American homeowners — the whole shebang, in other words.

But while he can influence those things, he cannot control them. The world is full of gamblers…and they’ll have their say too. Bessent knows that very well. He was on the team, with George Soros, that bet against the house – the Bank of England – in 1992, and won.

Shaping up — like a cage fight on the White House lawn — is a showdown between Bessent and Fed chairman Kevin Warsh. Broadly, the two may be said to represent the two forces of history — inflation or deflation...boom or bust...yin or yang.

Bessent has an advantage — with the full faith and credit of the US backing him up. But the ‘house’ is already wobbling and creaking, with waves lapping at its foundation. And Donald Trump has proven in Atlantic City that the house casino can be swept out to sea, too.

The dramatic tension is easy to describe. Bessent — the expansive yang force — has to finance the house...the federal budget...including, in the next twelve months, rolling over (refinancing) $10 trillion in old loans and another one to three trillion in new ones; keep reading.

Warsh, meanwhile, is the prudent ‘yin;’ he is more learned, and more reserved. He’s supposed to protect the value of the dollar, something his predecessors have failed — spectacularly — to do. The 1971 dollar today is worth only a small fraction of what it was worth when it was first printed. Warsh says he aims to do better. So, we suppose, did the others.

A lot depends on the ringmaster to whom Bessent reports...and to whom Warsh, ultimately, owes his job — Donald J. Trump. Who will he support? Warsh’s higher interest rates to protect the dollar? Or Bessent’s efforts to hold borrowing costs down...making it easier for the feds to finance and refinance their spending?

Ask us something harder!

Yet another ‘tell’ came last week. Speaking at his big rally in Dallas, POTUS told American voters that if they went for his slate in November they’d each get $5,000. The BBC was on the case:

US President Donald Trump says he would offer every adult American a $5,000 payout if Republicans win both chambers of Congress in November’s midterm elections.

There are nearly 270 million American adults, meaning a $5,000 payout would cost the US government some $1.3 trillion.

Was this remarkable, or what? Many voters think Trump is conservative...but there was nothing remotely conservative about bribing voters with a $1.3 trillion giveaway. Nobody has tried anything like it since the Democrat, George McGovern, proposed a $1,000 ‘demogrant’ in 1972.

But McGovern’s giveaway at least had the dignity of an idea attached. His plan was to replace all other welfare programs with a guaranteed minimum income — something even some conservatives approved of, as they thought a single tap might be easier to shut off.

Mr. Trump’s plan — if there is one — has no such saving grace. It is pure vote-buying jackassery.

Of course, the feds have no $1.3 trillion lying around. So, the cash would have to be borrowed. Already, the feds are expected to run a deficit of $1.8 trillion next year. This added ‘dividend’ would bring the deficit to over $3 trillion — or around 10% of GDP.

But the nation saves only about 0.3% of GDP — three tenths of one percent — not even enough for a down payment on the deficit. Ultimately, the Fed would have to fund the expense, effectively ‘printing’ the money by buying the government’s paper itself. It would have to ‘inflate,’ in other words.

Dan Denning, in a recent interview, put the question directly:

‘Who would you rather be, Bessent or Warsh?’

“History will be kinder to Warsh,” we opined. “After all, he is trying to do the right thing, protecting the dollar.”

But Bessent will win the fight. Come a crisis, Warsh will have to do some quick figuring. Principles and prudence may be valuable qualities. But when the ‘house’ crashes, he is likely to see them as unnecessary luxuries.

He will have no choice; he will shore it up with the only lumber available. Fake money.

Regards,

Bill Bonner