There is no turning back.
Yesterday morning, Treasury Secretary Scott Bessent gave a speech at an event hosted by the Institute of International Finance. This is a speech that will mark a clear delineation between the global economic order that existed for my life up to this point and whichever one materializes after the speech. There's been much discussion about it in recent years and the discussions have become more explicit since Trump regained his seat in the Oval Office earlier this year, but yesterday's speech from Bessent is the official crossing of the Rubicon. There is no going back.
In his speech, the Treasury Secretary called out the IMF and World Bank directly for their straying from their mandate of providing financial assistance to countries in need and toward woke politics focused on climate change and DEI initiatives. He also highlighted the absurdity of China being the second largest economy in the world getting accommodated by the IMF and World Bank as if it were still an emerging economy, which has benefited China's export-driven economy massively.
He also touched on the state of talks the US is currently having with our trading counterparts and expressed a positive outlook on the likelihood of coming to agreements across the board. "America First does not mean America alone" was the headline quote that came out of the speech. Said another way, "It's time for everyone to get to the table and renegotiate the global economic order."
Here's an AI generated synopsis of the speech and it's potential implications:
| Area | Near-term impact | Medium-term risk or upside |
|---|---|---|
| IMF/World Bank operations | Management will face intense pressure to show progress on budget discipline and to quantify results from lending programs. | If the U.S. withholds funding or votes against capital increases, lending capacity for low-income countries could shrink, pushing them toward alternative lenders such as China. |
| China’s multilateral status | Other shareholders (EU, Japan) must decide whether to back the U.S. push to graduate China from “developing” terms. | A reclassification could raise China’s borrowing costs and limit future concessional loans, but might also accelerate reforms inside China to stimulate consumption. |
| Global trade talks | Equity and commodity markets rallied on the hint of tariff relief and a “big deal” narrative. CBS News | Failure to convert rhetoric into a concrete agreement could reignite tariff escalations and unsettle markets; success would remove a major drag the IMF says is weighing on 2025 growth. |
| U.S. domestic politics | Bessent’s harder line satisfies “America First” lawmakers without an outright withdrawal. | If reforms stall, Congress could revive calls to exit or defund the institutions, impairing U.S. influence over global finance. |
Whether or not Bessent's speech leads to the US getting what it ultimately wants is yet to be seen and likely won't be seen in the near-term. A grand economic reordering is a process that I imagine will play out over the course of years, potentially a decade. Will Bessent's words be met with aggression, "Who are you to cast this die, flip the table and ask the rest of us to meet you at the table?" Or will much of our economic partners breath a sigh of relief because it has become abundantly clear that the path the global economy on is untenable? My gut tells me it's the latter.
Bessent's speech was a sober recognition of the state of the global economy, the unnatural imbalances that exists, the need for structural reform and a call to action. Here's to hoping it leads to some productive discussions that lead to actual change.
One thing I have supreme confidence is that no matter which direction we go in from here bitcoin will benefit.
It's becoming obvious that the global credit stack needs to be re-collateralized with hard assets. I think Bessent's comments on the success of private credit markets since 2008 and his desire to figure out ways to create a more relaxed regulatory environment to ensure that banks can participate more in those markets were particularly interesting. Especially with the backdrop of SAB 122 going into effect and banks beginning to incorporate bitcoin into their offerings. Bitcoin collateralized products with no re-hypothecation seem like a perfect mechanism to enable increased participation in these markets.
If things go to shit because no one wants to coalesce to the desires of the United States, bitcoin will benefit from the chaos.
The massive basis trade currently looming over financial markets represents a systemic risk that dwarfs previous crises. As James Lavish warned during our conversation, approximately $1 trillion in leveraged positions exist within this trade - ten times larger than those held by Long-Term Capital Management before its 1998 collapse. These trades employ staggering leverage ratios between 20x to 100x just to make minuscule basis point differences profitable. The Brookings Institution, which Lavish describes as a "tacit research arm of the Fed," has published a paper explicitly warning about this trade's dangers.
"The Brookings Institution came out with a solution... instead of printing money this time, the Fed will just take the whole trade off of the hedge funds books. Absolutely, utterly maniacal. The thought of the Fed becoming a hedge fund... it's nuts." - James Lavish
What makes this situation particularly alarming is how an unwind could trigger cascading margin calls throughout interconnected financial markets. As Lavish explained, when positions begin unwinding, prices move dramatically, triggering more margin calls that force more selling. This "powder keg behind the scenes" is being closely monitored by sophisticated investors who understand its destructive potential. Unlike a controlled demolition, this unwinding could quickly become chaotic, potentially forcing unprecedented Fed intervention.
Check out the full podcast here for more on Bitcoin's role as the neutral reserve asset, nation-state mining strategies, and the repeal of SAB 121's impact on banking adoption.
Panama City Signs Deal for Bitcoin Municipal Payments - via X
U.S. Economy Polls Show Falling Confidence in Trump Leadership - via CNBC
Jack Mallers's Bitcoin Bank Targets $500 Trillion Market - via X
Bitcoin Decouples From Markets With 10% Gain Amid Asset Slump - via X
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Final thought...
Writing from a bus.
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