A Treasury Secretary who controls neither the budget deficit nor the money supply nor international capital flows is never the “House"“ in financial markets, and anyone who claims to be such is, as Paul Krugman says, beclowning himself:
Paul Krugman sees that Scott Bessent—whom we all remember claimed with confidence and authority in the fall of 2024 that Donald Trump was really a free trader, and that his talk of tariffs was “escalating to deëscalate”—as having has destroyed his reputation by becoming a Trump lickspittle. Thus he is another example of the iron law that anyone who serves Trump destroys his own credibility and dignity—gives them to Trump, Trump takes them, usually does not even say “thank you”, and then moves on, offering nothing in return.
Bessent, after intervening to support the yen, publicly declared “I am the house now” dared traders to bet against him, then did a small QE operation in 30-year Treasuries to try to push long rates down. But:
Trump’s rejection of an Iranian proposal to end the war
→ crude oil prices spiked back up
→ elevated inflation (diesel near record levels)
→ the Fed keeps short rates high
→ that expectation feeds into long-term rates
→ rates hit new records.
Bessent’s jawboning was steamrolled by the very administration whose sycophancy he participates in. And Bessent then compounds his idiocy by predicting Iran’s economic collapse “within two weeks”:
CROSSPOST: PAUL KRUGMAN: The Beclowning of Scott Bessent

Another Trump enabler pays the price
Paul Krugman
2026-09-29 04:20 PDT
One iron law of current politics is that nobody who associates themselves with Donald Trump emerges with a shred of credibility. For some, that’s not a big loss — it’s not as if anyone respected Pete Hegseth even before he decided that the key to military success in an age of drones and AI was more testosterone. For others, however, the costs are real. I’m old enough to remember when Marco Rubio was widely considered a reasonable, thoughtful politician.
Right now, however, my candidate for the biggest loser is Scott Bessent, the Secretary of the Treasury. Bessent started out with significant reputation to lose: When Trump selected him, this was the headline in the Financial Times:
Jason Furman, Barack Obama’s chief economist, described him as a “credible Treasury secretary who has a real understanding of the global economy”.
But Bessent has now transformed himself into the Baghdad Bob of bonds.
Three weeks ago, after intervening (for reasons that remain somewhat unclear) to support the Japanese yen, Bessent boasted about his ability to move markets and dared investors to bet against his, declaring “I am the house now.” He then tried to push long-term interest rates down, buying 30-year U.S. Treasuries in a move some have compared to paying down part of your mortgage by running up your credit card balance.
Here’s how that’s going so far:
To get some perspective on how high interest rates have gone, here’s a longer-term perspective:
We haven’t seen interest rates this high since the fading days of the dotcom bubble.
Why are interest rates hitting new records? The backdrop, as I argued in last Sunday’s primer, is the huge AI-driven investment boom; more on that next week. But the immediate cause of the latest interest rate spike was Trump’s rejection of an Iranian proposal to end the war. This rejection sent crude oil prices, which for a while had fallen considerably, shooting back up:
It’s notable, by the way, that oil prices remain high even though a significant amount of oil is now being shuttled through the Strait of Hormuz by night, on smaller vessels. That’s an interesting story, which has a lot to do with the fact that oil from the Hormuz shuttle runs must be transferred to larger vessels before being shipped to markets in Europe and Asia; around 15 percent of the world’s large crude carriers are now parked off the coast of Oman, waiting to be tanked up. This is creating a shipping crunch:
But that’s a topic for another day. For now, the point is that with oil still high and refined products, especially diesel, still close to record levels, inflation will remain elevated. And this in turn means that the Federal Reserve will keep short-term interest rates high, an expectation that is feeding into longer-term rates. Hence Bessent’s bond-market humiliation.
The truth is that Bessent might not have been able to get interest rates down even in the best of circumstances. But he certainly won’t get anywhere as long as Trump keeps believing that he can somehow convert his Iran debacle into a triumphant victory. And Trump will keep believing that as long as he is surrounded by sycophants who tell him what he wants to hear.
Sycophants like, for example, Scott Bessent, who is predicting the imminent collapse of the Iranian economy, possibly within two weeks. Bessent is right to say that the embargo on Iranian oil exports is placing the country under great economic strain. But his implicit prediction that this will quickly produce a deal that Trump can call victory looks no more plausible than his boasts about the bond market.
The big question now is, why would anyone with a reputation to lose work for Donald Trump? As the beclowning of Bessent shows, joining the Trump team won’t just damage your reputation; it will utterly destroy it.

Brad DeLong here: Krugman calls it beclowning; the deeper truth is that Bessent torched his reputation long before the bond market got him.
Jason Furman did not have to participate in the sanewashing of the Trump II administration by calling Scott Bessent a “credible Treasury secretary”.
But he did.
Even though at the same time Bessent was setting his credibility on fire by assuring us that a Trump II administration would achieve 3-3-3: 3%/year real GDP growth, 3 million BPD more of oil production, and a 3% federal deficit as a share of GDP. Even though at the same time Bessent was setting his credibility on fire by assuring us that a Trump II administration would truly, surely be a free-trade administration because Trump was, in his heart of hearts, a free-trader, and was only talking about escalating tariffs as a way to strike deals to deëscalate them.
Trump was never a free-trader, and then when the Republican congressional caucus decided to let him play with “emergency” tariff toys, it was very clear from the get-go that Trump was like a pig in shit. And as for “deals”? Well, since Trump never keeps them, they were and are never real.
The days of sanewashing Treasury Secretary Bessent should never have been, and if they had been by now shoud have long been over.
But, still, we do have people overlooking the obvious that:
Bessent has now transformed himself into the Baghdad Bob of bonds...
Indeed. The not-so-secret secret is that he always was:
End net immigration—as Trump has—and the possibility of 3%/year real GDP growth goes out the window. And Bessent knew this before he took office. Forecasts of full-year 2026 and 2027 real GDP growth around 2.1%.
The deficit is twice 3% of GDP and moving the wrong way. Republican congressional caucuses will never vote for Medicare or Social Security or Defense cuts or for tax increases. “Emergency” tariffs by the fiat of the executive are not a serious budget-balancing item, as they are an order of magnitude too small. And even a Republican congressional caucus will only vote for Medicaid cuts if they are immediately passed through to tax cuts. And Bessent knew this before he took office
Domestic oil production is currently 13.8 million barrels/day, up 0.6 million from the 2024 baseline. Without huge new subsidies, that third “3” was never attainable in the absence of a geopolitical and geoeconomic catastrophe of the sort, well, that it looks like Trump may just be managing to create. And Bessent knew this, too, before he took office.
Reputation being relational rather than absolute, I have to wonder if Bessent feels he's torching his reputation in the social and professionally circles he cares about.
* Yes, nobody intellectually serious and willing to maintain object permanence can take him seriously, but that ship had already sailed.
* If spewing utter nonsense with a self-satisfied smirk limited your financial opportunities, everybody in the Trump administration and most GOP politicians (and not a few elsewhere FWIW) would have been bankrupt a long time ago.
* I don't think I have a solid grasp on the social side, but I have a nagging feeling that once you reach that sort of wealth and position you get invited to the parties you care about pretty much regardless of what nonsense you might have said (or had people kidnapped from the streets, etc).
I mean, I hope I'm wrong and they avoid the mirror every morning to postpone the dreadfully certain moment when the void of what they sold will no longer be filled by the empty promise of what they thought they were buying, etc, etc, but the whole century so far has been nothing but a lesson on how much I -we?- overestimated the ethical and intellectual commitments of a lot of people.
I'd say that Steve Feinberg (#2 in the Department of Defense: mostly in charge of procurement) is the only senior Trump official with a reputation to lose. He's pretty much the kind of guy that a hypothetical normie Republican administration would have picked for the job. And I've heard that Hegseth wants to get rid of him.