🏦 🇺🇸 🇮🇷 Pilkington: The US is losing control, not just over global markets, but over their own bond markets.

Philip Pilkington’s read on this week comes down to one thing: control. More specifically, who is starting to lose it.

He points to Treasury Secretary Scott Bessent’s intervention in the bond market, where Treasury sold short-term bills to help fund purchases of longer-term bonds. It was an unusual move that effectively stepped into territory normally handled by the Fed. It lasted less than a day before yields climbed again.

For Pilkington, the bigger issue is what the move says about the system: Treasury appeared willing to fight its own central bank in the middle of a crisis, suggesting the coordination between Washington’s institutions is starting to break down.

He sees something similar in the yen intervention. Washington shorted the euro to support the yen, which Pilkington sees as a departure from the usual rules of currency diplomacy. He interprets the ECB’s warning about a possible AI bubble as a response rather than a neutral observation.

His argument is that European pension funds could take that as a signal to start quietly reducing their exposure to U.S. equities.

His strongest analogy is the doorknob. You never think about how it works until suddenly it doesn’t. Pilkington argues that the same is true of things like the U.S. military’s reputation, the dollar’s perceived safety and the Fed’s authority over markets.

Much of that power depends on confidence and expectations. His view is that Iran’s control of the Strait of Hormuz has put several of those assumptions under pressure at the same time.

He is also skeptical of the Axios report suggesting oil shipping through Oman has returned close to pre-war levels. He points instead to diesel crack spreads above $100 and reports from contacts receiving genuine requests for physical fuel.

His China argument also runs against the obvious assumption. Beijing no longer needs to protect the U.S. economy in the way it once did, because years of shifting exports toward the Global South have reduced its dependence on American demand.

If Washington responds with secondary sanctions, Pilkington expects China to retaliate by restricting rare earth exports. In his view, that could hit the AI industry very quickly rather than gradually.

The system won't collapse on a particular day. He is arguing that several pressures are building at once, and that systems can look stable right up until the moment they aren’t.

📎 Mario Nawfal