Scott Bessent's "Treasury Twist": Can Stablecoins Really Fix $40 Trillion in Debt?
Episode 049 of Between The Lies tests the viral claim that Scott Bessent's "Treasury Twist" and GENIUS Act stablecoins can quietly fix America's $40 trillion debt. Luke Tatum and Rob Brayton of Perfect Spiral Capital run the math, revisit 1961's Operation Twist, weigh a Chinese gold-backed stablecoin, and explain why controlling your own capital beats playing Washington's game.
“$1.2 trillion ain’t no $40 trillion. And can you imagine what the US national debt is gonna be by 2030?”
A video making the rounds on YouTube claims the United States is about to quietly reset its $40 trillion debt problem. The plan, nicknamed the "Treasury Twist," swaps long-term government debt for short-term debt and counts on a new kind of buyer, dollar-backed stablecoins, to absorb it. On Episode 049 of Between The Lies, producer Nicky P sits down with Luke Tatum and Rob Brayton of Perfect Spiral Capital to test that claim. Between The Lies is a weekly show about navigating an uncertain economy with clear eyes, built on Austrian economics and a practical approach to keeping control of your own money. If you've seen the headline and wondered whether it holds up, this is the breakdown.
What We Covered
Why Washington wants to trade long-term debt for short-term debt
The interest rate on a 30-year Treasury bond is set largely by demand, and much of that demand has historically come from foreign governments and investors. Rob explains that this demand is softening. Other countries see little effort in Washington to fix the underlying debt problem, so they are less eager to lock up money in US debt for decades, and long-term yields have climbed as a result. Short-term debt is a different story. Rates on four-week Treasury bills track the federal funds rate, which the Federal Reserve sets. The Treasury Twist is an attempt to move the government's borrowing onto the end of the yield curve it can steer more directly: buy back long-term bonds, issue far more short-term bills, and let the near-term rate do the work.
“Unless you’re gonna fix the core cause, you’re really just putting more and more Band-Aids on a system, and likely introducing greater and greater aspects of fragility into the system.”
We've seen a version of this before
The nickname is a nod to Operation Twist, a maneuver that began in 1961 in which the Fed and Treasury tried to reshape the yield curve by shifting the mix of short- and long-term debt in the market. Luke notes that the results of the original were questionable at best, and the Fed tried a similar program again after the 2008 crisis. He also points to the pattern underneath it. For roughly a century, economic policy has favored short-term relief over long-term consequences, often with a celebrated "maestro" at the controls, as Ben Bernanke was once called. Renaming the old approach doesn't change what it is, and a plan that depends on a policymaker's sense of timing is only as good as that timing.
Why stablecoins can't carry $40 trillion
The new wrinkle is the GENIUS Act, which requires dollar stablecoins to be backed one-to-one by cash or short-term Treasuries. Long-term bonds don't qualify. In theory, that turns every new stablecoin into a buyer of short-term government debt. The video cites a projection that stablecoins could become the largest single holder of short-term Treasuries by 2030, at around $1.2 trillion. Luke's response is simple arithmetic: that's about one-fortieth of today's debt, and the debt will be far larger by 2030. Rob adds that the US isn't the only country that can issue a stablecoin. If China, which has been among the world's largest gold buyers, offered a gold-backed alternative, demand could shift quickly.
“Anytime you’re trying to implement something new, you should always be considering the upside, but you should also be considering what if it doesn’t work.”
Creative is not the same as fixed
Rob gives the plan credit as a creative answer to a hard problem, and Nicky pushes back on his co-hosts, arguing that demand for a stable dollar alternative is deeper than they assume and that nobody can build crypto's network of trust overnight. But all three agree on the core issue. The plan doesn't address spending, and every patch on the system adds fragility. Fragile systems tend to produce bigger bubbles or faster collapses when something gives. As Rob puts it, anyone launching something new should ask what happens if it doesn't work, and governments rarely do.
Key Takeaway
You have almost no say in how the Treasury manages $40 trillion in debt. You have complete say over who controls your capital. Luke and Rob's advice is to start at home: secure your own finances, then your family's, before worrying about policy you can't change. Keeping capital in assets that have held up through a century of booms and busts means the next round of financial engineering doesn't get to decide your future.
“The real secret, the way to win the game, is to not have to play that game.”
Related Episodes
Episode 001 — Crypto Regulation Bills: The GENIUS Act, Clarity Act, and Anti-CBDC Act Explained (verify live title)
Episode 038 — SoFi's Stablecoin and the Digital Dollar (verify live title)
Episode 045 — The Treasury Bond Buyback That Didn't Work (verify live title)
Want the full conversation, plus a free toolkit on taking control of your own capital? Listen to every episode and grab the toolkit at PerfectSpiralCapital.com/podcast.
FAQ
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The Treasury Twist is a strategy to shift US borrowing from long-term bonds to short-term bills, where rates follow the Federal Reserve and are easier for Washington to influence. Supporters argue that stablecoins, which must hold short-term Treasuries as reserves, will become a big new buyer of that debt. It changes how the debt is financed, but it does nothing to reduce how much is owed.
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No. Even the optimistic projection cited in the episode puts stablecoin demand for short-term Treasuries around $1.2 trillion by 2030, roughly one-fortieth of today's debt. And the debt will be considerably larger by then. Stablecoins may buy Washington some time, but they can't close a gap that size.
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Buyers are less confident that the US will get its spending under control, so they demand higher yields to hold 30-year bonds. Sanctions add political risk, since holding Treasuries means relying on a government that has shown it can cut countries out of the dollar system. Both make long-term US debt a harder sell.
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The evidence is weak. Operation Twist and its 2011 revival shifted long-term rates only slightly, and it's hard to show they achieved their broader goals. From an Austrian economics view, steering interest rates distorts the signals savers and borrowers rely on, which helps set up future booms and busts.
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It could pull demand away from dollar stablecoins, especially for people abroad looking for money that holds its value. As Rob Brayton notes on the episode, the US isn't the only player, and a competing coin backed by gold or offering a better return could weaken the whole Treasury Twist plan.
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Focus on what you can control: who holds your capital and on what terms. The Between The Lies hosts recommend starting with your own household and keeping capital in assets with a long track record through economic turmoil, such as dividend-paying whole life insurance from mutual companies, so your plans don't depend on Washington's experiments working.
Show full transcript
Between The Lies — Episode 049 Transcript
Cold Open & Intro [0:00]
Nicky P: I'm gonna admit, you boys had me all excited thinking we were gonna be doing an episode on changing definitions to change the health of our economy on paper. But instead, you bring me a completely different game being played by our economic overlords. Welcome to the Between the Lies Podcast, your weekly lesson on how to approach an uncertain world with positivity and balance. I'm Nicky P, here with my good friends and money brains, Luke Tatum and Rob Brayton with Perfect Spiral Capital, as they help us navigate the snares and pitfalls in the world of, trust me bro, economics. Stick around to the end of the video for the free toolkit, and be sure to like and subscribe if you enjoy what we're doing here. Gentlemen, with all these games being played, what are the chances of a win any time soon?
The Treasury Twist and the $40 Trillion Claim [0:50]
Luke Tatum: Well, gosh, Nick, I think it really comes down to who controls the money, right? So what are you doing with your money? Whose hands are you placing it into? Maybe we'll come back to that later, but what we're talking about is certainly a game that is being played. This is a little something that we're calling the Treasury Twist, because we live in the era where everything has to have a cute little funsy name for the economic catastrophe that's being deployed in the world.
This is a video that I just happened to see out there on YouTube. It's from Bravos Research. I'd never heard of them until this video. It's called "America's About to Quietly Reset Its $40 Trillion Debt Problem," and we'll of course provide a link to that in the show notes. But the thrust is basically that Scott Bessent, our current Treasury Secretary, is trying to take control over interest rates of debt by this kind of elaborate multi-step mechanism. And the claim that is being made, as you heard from the title of the video, is that this is going to somehow resolve the US's $40 trillion debt issue. Now, the video doesn't actually ever go back to explain that point at the end. It is the title of the video and it is how they start it. It's just not where it ends up.
So before we go into all the details of it, the quick version is that long-term debt is something that the Treasury doesn't really have a lot of control over, because it's based on the demand from foreign investors. So a 30-year bond that the US Treasury puts out there, the price of that is gonna be dictated by demand. But short-term debt is really more directly controlled by things like the federal funds rate and the Federal Reserve. They get to more or less set the short-term interest rates. And so how can we sort of do a bait and switch here? How can we pull one to switch the other? Is that a viable strategy? Have we been here before? Those are some of the questions I think we're gonna get into today. But the real secret, the way to win the game, as you asked, Nick, is to not have to play that game, I think. So we'll get into it. But Rob, what's your take on this? Where do you wanna start?
Why Foreign Buyers Are Cooling on US Debt [3:35]
Rob Brayton: Well, I think the video is very interesting in the way that they approached it, and they're referencing real things that have actually happened, so it's not like they're just making this stuff up. But I think what it ultimately highlights is something that I think is very real, and we've certainly talked about it before in other episodes: the trust of other countries who typically buy long-term debt in the United States is starting to falter a little bit, if you will. They're less apt to want to buy that long-term debt because they don't see that the United States is doing much to fix the problem. If we were doing that, there would probably be more appetite for it. That's really what's happening, and that's what we're seeing with these yields rising on long-term debt, particularly the 30-year and so on.
But I think it's an interesting thought process. It's really funny when you think about it. They're basically saying, "Well, we can't control how they feel about us in the long term, so let's see what we can do in the short term to manage more of it on our end." And that's where I think a lot of the video addresses how they're approaching the problem.
Operation Twist: We've Been Here Before [5:15]
Luke Tatum: Well, and ain't that just economic policy for the last 100 years, right? Who cares about the long term? Let's focus on the short term. That is what we have been living under, way beyond the beginning of my life. This has been the condition of the economic regime. It's not great that that's how the government is operating.
I don't know if Scott Bessent feels like he is some kind of maestro. They used to call Ben Bernanke the maestro, right? He could control the economy with a wave of his hand and whatnot. I don't know if he feels like he's the maestro here and he's gonna pull the greatest heist of all time or whatever. But regardless of how he feels, he's positioning this idea. Treasury Twist is what he's been calling it in the news media and interviews, and that's a reference to the so-called Operation Twist, which was a similar maneuver. This was in the '60s; 1961 was the beginning of it. What if we were to buy back 30-year notes, 10-year notes? The Treasury buys those back from the people who purchased them originally, and then we're gonna sell a lot more short-term debt, like four-week T-bills. We're gonna deploy so much short-term debt that we offset the money we spent buying back the long-term debt. So it's propping up the short term. It's just this weird idea. And the 1961 move, from what I can find, was questionable. Did it actually help anything? Was it effective? Did it really achieve the stated goals?
The Three-Step Plan and the GENIUS Act [7:10]
Luke Tatum: So the extra wrinkle that we're introducing here is this idea of stablecoins, as far as cryptocurrency goes, and the GENIUS Act. The crux of the whole thing, I'll just read my notes if you guys don't mind. They lay out a three-point plan. That's what the Treasury Twist is.
Number one is reduce exposure to long-term bonds, since the US can't directly control them. Expanded buyback of long-term bonds; the Treasury is buying bonds from foreign investors. Number two, the Treasury has been expanding four-week Treasury bills for the last nine quarters, but not expanding the three-year, the 10-year, and the 30-year. Roughly, they've doubled the amount of four-week bills issued per quarter since 2016. So basically, long-term debt is being replaced by short-term debt. And number three: since demand for short-term US debt is at a 10-year low, there needs to be a different buyer who wants to buy short-term debt.
$1.2 Trillion Ain't No $40 Trillion [8:30]
Luke Tatum: So the video, and this is what I thought was so interesting, is saying that because the GENIUS Act is now in effect, and the GENIUS Act requires 100% reserve backing for stablecoins... Well, 100% reserve backing means US dollars just sitting in a savings account, checking account, just sitting in an account somewhere, or short-term Treasuries. Long-term Treasuries are not an option, right? So it's supposedly sufficient demand.
But my issue is they're projecting that by 2030 the stablecoin market could be, if trends continue, the largest single category of holder for short-term debt. So it could be $1.2 trillion of stablecoin short-term debt shoring up those accounts. But $1.2 trillion ain't no $40 trillion. And can you imagine what the US national debt is gonna be by 2030? That's not slowing down. It just is not sufficient. One-fortieth of the current debt is not enough to change the tide on this thing. So I don't know. Anything you wanna pick apart there, guys?
Band-Aids, Tariffs, and Sanctions [10:05]
Rob Brayton: Yeah, I mean, you gotta give credit where it's due, right? It's a very interesting way to approach a tough problem. I'm not gonna say that this isn't a very interesting way to do it. Is it the way I would do it? No. But is it a way to do something? Yes, it is. And could it have some shorter-term knock-on benefits for the US dollar and the economy? It might. That remains to be seen. But again, the biggest issue I have with this is it doesn't fix that underlying debt problem. And unless you're gonna fix the core cause, you're really just putting more and more Band-Aids on a system, and likely introducing greater and greater aspects of fragility into the system that are likely to cause either larger bubbles or a more rapid decline if something were to unravel.
Luke Tatum: Yeah. Oh, you know what this reminds me of too? I know you guys remember this. Remember how we were like, "What if we eliminated the income tax because of how much money we're gonna rake in with tariffs?" Remember that? It's like, okay, but the tariff revenue is like $9 billion or something, some little drop-in-the-bucket number, and the total income tax receipts are like a trillion dollars. I'm not seeing how a teeny-tiny fraction of that is going to completely replace this other thing that's so much bigger. So it does remind me of that a little bit.
Another thing they brought up in the video was this Operation Economic Outcast, where the US is sanctioning or trying to cut Iran and its allies out of the Western financial system altogether. So there's the regime uncertainty, the regime risk, the political risk of being tied to the US government. There's definitely stuff there, and I can understand how that's an explanatory factor in the buying of US debt. Do you want to do that if the US can just cut you off, and they're doing that on a regular basis? That's a real thing, and it's worth a lot more exploration. But I don't think it's as simple as, "Well, we're just gonna prop up short-term bonds." That doesn't quite do it for me as an explanation.
I know I've been very critical this episode, so thanks for bearing with me. But the original video is worth watching. It's very well produced. I like it, and it got my gears turning, hence the episode. What's up, Nick? Yeah, their conclusions. Where do we end up with this? The idea that there are so many people in the world with an unstable currency that they would do anything for US dollars, to the point that they're going to offset the entire US national debt by buying stablecoins... I just do not see that. No matter how much instability there is in the world, that's just crazy to me.
What If China Issues a Gold-Backed Stablecoin? [13:55]
Rob Brayton: I don't either, especially when you consider the fact that there's other countries that can issue stablecoins too, and all they have to do is offer a slightly greater return on the stablecoin, and you might see people shift over that way, assuming they can offer it. Now granted, a lot of these people just want a stable money so that they can go buy bread or groceries, whatever it is, right? But you start layering in that it doesn't erode at the same level as maybe a dollar would, and that could change things too. You could see this completely backfire by somebody like China saying, "Hey, you know what? We're just gonna issue a gold-backed stablecoin, since we've been the world's largest gold buyer for the last I don't know how many years," and all of a sudden they come out with something that way. That could happen. I'm not saying it is. But that's all it takes, and this plan may not go so well.
It doesn't take much. We are not the only player in this global sphere of things. I'm not saying that Bessent and everybody else is assuming that they are, but this whole strategy is not super stable either. There are very much limits and challenges at play that could cause it to not go as intended. And anytime you're trying to implement something new, you should always be considering the upside, but you should also be considering what if it doesn't work. And I don't know that the government's really good at saying, "What if it doesn't work?" We have lots of examples where we can clearly tell they didn't think that through.
Luke Tatum: Yeah, I mean, gosh, you mean to tell me that the US government does not control physical reality?
Nicky P Pushes Back: Who Actually Wants Dollars [16:15]
Nicky P: So I have a few thoughts, for a change, gentlemen. I think you're misjudging the parameters of what is an unstable government versus an unstable currency, and the reasons people might want to get into that market. When we were talking before this, you'd mentioned Argentina, I believe, and Turkey were two of the places they were talking about. But you're talking about places where people already have currencies that are operating. There's a lot of places that don't have modern currencies at all, that are essentially stuck operating in the Stone Ages. You know how many people in China would love to get their hands on something that isn't regulated by their own government? They're probably more thirsty for that than we are here in America, because their government plays just as fast and loose with their economy as ours does.
Now, one of the things you guys are mentioning is, how do we know somebody doesn't beat us to market on a functioning, working cryptocurrency? Well, that's already been decided. They can't, because we've been at it for two decades already. No one's going to come in and create the network effect that any of the cryptocurrencies we have overnight. The mathematics required for trust just don't exist. So depending on how they choose to do it, unless they choose to do it in the stupidest of ways, I guess. But I haven't gotten an inkling that they're planning on doing this in the stupidest of ways. The plans always seem to be that they kind of know what they're doing.
When we've talked about this particular strategy in the past, our joke always is, "Oh, so we can kick the can a little further down the road by sloughing our debt off onto a much larger group of people than it already was." Yeah, that still holds true. And the only way to actually ever fix our economy is to say, "No, guys, spending. Spending is everything. Stop spending. Stop wasting money." But since that doesn't seem to be on the horizon at any point, because there's no political will on either side to take responsibility... Frankly, I don't know any American that's willing to take responsibility, let alone hold the screws to their government for responsibility.
Old Money vs. New Money [19:10]
Nicky P: What's funny is that this is finally the mechanism. I always talk about the City of London people, the group of people that follow the economy and look at every piece on the chessboard being moved as a way for the new-guard financial world to essentially break itself away from the old world, old money centered in the City of London, which is what we'd call the world order as it is. The people that have been using militaristic debt to hold nations hostage and accountable for years. Sometimes those guys talk and things sound weird, like that just doesn't make any sense. And then all of a sudden you start seeing them happen in practice, and you're kind of like, man, maybe these guys are onto something. They're seeing something that most people aren't.
So if nothing else, it's certainly worth paying attention to this landscape, because maybe there's more truth to the idea that there is a battle between Silicon Valley money and Old World money. I know how much as kids we didn't like being told how to do our business by the "grown-ups," quote unquote, and maybe this is the current generation saying, "Yeah, old guys, get out of there. You've been screwing it up." Which we all know is kind of the general sentiment between the generations now. "Hey, old people, you f***ed your money up long enough. Let us do it ourselves. At least give it a try."
Luke Tatum: Well, if we didn't think it was worth considering, we wouldn't have done the episode at all, right? So I think it's definitely something to keep an eye on and see how it shakes out. While I don't agree with the conclusions of the video, as I've already made very clear, there are a lot of interesting things in the works, and exactly how it shakes out is gonna be quite a story over the next several years.
Nicky P: At the very least, it's a way of understanding the moves that other people are gonna make. Not everybody working in the economy sees things exactly the way that we do, so understanding the worldview of the other players out there is certainly going to give you a more complete idea of how all this stuff's working. Certainly closer to the big picture.
Control Who Controls Your Capital [22:10]
Luke Tatum: Right. Any other thoughts on this one, gentlemen?
Rob Brayton: I think the last thing I would say is, do you have much control over it personally? Probably not. But what you can control is who controls your capital, and that's a decision that you can make, a private decision that is really your choice. That's a lot of what we specialize in here. That's what all of us do: focus on control of our own capital so that we have the opportunity to weather the storms that are likely to come, and do so with assets that are tried and true over all kinds of turmoil. So if you're interested in that, obviously reach out to any of us. We'd love to have that conversation. But in general, when we think about positivity and what you can do, a great way to do it is to ask how much of your capital you can control, and in what markets and areas you have the most control.
Luke Tatum: Yeah. How do you pull that back into your sphere of control? It has to start with you as a person, then your family, then your community, et cetera, right? You're never going to be able to have the kind of impact that you would like to have on global-scale issues if you don't start at home and lock it down there first. So maybe quit trusting the old guard or the new guard with your financial future, and try to reel that back in. The way that we do that is, as you say, tried and true. And if you'd like some guidance on that, and some juicy nuggets of information on how that can and does work for so many people, check us out at perfectspiralcapital.com/podcast. We've got a whole toolkit worth of juicy stuff over there for you in exchange for an email address. And there are a lot of specialty videos on your channel, Rob. Rob Brayton PSC is his separate YouTube channel, where he's got a lot of analysis. I think that'll do it for us. Thanks, guys, for letting me pick the topic this week, and we'll see y'all next time.
“What you can control is who controls your capital, and that’s a decision that you can make, a private decision that is really your choice.”
