News Block: Fed Turns Hawkish as Bitcoin Heads Into Its Biggest September Test

**Natalie Brunell** (0:00)
Hey, everyone, I'm Natalie Brunell. Welcome to the Coin Stories News Block powered exclusively by Ledn. Well, if you've been waiting for mortgage rates to come down or hoping prices finally stop climbing so fast or wondering why Bitcoin pulled back after briefly trading above $80,000, there's one big question hanging over all of it right now. Is the Fed about to raise rates again? Fed Chair Kevin Warsh just gave markets reason to believe the answer could be yes. He gave his first big Jackson Hole speech as Fed Chair, and his message was pretty clear. He doesn't think the inflation problem is over. Inflation is still running at 3.7% well above the Fed's 2% target, and importantly, this isn't being driven by just one or two problem areas. Price increases are still pretty widespread in the economy. So Warsh basically said, a couple of better inflation reports aren't going to be enough. He wants convincing evidence that inflation is actually coming back down. And the markets listened to that speech. Beforehand, traders were putting the odds of a September rate hike at around one in three, and now they're roughly two in three. But here's why this all gets complicated. Higher rates, yes, they can bring inflation down, but they also make borrowing more expensive for everyone, whether you're buying a house, financing a car or running a business. And Washington has the biggest borrowing problem of all. The federal debt just recently crossed $40 trillion.
So higher interest rates also mean a much bigger bill for the government. And at the same time, Treasury is taking an unusual step of its own. We've been covering this recently. Starting September 9th, it is doubling the size of certain buybacks of longer term government bonds. Treasury says the goal is to keep the market functioning smoothly, right? It's that shadow third mandate that Luke Gromen talks about. And as we reported last week, folks like Stanley Druckenmiller say, no, this looks a lot more like price management, which means Washington is in a very uncomfortable position. The Fed wants inflation down, but decades of borrowing have made high rates increasingly painful for the government itself. And now oil is back above $90, which could make the inflation problem even worse. And of course for Bitcoin, another rate hike could absolutely create short term pressure. But the bigger story is with debt this high, government created a problem it can't easily solve. And it's likely going to add volatility to the markets in the near term. Well, Treasury Secretary Scott Bessent sent Elizabeth Warren a pretty brutal letter after she questioned the US government's recent intervention in the Japanese yen. He even suggested she needs a personal tutor in foreign exchange for dummies. Here's the background. The yen had been falling sharply and the US Treasury stepped in alongside Japan to support it. The New York Fed acting for Treasury sold euros the US already owned and used them to buy Japanese yen to support the currency. Warren asked Bessent how much the US bought, why Treasury intervened and what risk American taxpayers could face. Okay, those are some fair questions, but she got one important part wrong. She suggested Japan might eventually have to repay the United States, but there's nothing to repay. This wasn't a loan.
Treasury simply exchanged one currency it owned for another and Bessent absolutely pounced on that mistake.

**SPEAKER_2** (3:12)
She is on the Senate Finance Committee. She's a ranking member of the Senate Banking Committee, and neither she nor her staff know the difference between a foreign exchange intervention or a currency swap.

**Natalie Brunell** (3:24)
He said Warren understands foreign exchange markets even less than banking, recommended she take an entry level international finance course, and offered to personally give her that foreign exchange for dummies tutorial. Obviously, that's the part that went viral, but I think there's a more important part of this story. Treasury still hasn't publicly disclosed exactly how much the US spent buying yen. Bessent says the intervention was necessary because a disorderly collapse in the yen could destabilize markets globally and ultimately push borrowing costs even higher here in the United States.
He's right. But if the US government is stepping into one of the world's largest currency markets, I think the public should know exactly how big that intervention was. Both things can be true, right? Warren misunderstood a very important part of the transaction, but Treasury still should answer the question. Government transparency shouldn't depend on whether you like the politician who's asking for it. Ledn just introduced their lowest rates ever. The larger the loan, the lower the rate on all new loans, refinances and renewals. Your Bitcoin stays custody, never lent out, and you can repay any time with zero penalties. Get a quarter percentage point off your first loan at ledn.io/natalie. Jamie Dimon once called Bitcoin a fraud. But now some of the biggest financial institutions in the world, including Chase, are racing to put dollars on chain. 21 major financial institutions, including Goldman Sachs, Bank of America, Citi and Deutsche Bank, are now planning to launch dollar stable coins in 2027 And JP Morgan is separately considering one of its own. No, I don't think Jamie Dimon suddenly became a Bitcoiner. I think the banks just realized something much simpler. People increasingly expect money to work like the internet. They want to be able to send it anywhere, anytime without wondering whether the bank is closed or waiting days for transactions to settle. That's essentially what stable coins offer. A dollar stable coin is a digital token designed to stay worth $1, but it can move across digital networks around the clock. And after Congress passed the Genius Act last year, banks finally have a clearer framework for getting this into business. They also clearly don't want crypto companies owning the future of digital dollars by themselves. But there's an important distinction here. Stable coins change how dollars move, but they don't change what a dollar is. You can put a dollar on a blockchain. Yes, you can send it around the world in seconds. You can make the technology much better, but it's still a dollar. Its purchasing power still depends on the same government, the same central bank and the same monetary system. Bitcoin is a completely different proposition. No bank decides how much Bitcoin gets created. No Fed chair or Treasury secretary controls its supply and no central bank can vote to make more of it. That's why I actually think stable coins could be good for both the dollar and Bitcoin, because stable coins can make the dollar even easier to use around the world, but Bitcoin makes you ask that deeper question. Once every form of money can move instantly, what kind of money do you actually want to save in? And the answer is not stable coins. All right, if you own Bitcoin, you've probably heard some version of this before. September is supposed to be a terrible month. It's historically been Bitcoin's weakest, which is how we ended up with the nickname Red September. But this year, I think the calendar matters a lot less than what Washington is about to do. Bitcoin just gained nearly 25% in August, its strongest month since late 2024 And now there are several dates in September that can move the market a lot more than seasonality. The first is September 4th. That's when we get the August jobs report. Why should Bitcoin investors care about jobs? Well, because if the economy and labor market still looks strong, the Fed actually has more room to raise rates to fight inflation. If employment suddenly looks weak, raising rates becomes a much harder decision. Then September 11th, we get the latest inflation report. That could be the biggest number of all. If inflation comes in hot again, that's another case for a rate hike. Then September 15th, there's a major procedural vote in the Senate on the Clarity Act. That's the legislation that could finally establish clearer rules about which regulators oversee different parts of the crypto market. Now, this isn't final passage. The bill needs 60 votes to move forward, so we'll get a pretty good sense of whether it's actually got enough support. And then September 15th and 16th, the Federal Reserve is meeting again. Right now, markets are putting the odds of another rate hike at roughly two in three. So yes, historically, September has been pretty rough for Bitcoin, but I'm much less interested in whether Bitcoin was red in September 10 years ago than I am in what happens over the next two weeks. We're going to get some major decisions on inflation, interest rates, and crypto regulation. While Bitcoin is coming off one of the strongest months it's had in years. And that's really the September story. Thanks so much for watching this week's News Block powered exclusively by Ledn. We'll be back next week. Make sure you're subscribed and turn on those notifications so you never miss any new content.