The phrase “failure’s not an option” typically accompanies dire circumstances like, say, Operation Dynamo.

No one with any sense about them creates for themselves a situation where that phrase applies. (“911. What’s your emergency?” “Yes, hello, I loosed a crate of poisonous snakes in my house and they chased me into the bathroom. I’m barricaded in here with no way out. I need someone to come extract me. Failure’s not an option.”)

If you haven’t guessed already, I’m talking about Scott Bessent and his upsized Treasury buybacks again, where “again” means for the fifth time in the last seven articles. As discussed in the latest Weekly, Bessent’s decision to hijack a program designed primarily to promote liquidity in off-the-runs for the purposes of tamping down yields ahead of the mid-terms was questionable, to put it politely.

Bessent can’t conjure reserves. Only the Fed can. He can sell Bills to upsize the buybacks, but if he does that and it causes indigestion in funding markets, Kevin Warsh will have to step in to buy the Bills, which means the Fed would be indirectly funding the buybacks.

The market knows all of that, and it also knows that even if Warsh is beholden to Donald Trump (and in my opinion he most assuredly is), it’ll be a very bad look for a Fed chair who spent his first two months in the big seat talking up the merits of “market signals” if he ends up being forced to facilitate an effort to blunt those very same market signals.

So, my guess is… well, let me stop myself because lots of things could happen to make this a moot point. More soft data, for example, could put a bid under an otherwise heavy US long-end. Or some fresh f-ckery in the Gulf could trigger a flight to safety. Etc. Instead, I’ll just say it’s possible the market will test Bessent vis à vis the “whatever it takes” promise implicit in his Thursday contention that buybacks could be upsized further if need be.

When your bluff’s called, you have a choice: Follow through or back down. Neither of those are good options for Bessent. Following through means perpetuating a Ponzi scheme, while backing down risks giving the market free rein to really push the bear steepener. Either way, Scott chances losing the long-end, the worst of all possible outcomes.

“[It’d] be extraordinary if [a] fresh round of QE fails and Bessent can’t drag [the] 30-year yield below 5%,” BofA’s Michael Hartnett wrote, in this week’s installment of his popular “Flow Show” series.  “Policy failure would cause the dollar [to] slump, and asset allocation[s] to shift short risk.”

As the figure shows, the dollar’s already slumping. After another rough week, the greenback’s at risk of notching another monthly decline in excess of 1%. Bitcoin, meanwhile, was gunning for its best week in over three years.

At regular intervals since the Liz Truss debacle four years ago, I remind readers that the combination of rising bond yields and a weaker currency is the stuff of emerging markets. When it happens to developed economies, it’s trouble. If it happens to the US, it’s existential, and not just for America.

I’d also point out that it’s never a good thing when you feel compelled to fund at the front-end because you know price-sensitive investors will demand higher compensation to loan you money over longer horizons to compensate for sundry risks. That too is the stuff of emerging markets.

The figure above shows you gold’s MTD performance. If it can hold gains, August will be the best month for shiny, sun-colored metal since the frenzy that drove spot prices beyond $5,500 earlier this year.

You know what’s coming, and if you don’t, you should: Who was it who suggested gold might be poised for more gains? Who was that? (I told you so.)

On Friday, Ray Dalio suggested we may be witnessing the beginning of the end. “The recent confluence of three events — 1) the Japanese government selling some of their US bond holdings to support the yen without having to raise interest rates more than they would like, 2) US bond yields rising to new highs led by the long-end, accompanied by dollar weakness, due both to huge current and prospective debt supply and weakening demand for it, and 3) this week’s announcement by Bessent that the Treasury will buy bonds, which he has only limited capacity to do — has led many people to ask me if these events are consistent with the classic template outlined in my book ‘How Countries Go Broke,'” Ray said. “The answer is yes.”

Bottom line: Bessent’s attempt to cap long-end US yields better work, and without Treasury having to resort to larger and larger Bill-funded buyback operations. Failure’s not an option.