Bessent’s Quixotic Attempt to Strengthen the Yen | American Enterprise Institute– www.aei.org

George Santanyana, the Spanish philosopher, famously said that those who cannot remember the past are condemned to repeat it.

When it comes to foreign currency intervention, it is surprising that of all people, Treasury Secretary Scott Bessent, a former hedge fund operator, seems to have forgotten the many earlier attempts at foreign exchange intervention that failed for want of being supported by fundamental economic policy change. This has induced Mr. Bessent to embark on a quixotic attempt to prop up the swooning Japanese yen with foreign exchange intervention without requiring that the Bank of Japan hikes interest rates or that the Japanese government addresses Japan’s public finance sustainability problem.

If there is one episode of failed foreign exchange intervention with which Mr. Bessent should be more than familiar, it is that in support of the pound sterling in 1992. In that year, the Bank of England failed to prevent a humiliating sterling devaluation despite massive foreign exchange intervention and then large interest rate hikes. After all, Mr. Bessent was a principal advisor to George Soros in his successful attempt to break the Bank of England on what came to be known as Black Wednesday.