US treasury secretary Scott Bessent is getting more desperate by the day as he tries hard to persuade the global financial markets that the fundamentals of the US economy are very strong, and there is no reason for other large economies to sell US bonds in panic and buy more gold instead.One tipping point was that gold accumulation by global central banks crossed their holdings of US treasury assets recently. US’s fickle economic and foreign policy combine have led to its long-term creditworthiness being questioned by most large economies, some of whom are allies. For instance Japan, the largest holder of US treasury paper ($1.2 trillion) has been dumping the American bonds in recent months, as the US war on Iran caused massive inflation fears worldwide and led to an unprecedented fall in the Japanese currency. Japan started selling US dollar assets to defend its currency. This caused US long-term bond yields to rise steadily, making the US’s own borrowings costlier than ever. This has been happening over the past few months as Trump waxed and waned on the peace deal with Iran. Bessent has been in touch with Japan during this entire period.Also, in spite of his best efforts to coordinate with Japan to prevent large scale dumping of US bonds, Bessent has not been able to suppress the bottom-up sentiment of fear and lack of confidence in Trump’s behaviour. This week, Japan again dumped over $26 billion of US bonds despite Bessent’s claim that the US was working with Japan closely to shore up the yen.Bessent did attempt something very unorthodox, which the US government has never done before. The US conducted a significant sale of euros to buy Japanese yen in order to persuade Japan not to sell US bonds. Europeans were not just surprised but also upset that the US had made this move without consultation. Evidently Japan did not heed Bessent’s appeal, as it is not so confident of the US’s capacity to navigate the choppy seas of global financial markets. Clearly, this seems way above Bessent’s pay grade. Managing a Soros fund, which he has done in the past, is quite different from supervising the balance sheet of the Federal Reserve, which has to work within the constraints of the US’s massive debt of $40 trillion, owed largely foreign governments.Also read: The Global South Was Once a Project of Solidarity. What Happened to It?Foreign holdings of US treasury assets have fallen by $233 billion in recent months, largely led by Japan and China. Japan itself has sold over $120 billion of US bonds.Bessent’s job is most unenviable, as he is having to restore confidence in the US’s creditworthiness against the backdrop of two hugely destabilising projects within a year, starting with the ‘liberation day tariff’ announcement of April 2025, followed by the unprovoked war against Iran six months ago. Both events put immense pressure on both the inflation rate and the US’s borrowing costs. One must recall how the liberation day tariffs were paused by Trump for 90 days only after Bessent cautioned him that China, Japan and others were dumping US bonds in panic, causing a major disruption potentially to US’s future borrowing programme. Trump publicly admitted that the US bond markets were acting a “little queasy”! A similar picture is playing out again before our eyes.This week, the US 30-year bond yield rose to its highest level since 2007 (peaking near 5.33%). Even the 10-year and 20-year bond yields are rising to new highs. Rising bond yields have a direct impact on US housing mortgage rates, which will also rise – making it a political hot potato besides weakening the economic revival.This must cause immense worry for Trump, who faces midterm elections in a few months. No wonder Trump has opted for “low-keying” his engagement with Iran.Meanwhile, Bessent is desperately talking up the markets with his brave narrative. “We believe that the US yields don’t reflect the underlying fundamentals… We believe that the liquidity, especially in the 30-year point, is very poor.” Bessent is essentially telling the world that the US fundamentals are good and there is every reason for other major economies to keep buying US bonds and consequently keep the US’s long term creditworthiness intact. But is the world listening? The buying appetite for long tenure US bonds is declining precisely because the central banks of Japan, China and many other rising economies of the global south are incrementally moving away from buying US bonds and buying gold instead. This is a fundamental shift happening in the global financial architecture whose cumulative impact will be felt in the next five to 10 years, which is not a very long time in the future.Bessent is trying other financial engineering tricks which are also akin to applying band-aids without solving the US’s structural debt problem exacerbated by Trump’s disastrous economic policies and geopolitical adventures. Since world central banks are incrementally shying away from buying 30-year tenure US bonds, Bessent is getting his own treasury to buy these bonds. But oddly, the funds to buy 30-year bonds are being raised by issuing short term treasury bills of up to one year tenure. Most financial market experts have called this superficial financial engineering or “twisting the yield curve”, without addressing the core problem.Bessent has argued that the US’s economic fundamentals are still strong. This claim is essentially based on the potential AI investment boom which is probably the only meaningful activity happening in the US. Otherwise Trump’s dream of reviving old economy manufacturing and employment lies in tatters.However, after the prolonged war with Iran, the AI investment boom is also on somewhat shaky grounds. Economist and former Greek finance minister Yanis Varoufakis says the massive recycled petro dollars of the Gulf states were also fuelling the AI boom in the US. By one estimate, the Gulf states had committed roughly $2.4 trillion for the US’s AI investments in Trump’s current tenure. Another $1.5 trillion was committed towards armament purchase. All these plans are on hold after the prolonged war with Iran has disrupted the economies of Saudi Arabia, UAE, Qatar, Bahrain etc.Also read: Modi Said the World Is Shunning Globalisation. What Does It Mean for India?The AI investment-led boom story in the US was still credible before the war on Iran in February this year. Now it is less believable than before. This is what is manifesting in the world, with US allies like Japan and the rich Gulf states losing confidence in the US economy. There is something fundamentally changing in the global economic, financial and geopolitical architecture for which Trump is ironically acting as a catalyst. This fundamental shift is being acknowledged by US financial market leaders Warren Buffet and Ray Dalio. Vice President J.D. Vance also let slip a hint when he suggested that it is not necessary that US debt paper should permanently act as a dominant reserve currency asset for the world. He suggested the status as reserve currency makes Americans over consume on borrowed funds from the rest of the world.We are clearly at an inflection point in the changing global economic and geopolitical architecture. We must thank Trump for arriving here faster than scheduled!