The release of the Epstein files has cast a harsh light on the American justice system, with former Attorney General Pam Bondi scrambling to justify the handling of classified evidence. For those of us across the pond, the spectacle is a masterclass in how to turn a scandal into a political football. Bondi's insistence that the evidence was handled with 'utmost integrity' rings hollow when the very files in question were reportedly mishandled, calling into question the transparency of a system already buckling under the weight of its own contradictions.
Let's be clear. The Epstein case was always a story of wealth, power, and procedural failure. Now, with Bondi at the centre, we see the same old playbook: deny, deflect, and bury the truth beneath a mountain of legal jargon. The markets, ever sensitive to political instability, have taken note. The dollar is softening, and gilt yields are twitching nervously. Why? Because investors hate uncertainty, and nothing says 'uncertainty' like a former attorney general stonewalling a congressional inquiry.
From a fiscal perspective, this is a distraction from the real issues: inflation, debt, and the Federal Reserve's next move. But the Epstein files are a reminder that the rot runs deeper than interest rates. The US justice system, a supposed pillar of the capitalist world, is showing cracks. If the elites can manipulate evidence in a case of this magnitude, what does that say about the rule of law? The market is pricing in a risk premium on trust, and that is a dangerous thing.
Bondi's defence amounts to a 'trust me' pitch. But trust is not a commodity you can issue like Treasury bonds. It is earned, and the US Department of Justice is running a deficit in that department. The files, as far as we can see, contain details that should have been made public years ago. Instead, they are being parceled out like state secrets, feeding a narrative of cover up that does more damage than the truth ever could.
Europe, meanwhile, watches with a mix of schadenfreude and concern. The EU's own regulatory framework, for all its faults, has been tightening accountability. The US, by contrast, seems stuck in a cycle of scandal and selective transparency. For investors, this is a red flag. Capital flight to safer havens, like Swiss bonds or German Bunds, may accelerate if the perception of US institutional decay persists.
On the inflation front, this political theatre does not help. The Fed is grappling with sticky price pressures, and a crisis of confidence in the justice system only adds to the economic fog. Bondi's performance, while perhaps soothing for the base, does little to reassure the bond market. If the Fed sees this as a risk to financial stability, expect a hawkish tilt in their next statement.
In summary, the Epstein files probe is not just a legal issue. It is a stress test for American institutions. And so far, the results are not encouraging. The bottom line? Watch the dollar, watch the bond yields, and keep your capital portfolio hedged. Because when the justice system becomes a political battlefield, the markets are the first to feel the shrapnel.
