{"id":5712,"date":"2026-08-21T16:46:33","date_gmt":"2026-08-21T16:46:33","guid":{"rendered":"https:\/\/crosscountrymovingteams.com\/?p=5712"},"modified":"2026-08-21T16:46:33","modified_gmt":"2026-08-21T16:46:33","slug":"scott-bessent-is-playing-with-fire-as-the-treasurys-debt-buyback-risks-putting-the-dollar-in-a-devaluation-spiral-like-the-yen-economist-warns","status":"publish","type":"post","link":"https:\/\/crosscountrymovingteams.com\/?p=5712","title":{"rendered":"Scott Bessent is \u2018playing with fire\u2019 as the Treasury\u2019s debt buyback risks putting the dollar in a devaluation spiral like the yen, economist warns"},"content":{"rendered":"<div>\n<p>In a Substack post on Thursday, Robin Brooks, a senior fellow at the Brookings Institution and former chief economist at the Institute of International Finance, sounded the alarm on the Treasury Department\u2019s plan to increase buybacks of long-term bonds.<\/p>\n<p>Read more <a href=\"https:\/\/crosscountrymovingteams.com\/?p=5710\">Trump admits tariffs are a tax on America\u2019s love for hamburgers and allows 300,000 metric tons of ground beef imports at \u2018below current market prices\u2019<\/a><\/p>\n<p>The announcement came after the 30-year yield hit the highest level in nearly 20 years. While yields briefly retreated, they soon climbed back to their earlier levels as Wall Street doubted Bessent\u2019s ability to hold back the $32 trillion Treasury market.<\/p>\n<div>\n<div>\n<div><\/div>\n<\/div>\n<\/div>\n<p>Brooks dismissed the buyback scheme as mere financial engineering that doesn\u2019t address the mounting stress in the Treasury market. At the same time, it also confirmed there\u2019s no desire to tackle the underlying problem of the deficit, which is on track to reach $2 trillion this fiscal year. <\/p>\n<p>\u201cWhen fiscal policy is out of control, governments can obviously do many things to\u00a0cap\u00a0yields, but this just puts\u00a0depreciation\u00a0pressure on the currency because markets don\u2019t get paid the kind of risk premium they desire,\u201d he wrote. \u201cWhat would be a debt crisis thus morphs into a currency crisis, which is why the Yen has been\u00a0falling\u00a0for so many years.\u201d<\/p>\n<p>Brooks has long highlighted Japan\u2019s efforts to keep its bond yields artificially low as a way of keeping its massive debt burden, which tops 200% of GDP, in check. With markets unable to price Japanese debt properly, investors have sent the yen lower. <\/p>\n<p>Similarly, the Treasury\u2019s buyback plan caused the dollar to tumble in what Wall Street has dubbed the return of the \u201cdebasement trade.\u201d That was accompanied by a jump in precious metal prices, as investors anticipate further dollar devaluation.<\/p>\n<div>\n<div><\/div>\n<\/div>\n<p>\u201cMarkets are primed for Dollar debasement to resume and \u2014 as Japan shows \u2014 it can be next to impossible to stabilize a currency once it enters a devaluation spiral,\u201d Brooks warned. \u201cThe U.S. is playing with fire with this buyback.\u201d<\/p>\n<p>Jonas Goltermann, chief markets economist at Capital Economics, said in a note Thursday that debasement trade worries are overblown and predicted the dollar with strengthen in the coming months on the back of the robust U.S. economy.<\/p>\n<p>Read more <a href=\"https:\/\/crosscountrymovingteams.com\/?p=5708\">Despite CEOs like Elon Musk pushing in-person office work, a major study of 7,000 workers says remote employees are just as connected\u2014and more engaged<\/a><\/p>\n<div>\n<div>\n<div><\/div>\n<\/div>\n<\/div>\n<p>The dollar\u2019s recent drop was also consistent with differences in yields versus doubts about U.S. credibility on fighting inflation, he added.<\/p>\n<div>\n<div><\/div>\n<\/div>\n<p>\u201cThat said, if the steady stream of unconventional policy ideas continues, that may well change,\u201d Goltermann said. \u201cAs such, we are becoming less convinced that the dollar will rebound as far as our current forecasts imply over the coming months, even if we are right that the US economy will pick up more momentum over the coming months.\u201d<\/p>\n<div>\n<div><\/div>\n<\/div>\n<div>\n<div><\/div>\n<\/div>\n<p>The run-up in Treasury yields that preceded the Bessent\u2019s debt buyback plan is a necessary normalization from the earlier era of near-zero levels instead of a crisis or market dysfunction, according to Lawrence Gillum, chief fixed income strategist for LPLFinancial.<\/p>\n<p>He pointed out that rate volatility remains subdued, inflation expectations are still\u00a0anchored, and bond auctions continue to draw enough demand. <\/p>\n<p>Still, Gillum expects long-term yields to continue climbing, given the steep budget deficit the U.S. is running as well as all the fresh debt being issued from the Treasury and AI hyperscalers. <\/p>\n<p>That means the yield will likely become front and center again, prompting more actions like the buyback, even if it\u2019s more a symbolic Band-Aid than an actual fix.<\/p>\n<div>\n<div>\n<div><\/div>\n<\/div>\n<\/div>\n<div>\n<div><\/div>\n<\/div>\n<p>\u201cBut it is a reminder that the Treasury Department is paying attention and will do whatever it can to keep yields from getting too high too quickly,\u201d he said.<\/p>\n<p>Read more <a href=\"https:\/\/crosscountrymovingteams.com\/?p=5706\">The banking lobby\u2019s bad faith campaign to kill the Clarity Act will backfire<\/a><\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>&#8220;Markets are primed for Dollar debasement to resume and \u2014 as Japan shows \u2014 it can be next to impossible to stabilize a currency once it enters a devaluation spiral.&#8221;<\/p>\n","protected":false},"author":1,"featured_media":5711,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[198],"tags":[],"class_list":["post-5712","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-debt"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.7 - 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