Economist warns Treasury debt buyback risks dollar devaluation spiral
MacroDigital Finance
Economist Robin Brooks warned that Treasury Secretary Scott Bessent's plan to increase buybacks of long-term bonds risks putting the dollar in a devaluation spiral similar to the yen. In a Substack post, Brooks, a senior fellow at the Brookings Institution, said the buyback scheme is financial engineering that fails to address the deficit, which is on track to reach $2 trillion this fiscal year. He argued that capping yields through buybacks puts depreciation pressure on the currency, and markets are primed for dollar debasement to resume. Jonas Goltermann of Capital Economics said debasement trade worries are overblown and predicted the dollar will strengthen, while Lawrence Gillum of LPL Financial expects long-term yields to keep climbing given the steep budget deficit and fresh debt issuance.
