Critics warn Treasury's bond buyback plan could spark dollar devaluation

Robin Brooks, a senior fellow at the Brookings Institution, warned that Treasury Secretary Scott Bessent’s plan to increase purchases of long-term Treasury bonds resembles Japan’s yield-suppression policy and could trigger a devaluation spiral for the dollar. Brooks said the scheme does not solve the underlying $2 trillion deficit and may force investors to accept lower risk premiums, potentially turning a debt issue into a currency crisis.

He noted that the dollar has already slipped, prompting a rise in precious-metal prices as markets anticipate further weakening. Counterpoints came from Capital Economics’ chief markets economist Jonas Goltermann, who called the debasement concerns exaggerated and expected the dollar to strengthen on solid economic fundamentals, though he admitted unconventional policies could alter that outlook. Lawrence Gillum of LPL Financial described the buyback as a symbolic move to keep yields from climbing too quickly, acknowledging that persistent budget deficits and new debt issuance will keep yield pressures high. The debate highlights tension between short-term market stabilization and long-term fiscal sustainability.