economy
Scott Bessent is 'playing with fire' as the Treasury's debt buyback risks putting the dollar in a devaluation spiral like the yen, economist warns
Treasury Secretary Scott Bessent appears to be heading down a path similar to Japan’s, and it signals “debasement” of the dollar, according to a top economist.
TL;DR
- Economist Robin Brooks warns Treasury's bond buyback plan could lead to dollar debasement and a currency crisis, similar to Japan's yen.
- The plan is seen as financial engineering that fails to address the growing U.S. deficit, projected to reach $2 trillion.
- This strategy could cause a currency crisis by putting depreciation pressure on the dollar, as markets may not receive adequate risk premiums.
- Other economists express less concern, predicting dollar strengthening due to the robust U.S. economy, though acknowledging potential shifts if unconventional policies persist.
- The rise in Treasury yields is viewed by some as a normalization, not a crisis, but continued deficits and debt issuance are expected to keep yields climbing.