by Liz Capo McCormick
It sounds too radical to even warrant a second thought. That President Donald Trump could force some of the US’s foreign creditors to swap their Treasuries into ultra long-term bonds to ease the country’s debt burden.
And yet, that’s what Jim Bianco corralled his clients to discuss on Thursday after rumors of a so-called ‘Mar-a-Lago Accord’ began making the rounds.
To be clear, Bianco doesn’t see it happening anytime soon, if ever. But in some ways that’s beside the point. Trump, he said in no uncertain terms, could very well upend the entire global financial order over the next four years, and Wall Street needs to be prepared.
The idea of dramatically restructuring America’s debt load is part of the Trump team’s agenda to revamp global trade via tariffs, weaken the dollar and ultimately reduce borrowing costs, all with the goal of putting US industry on more even footing with the rest of the world, said Bianco, an over three-decade market veteran and founder of Bianco Research.
Other elements of the plan include the creation of a sovereign wealth fund — which Trump has already set in motion — and forcing America’s allies to shoulder a larger share of security spending.
“You have to start thinking big and you have to start thinking bold about what is going on here,” Bianco told listeners during the roughly hour-long webinar. “The Mar-a-Lago Accord is not actually a thing, it’s a concept. It is a plan to basically remake some of the financial system.”
The term ‘Mar-a-Lago Accord’ is a riff on the on the 1985 Plaza Accord and, before that, the 1944 Bretton Woods Agreement, both major milestones in the establishment of the modern global economic system. Each were named after the resorts where they were negotiated.
Many of the ideas behind the agenda come from a November 2024 paper by Stephen Miran, Trump’s nominee to lead the White House Council of Economic Advisers. In it, the former Treasury official laid out a road map for reforming the global trading system and weeding out economic imbalances driven by “persistent dollar overvaluation.”
Bianco said such a view doesn’t necessarily conflict with that of Treasury Secretary Scott Bessent, who said Thursday on Bloomberg Television that “the US still has a strong dollar policy.”
“It’s time to take the risk of the Trump administration orchestrating a weaker dollar more seriously. The Trump administration has a proclivity for bold, high-stakes maneuvers.”
— Simon Flint, macro strategist
That’s because while the US may seek a weaker trade-weighted dollar — a measure of the US currency versus its trading partners — as a way to narrow the trade deficit, financial measures of the greenback, like the Bloomberg Dollar Spot Index, could strengthen at the same time. That gauge is up 2.3% since Trump’s November election win.
“Stephen Miran and Scott Bessent seem to be kind of singing from the same hymn sheet,” Bianco said. “The whole idea hopefully is lower the value of the dollar, lower the value of interest rates, bring down the debt burden in the country. And that’s what they’re trying to do.”
Bianco, like Miran’s paper, referenced the work of former Credit Suisse Group AG strategist Zoltan Pozsar, who has for several years called for a “Bretton Woods III” revamp as part of his theory that the dollar will play a much less dominant role in global finance in the coming decades.
One key idea of Pozsar’s is that other nations should pay more for the security and stability provided by the US. A way to do so would be by swapping some of their Treasuries into 100-year, non-tradeable zero-coupon bonds. If these nations needed cash quickly, the Federal Reserve could make it temporarily available to them through a lending facility.
Bianco stressed that this type of debt swap may not actually happen, and if the US were to pursue it, it would require significant international cooperation and could potentially impact global financial stability. Bond investors are so far showing little sign of concern, with trading in the Treasury market particularly calm in recent days.
Still, the point of discussing these ideas with clients is to emphasize the magnitude of the potential changes in store, Bianco said.
“Take them seriously, don’t take it literally,” he said referring to the debt swap idea and some of Trump’s more radical proposals in general. “If Trump is willing to blow up NATO, why wouldn’t he be willing to blow up the financial system?”
Copyright Bloomberg News
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