The Short-Lived Relief of Treasury Buybacks and the Unsustainable Path of Modern Central BankingThe recent intervention in the bond market, through the upsizing of the US Treasury’s buyback programme, has pushed yields lower and contributed to a weaker dollar. In my view, this is only short-lived relief. I cannot believe I am already writing an article on the very same topic I warned about just 24 hours ago (Pic1 and Pic2) here on Slice, but clearly I was right on the cue, warning about something that till Tuesday was still broadly ignored by mainstream and social media. The buyback is fundamentally a zero-sum game. To finance repurchases of long-duration Treasury bonds, the U.S. Treasury must issue more T-Bills. In the near term, this can suppress yields, but over the longer term it undermines the U.S. debt market in two critical ways: First, the massive volume of T-Bills that must be rolled over creates ongoing pressure . In order to control the rise of long-term U.S. yields, which are the benchmark rate for many critical financial instruments like home mortgages, the US Treasury is not only running a bigger buyback programme now, but at the same time is front-loading a ton of US debt, issuing more T-Bills while avoiding adding supply to the long end of the curve (the same it is trying to buy back). Already, more than $7 trillion in Treasuries will mature within a year, and those must be refinanced month after month. Any liquidity crunch that reduces demand for bills would place the government under acute stress. Second, systematically retiring long-duration bonds drains the market of risk-free bond supply . As the available stock of longer-term U.S. paper shrinks while the money supply continues to expand, newly created cash—especially that held by insurers and pension funds—is forced into alternative credit markets. This is precisely why hyperscalers have been able to issue unprecedented amounts of long-duration corporate bonds. What’s the risk of forcing too much cash into a specific market? Of course, inflating market bubbles. This dynamic is not isolated. Around the world, we are witnessing the same pattern: governments issue debt to fund spending, and whatever the private market does not absorb is simply purchased by central banks with newly created money. It is unsustainable. Paradoxically, instead of learning from Japan’s decades-long experiment (or the more dramatic cases of Argentina and Turkey), the United States, the United Kingdom and the European Union are adopting the same playbook. The eurozone is more heterogeneous; France is in considerably worse fiscal shape than Spain or Austria; but the overall direction is identical, with one small problem: in Europe, the ECB needs to find a policy that more or less fits all, while some countries are increasingly in need of a tailored one. The chart of gold priced in Turkish lira already illustrates the endpoint (and how Japan is still not close to a monetary collapse that will take decades to unfold, contrary to what many fake social media experts keep claiming by confusing it with the dynamics of the JPY carry trade) . In the years ahead, I expect the same pattern to appear against other major currencies. That is why I continue to recommend the accumulation of physical gold for the long term. The explicit goal of recent policies by the US and other G7 countries is to inflate the debt away. What the United States still fails to grasp is that you cannot pursue this strategy while preserving the dollar’s status as the global reserve currency because the double-edged sword is that holders of U.S. Treasuries will watch the real value of their reserves erode. It is therefore unsurprising that China and other major holders have been gradually reducing their USD reserves in favour of gold. This does not mean we will see a gold-backed Chinese yuan in our lifetimes. Such a move would strengthen the currency too sharply and cripple domestic manufacturing and exports - the same fate that eventually befell the United States and, before it, the United Kingdom when the pound sterling was the world’s reserve currency. I would not be surprised, however, if gold eventually emerges as the preferred settlement asset among central banks, while fiat currencies remain largely confined to domestic use. Some observers argue that as long as the Federal Reserve is not directly monetising the buybacks, the exercise is merely a re-profiling of debt from longer to shorter maturities and should be neutral for the dollar. I disagree. Think of T-Bills as a cash proxy. Front-loading issuance of bills effectively increases the near-term supply of dollar liquidity, while longer-duration bonds “lock” that cash away for years, with very different impacts on the velocity of money and credit creation. Markets correctly anticipate higher dollar balance availability in the near future and therefore weaken the currency in the short run - exactly what occurred when the buyback programme was first introduced by Janet Yellen (criticised at that time by the very same Scott Bessent that just doubled down on it). Over the medium term, the dollar can strengthen again relative to currencies such as the yen, because a persistently weak dollar damages U.S. export competitiveness and forces other countries to devalue even further to protect their own industries. To conclude, the current relief is temporary. Physical gold remains, in my judgement, the most reliable long-term hedge against the risk of the modern fiat monetary system collapsing.