Mar-a-Lago Accord: Swapping US Debt for Century-Long Bonds

Mar-a-Lago Accord: Swapping US Debt for Century-Long Bonds

The idea has circulated for days on Wall Street trading desks and sounds like a bad joke: that the US Treasury would force foreign creditors to exchange their bonds for ultra-long-term, non-tradable securities with zero coupons. Jim Bianco, founder of Bianco Research, brought it to light during a client webinar after rumors about a supposed "Mar-a-Lago Accord" began spreading. Bianco does not believe this will happen soon, if ever, but argues that Trump could disrupt the global financial order over the next four years and that investors should be prepared.

The name is a variation of the 1985 Plaza Accord and, before that, the 1944 Bretton Woods Agreement, both named after the resorts where they were negotiated. The roadmap fueling this idea comes from a November 2024 document signed by Stephen Miran, Trump’s nominee to lead the White House Council of Economic Advisers, which proposes reforming the global trade system to correct imbalances caused by the "persistent overvaluation of the dollar."

What the debt swap exactly proposes

The mechanism, as described by Bianco trinc former Credit Suisse strategist Zoltan Pozsar, consists of other nations paying more for the security and stability provided by the US. The formula: exchanging part of their Treasury bonds for 100-year, non-tradable, zero-coupon bonds. If these countries needed quick cash, the Federal Reserve could temporarily provide it through a credit line.

Bianco himself admits that such a move would require enormous international cooperation and could destabilize the global financial system. For now, bond investors show no signs of alarm, and trading in the Treasury market has been particularly calm. His advice to clients was explicit: "Take it seriously, don't take it literally." He added an uncomfortable question: if Trump is willing to blow up NATO, why wouldn't he be willing to blow up the financial system?

The precedent: when Nixon closed the gold window

The discussion has quickly shifted to monetary history. The Bretton Woods gold standard functioned until France, seeing US spending in Vietnam, began sending ships loaded with dollars to claim its gold. Nixon "temporarily" suspended convertibility and, since other countries didn't appreciate it, another anchor was soon invented: the petrodollar, with all crude oil traded in dollars and Saudi Arabia as a key piece.

The skeptical reading is that Bretton Woods was never a real gold standard, but an illusory equilibrium: convertibility only applied to central banks, and most countries maintained fixed parities or minimal margins against the dollar. Gold was a showcase reference. When it stopped being one, the system continued working by inertia and necessity.

Can you force a creditor to swap their debt?

This is the question running through the entire analysis and the one nobody answers precisely. Tariff blackmail is pointed to as leverage: threatening tariffs on countries whose reserves depend on those bonds. Others note that a forced swap is, in practice, a debt restructuring, and that in the Greek case, when the creditor is small and poor, it is called sovereign default. The difference is one of degree, not nature.

The most repeated argument is that declaring a default would be shooting oneself in the foot. The US is a net debtor while Europe, China, and Japan are net creditors, but the bulk of US debt is held domestically: pension funds, collective savings, the Federal Reserve itself. Of the $33 trillion in debt, about $9 trillion is in foreign hands, around 30%. Much of that figure appears registered in Cayman, Luxembourg, Belgium, or Ireland, suggesting holdings of diffuse origin rather than clearly identifiable creditors.

The weak dollar that isn't so weak

Treasury Secretary Scott Bessent stated that the US maintains a strong dollar policy. Bianco sees no contradiction: one can seek a weaker trade-weighted dollar to reduce the trade deficit while dollar financial indicators strengthen. The Bloomberg Dollar Spot index has risen 2.3% since Trump's electoral victory.

The debate on debt duration has consequences for liquidity. Issuing longer-term debt reduces system liquidity and, with it, the fuel that has driven stock market gains. The issuance of bills and short-term debt during the latter part of Yellen's tenure is cited as one reason for market behavior in 2024. Lengthening maturities is the opposite.

Where the analysis gets stuck

The underlying doubt remains: whether the US can afford such a gesture without the rest of the world starting to look for alternatives. Available data suggest that China is already buying less debt and spending its dollars on gold, and that Japan has more commercial weight with China than with the US. With these elements, the question is not whether the swap is technically possible, but how long it takes for a creditor to stop believing in the guarantee.