By Stuart Englert | GoldSeek

The U.S. dollar took a walloping this week after the U.S. Treasury announced it would double purchases of long-term U.S. debt instruments beginning next month.

In short, the federal government once again must buy back a larger portion of its own bonds to help finance the exploding national debt, which surpassed $40 trillion for the first time on Wednesday.

Why is the federal government forced to buy back more of its own bonds and monetize its debt? Because investor appetite and sentiment for U.S. debt is waning. Buyers are not eager to gobble up the glut of new federal debt issues, at least not at current yield rates.

The buyback operation itself dates to 2024, when the Treasury resumed regular repurchases of outstanding securities for the first time in more than two decades, with the stated aims of supporting trading liquidity in older issues and managing the maturity profile of the government's obligations. This week's announcement doubles the size of those long-dated repurchases.

If the American economy were booming and buyers considered U.S. bonds a great long-term investment, the Treasury would not have to purchase its own debt instruments to reduce its borrowing costs, service its debts, and fulfill its other financial obligations.

The composition of the buyer base has shifted as well. Treasury Department data show foreign holders' share of outstanding marketable U.S. debt has fallen from more than 40 percent a decade ago to roughly 30 percent, leaving domestic money market funds, households, and other domestic buyers to absorb more of the new supply, even as Japan and China remain the largest foreign holders.

That is bad news for the greenback, whose exchange value fell to a three-month low against six other major currencies this week, sparking a strong rebound in gold and silver prices. Gold topped $4,600 an ounce on Friday, while silver flirted with $70.

Extend and Pretend

The official solution to the nation's record-breaking debt problem is repeated like a broken record.

"We're going to have to grow our way out of this," Treasury Secretary Scott Bessent responded on Thursday when asked about the burgeoning federal debt.

"We want growth in our country," President Donald Trump said during his Republican nomination speech in 2024. "That's what's going to pay off our debt."

Similar claims and remarks have been made by other presidents and government authorities over the last five decades. They have used such assertions to institute tax cuts and implement policies designed to boost foreign trade and juice gross domestic product (GDP).

Economic growth, however, never exceeds deficit spending enough to reduce the national debt, which keeps growing at an accelerating and unprecedented pace and has surpassed 125 percent of annual GDP. The major credit rating agencies have rendered their own verdicts along the way: S&P stripped the United States of its AAA rating in 2011, Fitch followed in 2023, and Moody's — the last of the big three — cut its top rating in May 2025.

The Congressional Budget Office, for its part, recorded a federal deficit of roughly $1.8 trillion for fiscal 2024 and projects that debt held by the public — a narrower measure than the gross debt figure cited above — will surpass its World War II-era high relative to GDP within the coming decade. Net interest on the debt, now running near $1 trillion a year, has already overtaken annual defense spending, according to the CBO, a concrete illustration of the compounding cost of carrying the debt.

Meanwhile, elected and unelected officials continue to extend and pretend, imagining the nation's financial liabilities are manageable while ignoring the underlying reason for the unsustainable indebtedness: excessive federal spending and borrowing for warfare, welfare, and ever-rising debt service.

The next scheduled checkpoints where the trajectory becomes concrete are the Treasury's quarterly refunding statements — the venue where buyback sizes and near-term borrowing estimates are set — alongside the regular monthly budget statements from the Treasury and the CBO's ongoing baseline updates.

Loss of Common Cents

It is as if fiscal authorities and politicians lose their collective mind and common sense once they venture inside the Beltway, all while collecting their depreciating federal paychecks.

The issuance of the last U.S. penny last November should have served as a wake-up call. The spiraling public debt, and its associated inflation, is rapidly debasing the nation's currency, eroding confidence in the dollar, and deterring demand for U.S. debt instruments.

When it costs 4 cents to make a single Lincoln penny, you cannot grow your way out of fiscal reality. Producing more pennies, digitizing more dollars, or recycling more of your own debt is not a solution. The elementary school math simply does not work.

In 1992, when the federal debt totaled $4 trillion, Democratic strategist James Carville instructed presidential campaign workers to maintain focus on the primary concern of American voters. "It's the economy, stupid," he advised.

Today, with the national debt 10 times larger, American voters should enlighten the befuddled politicians and money-crunching bureaucrats in Washington, D.C., by repeating the phrase "It's the debt, stupid."

© 2026 Stuart Englert. All rights reserved. Englert is the author of "Rigged: Exposing the Largest Financial Fraud in History" and "Patient Millionaire: A Financial Memoir."