The ‘Great American Debt Swap’: Trump Budget Would Monetize Debt Via Federal Reserve

The most radical element of Trump’s budget isn’t spending—it’s an unprecedented proposal to have the Federal Reserve permanently hold $10 trillion of U.S. debt, effectively canceling interest payments.

How It Works:

1. Fed becomes “permanent buyer” of Treasury bonds
2. Interest payments recycled back to Treasury
3. Annual deficit artificially reduced by $400B+

Risks:

• Could trigger dollar devaluation
• Inflation may spike to 1970s levels
• Foreign creditors likely to demand higher rates

Market Reaction:

• 10-year Treasury yield jumps 0.8% overnight
• Gold prices hit record high