Partially Implemented — Escalation Risk Rising
There is a document that, more than almost anything else in the economic and policy world of 2025–2026, explains what is actually happening to the US dollar, to trade policy, and to the global financial order. Most people have never heard of it. It is called the Mar-a-Lago Accord, and it is the closest thing to a public blueprint for the monetary strategy currently being executed by the US government.
The Accord was authored by Stephen Miran — a hedge fund economist who became a Fed Governor — and it proposes a managed restructuring of the global monetary system. The core argument: the dollar is too strong. Its status as the world's reserve currency means every country needs to hold dollars, which creates permanent artificial demand that keeps the dollar overvalued. That overvaluation makes American exports expensive, American manufacturing uncompetitive, and American workers unemployed. The Accord's solution: deliberately weaken the dollar through a coordinated program of tariffs, diplomatic pressure on trading partners, and if necessary, direct intervention in currency markets or Treasury restructuring.
The Council on Foreign Relations assessed in January 2026 that the Accord is becoming a reality. And they're right — it is. Tariffs are at their highest average rate since 1934. The dollar fell roughly 10% on a trade-weighted basis in 2025. The diagnosis was correct. The medicine is being administered. The problem: the medicine has a side effect that the prescription didn't adequately address.
Plain Language — What Is the Mar-a-Lago Accord?
For decades, the US dollar has served as the world's reserve currency — the money that countries use to buy oil, settle trade, and hold as savings. Because everyone needs dollars, there's always strong global demand for them. This keeps the dollar's value high relative to other currencies.
The Mar-a-Lago Accord says this is actually a problem for America. A strong dollar makes American products more expensive for foreign buyers, which means fewer exports and fewer manufacturing jobs at home. Countries like Germany and China, whose currencies are weaker, have a built-in advantage selling into global markets.
The Accord's solution is to weaken the dollar — make it cheaper — through a combination of tariffs (which reduce imports and signal to markets that the US is retreating from free trade), pressure on allies to appreciate their currencies, and potentially more drastic measures like restructuring what foreign countries get paid for holding US Treasury bonds.
The dollar weakening has worked. But the side effect is that the same policies making the dollar weaker are also making foreign investors less eager to buy US bonds — and the US needs foreigners to buy enormous amounts of its bonds to fund the deficit. It's like fixing one pipe by widening a crack in another.
US Tariff Rate (Average)
17.9%
Highest since 1934. Core Accord mechanism in operation. Deliberately weakening dollar demand.
Dollar Trade-Weighted (2025)
−10%
Dollar fell ~10% in 2025, another −1.2% in January 2026. Goal is being achieved.
CFR Assessment (Jan 2026)
Live
Council on Foreign Relations: "The Mar-a-Lago Accord is becoming a reality."
Foreign Treasury Demand
Declining
Foreign share of US debt down from 49% peak (2008) to ~25%. Side effect of the Accord's execution.
Section I
WHAT'S ALREADY BEEN IMPLEMENTED — AND ITS UNINTENDED CONSEQUENCES
Tariffs at 1934-level averages
17.9% average tariff rate across all imports. Reduces import demand, signals dollar retreat from free trade order.
Enacted
Dollar devaluation ~10%
Dollar trade-weighted index fell 10% in 2025, continued declining into 2026. Primary goal achieved.
Achieved
Pressure on allies re: currencies
Bilateral negotiations with Japan, EU, and others on currency alignment ongoing. Partial results.
Partial
Forced 100-year bond swap
Converting foreign Treasury holdings to 100-year non-tradable bonds. Functionally a selective default. Not yet enacted.
Not Enacted
User fees on foreign holders
Fees charged to foreign official holders of US Treasuries. Another form of selective default. Not yet enacted.
Not Enacted
Fed-Treasury yield caps
Formal coordination between Fed and Treasury to cap long-term yields. Fiscal dominance institutionalized. Not yet enacted.
Not Enacted
The elements already enacted have produced the intended outcome — dollar weakening — but with a side effect that the Accord's architects appear not to have fully modeled. By signaling that the US is withdrawing from the rules-based trade and monetary order, these policies have reduced the attractiveness of dollar-denominated assets to foreign investors at exactly the moment the US needs maximum foreign demand.
The US must refinance approximately $10 trillion in maturing Treasury debt in 2026, plus issue new debt to cover the $1.8 trillion deficit. That requires an enormous amount of willing buyers. Historically, foreign central banks and sovereign wealth funds have been among the most reliable buyers of US Treasuries — not because they particularly wanted to, but because the dollar's reserve status made them structurally required to hold it. The policies pursuing dollar devaluation are undermining that structural requirement. The market that the US depends on to fund its deficit is the same market the Accord's execution is gradually alienating.
Section II
THE DANGEROUS ELEMENTS — NOT YET ENACTED, ALREADY BEING PRICED
The three elements not yet enacted — forced bond conversion, user fees on foreign holders, and yield caps — are the most dangerous elements of the Accord. They are also the most logical next steps if the already-enacted measures prove insufficient to achieve the goals the Accord seeks. And the bond market does not need these measures to be enacted to price in the risk they represent. It only needs to believe there is a meaningful probability they might be.
1
Forced 100-Year Bond Swap — Selective Default by Another Name
This proposal would require foreign official holders of US Treasuries — the central banks of Japan, China, South Korea, and others — to exchange their liquid, tradable bonds for 100-year non-tradable securities. Those new bonds could not be sold. They could not be used as collateral. They would mature in 2125. In practice, this is a sovereign default. The US has never defaulted on its obligations. The moment it does — even partially, even dressed in legal language — the foundational assumption of the global financial system (that US Treasuries are the world's risk-free asset, redeemable at any time) is permanently broken. Every financial model on earth uses Treasury yields as the baseline "risk-free rate." If Treasuries are not actually risk-free, every model needs to be rebuilt from scratch. The downstream repricing across every asset class globally would be immediate and incalculable.
2
User Fees on Foreign Holders — Restructuring Dressed as Policy
Charging fees to foreign central banks for holding US Treasuries is a softer version of the same mechanism — it reduces the return on holding US debt, making foreign institutions less willing to hold it. From a foreign reserve manager's perspective, being charged a fee for holding an asset you were once paid to hold is a form of expropriation. The rational response is to sell. If major foreign holders begin systematically reducing their Treasury holdings — faster than they already are — the US faces a structural shortfall in demand for its debt at a time when it is issuing more than ever before. The yield implications are severe.
3
Fed-Treasury Yield Caps — Fiscal Dominance Made Official
Formal coordination between the Federal Reserve and the Treasury to cap long-term yields — a policy called "yield curve control" — was used in World War II and has been employed more recently by the Bank of Japan. It means the central bank commits to buying whatever quantity of bonds is necessary to keep yields below a specified level. In the US context, this would be fiscal dominance institutionalized: the Fed explicitly subordinating its independence and its inflation mandate to the government's borrowing costs. Yield curve control in Japan caused significant inflation and currency weakness. In the US — the world's reserve currency — it would likely trigger exactly the foreign selling and currency flight it is designed to prevent.
⚠ The Probability Problem — Why Markets Price Unannounced Policy
The most important insight about the Mar-a-Lago Accord's dangerous elements is this: they do not need to be implemented to affect market behavior. Markets are forward-looking. If investors assign even a 10–15% probability to the forced bond conversion being implemented in the next two years, they demand a higher premium for holding US Treasuries today — because the expected value of holding Treasuries includes that 10–15% chance of a severe adverse outcome. That higher premium is the term premium widening that is already visible in Treasury markets.
As the Accord's logic is pursued further, as dollar devaluation continues, as trade relationships deteriorate, and as political pressure on the Fed intensifies, the probability that investors assign to the dangerous elements being implemented rises. The risk premium rises with it. And rising Treasury yields — the direct consequence of that risk premium — make the fiscal situation worse, which increases the political pressure to implement more of the Accord, which raises the probability further. This is the specific feedback loop that makes Section 05 dangerous: it is self-reinforcing in the direction of escalation.
Section III
THE 1985 PLAZA ACCORD — WHAT WORKED THEN, WHY IT'S DIFFERENT NOW
The Mar-a-Lago Accord is consciously modeled on the Plaza Accord of 1985, in which the G5 nations (US, Japan, West Germany, France, UK) agreed to coordinate currency interventions to weaken the dollar. The Plaza Accord worked. The dollar fell 50% against the Japanese yen and the German mark over two years. US trade competitiveness improved. American manufacturing benefited.
The differences between 1985 and 2026 are more important than the similarities. In 1985, the US ran a structural budget surplus in several years and its debt-to-GDP was around 40%. The US was the world's largest creditor nation — it was owed money by the rest of the world, not the reverse. The Plaza coordination was voluntary and genuinely multilateral — trading partners agreed because they also saw benefits from adjustment. The global trading system was not under simultaneous challenge from tariffs, sanctions, and geopolitical realignment.
Today, the US is the world's largest debtor nation. Its trading partners have less incentive to cooperate because tariffs and sanctions have damaged relationships. The dollar devaluation the Accord seeks makes the US's debt cheaper to service in real terms — but it also makes the purchasing power of every dollar held by foreign investors smaller, which is precisely what reduces their willingness to continue holding it. The policy that solves the trade problem creates the debt-financing problem.
"The Mar-a-Lago Accord is not just a policy document. It is a statement that the United States is willing to restructure the global monetary order on its own terms, without the consensus that made the Plaza Accord work. The difference matters enormously."
— Council on Foreign Relations analysis, January 2026
⚠ Integration Point — How Section 05 Connects to the Broader Crisis Map
The Mar-a-Lago Accord sits at the intersection of every other risk documented in this report. The bond vigilante dynamics of Section 02 are partly driven by the risk premium investors demand for holding the debt of a government that is actively contemplating restructuring that debt. The dollar erosion of Section 06 is the direct result of the Accord's implementation — and that erosion feeds back into import prices and inflation, deepening the stagflation trap of Section 03. The foreign creditor withdrawal documented in Section 01 — China reducing its Treasury holdings from $1.3 trillion to $730–780 billion — is a rational response to the Accord's logic being executed.
The domestic consequences reach further than the financial system. A weaker dollar makes imported goods more expensive — food, electronics, clothing, cars — which is a direct inflation tax on American consumers. It makes foreign travel more expensive. It reduces the purchasing power of retirement accounts denominated in dollars. For the bottom 60% of earners who have no international assets and spend most of their income on domestic consumption, dollar devaluation is a straightforward reduction in living standards.
The dangerous unimplemented elements of the Accord — the forced bond swap, the user fees, the yield caps — represent a threshold. If crossed, the consequences are not merely economic. They represent the United States breaking the implicit contract that has underpinned the global financial system since 1945. That contract, once broken, cannot be restored by any policy action. It took 80 years to build. It could be destroyed in a single announcement.