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Full faith and credit of the United States...hmm [1]
['This Content Is Not Subject To Review Daily Kos Staff Prior To Publication.']
Date: 2025-02-22
The US dollar is the world’s currency. The American economy benefits from this dominance in ways large and small. China’s biggest wet dream is dislodging the dollar from its pedestal.
We fund our government with tax revenue and the sale of US bonds (Treasury debt), as well as other less substantial revenue streams. The US has a fiat currency. In other words, its value in the world is based on people’s faith it will remain a stable currency. That’s it, nothing else. Simply a faith that the US will continue operating as a successful state.
If anyone has been watching the Russian bond market like I have, it’s clear that Putin’s disastrous governance has flushed his bond market down the toilet. In Russia’s case, this is a big part of its plunge into economic darkness. The US is not Russia, but Putin’s bond market turmoil is still valuable as a cautionary tale.
For years, China, Japan, Europe, Saudi Arabia and others, have taken on our Treasury debt without a whimper. It’s considered the safest debt in the world largely because our government and economy have been stable. I believe Trump, and the Republicans in Congress are destroying this valuable US interest.
The GOP’s proposed multi-trillion dollar tax bill, if passed, will be one more step toward this destruction. Their proposal is obscene. They want to give a tax reduction to those who already have 90% of the money. And, these are the same ones who have historically benefited the most from stable US debt. These pigs have had their noses at the trough for too long without a butcher’s bill.
Their feeding frenzy and Trump’s abuse of our allies is likely to reduce US Treasury demand around the world. It doesn’t have to be a complete demand collapse to cause serious economic problems for the US. If the trends we are seeing now, toward rising inflation, declining consumer confidence, trade wars, and federal labor turmoil, continue, then even a moderate reduction in Treasury demand could have disastrous effects on US government borrowing and spending.
I think it unlikely the US will default on its debt, but it is possible. Many experts say it’s ridiculous to believe the US dollar could lose its dominance as the world currency. That may be true, but even if it just loses some of its glitter, the tarnish could push this country into an economic downturn with a very long reach.
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