alt Hacker News>They want to repudiate foreign held debt, or devalue it, by revaluation of the USD
Devaluing dollar does not reduce debt measured in dollars. It only makes US debt less valuable to forefingers.
Devaluing dollar can work well only if foreign investments into US stop or reverse. "foreign investors at the end of last year owned 18% of U.S. stocks, according to Goldman Sachs" The trend has already reversed https://www.reuters.com/markets/us/foreign-demand-us-assets-... Killing foreign demand for US assets more permanently is possible but it means financial market crash.
What WILL happen is recession. Atlanta Fed GDPNow dropped from -2.8 to -3.7 percent in a week. https://www.atlantafed.org/cqer/research/gdpnow?date=2025-04...
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I certainly don't understand enough of economics, but:
- If everything overnight costs 20% more for the American consumer, it equals 20% less disposable income and less purchasing power.
- US companies, even the few ones not directly affected by tariffs, are going to be hit by less demand, and that in the aggregate is going to affect the performance of all American companies.
- So, it makes sense to dump as much American stock (and perhaps other instruments) as rationally possible.
The rest of the world is also going to feel the shock, though at this point is unknowable to what extent, and it also depends on the policies governments outside USA enact. In Sweden for example, we react to imported USA inflation by increasing central bank rates and catapulting the country into recession, and I totally see that happening in the next few weeks. Even it does not, it is what the public expects, and already many may be reigning in on consumption and investment. And dumping American stocks like crazy.
Foreign countries like Japan and China own around $1.8T in US bonds. These are valued in dollars, like stocks.
I thought the US gov is hoping that debt is relinquished as part of negotiations, is that not the case?
https://www.nordea.com/en/news/mar-a-lago-accord-explained-a...
https://think.ing.com/articles/mar-a-lago-accord-10-question...
https://www.forbes.com/sites/eriksherman/2025/02/23/why-trum...
https://www.lowyinstitute.org/the-interpreter/unpacking-mar-...