alt Hacker NewsFAFO* goes both ways. US is in an interesting spot. We have a 1 one-time reset button: Since we’re the reserve currency we can inflate out debt away at the cost of inflation. If and when we do that the world will pivot away, maybe, to another currency. At that point the great American tailwind will be over and we’ll have to be competitive at the global stage — interesting to see what that means, if anything.
As an analogy, imagine you’ve accumulated enough debt and bought yourself a house, a car, and invested in enough productive unseizable assets (very important), like a farm and whatnot, to sustain yourself. what’s the point in servicing your debt? If the only consequence is no one will lend you again, you already have everything so whatever, right?
I can poke a million flaws in this logic, but I _think_ that’s the megasupersmart move the current administration is gunning for. Hell do I know how it will pan out, but I have a hunch. FAFO I guess.
*fuck around, find out (◔_◔)
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I think the flaw in your thinking is that you assume the US is self-sufficient. If that was the case there would be a very small trade deficit and given the sherade about tariffs early last year, this is not the case (IMHO).
As an external person which is actually benefitting from Trump's shanenigans (I am paid in CHF, which are worth more and more as they are considered probably the safest currency there is) I think the current US Administration wants to thread the needle by devaluating the currency enough that debt becomes manageable and exports benefit from a weak USD while remaining the reserve currency.
However, I also believe that for this plan to work you shouldn't alienate your closest allies as they will go trade elsewhere, impose tariffs on you, or trade in Yuans just to spite you. So you are left with a weak currency that is not as important anymore and basically unchanged exports.
Any country willing to not be lent to again in future can default on their debts, nothing special there; the actual clever bit is stringing out the ability to accumulate debt at relatively low cost into decades of investment... something they seem to be willing to sacrifice to well and truly own the libs. The sadder reality is that there isn't any megasupersmart strategy, just an ageing buffoon with the foreign policy savvy of a middle schooler who's just heard about the Louisiana purchase and tariffs, and a bunch of grifters hanging on.
The experiment in "is America too big to fail" is probably going to result in a "not quite" answer, but they're really giving it a go.
If you don't service the debt, your assets will be repossessed and sold off.
Foreigners don't need to own fixed-interest securities. They can also invest in other US assets, such as the stock market. That's quite a good inflation hedge, so long as the US remains a good place to invest.
There is no secondary reserve currency the world can look to. The world is becoming increasingly hostile and unstable, and no one is in this position, or seems fit to serve this position, in the next twenty years. Its also the case that the US still has a goal of maintaining low inflation, and I think its likely we would pursue austerity on benefits before we would intentionally succumb to higher levels of inflation (as we already have).
Or, you grow the pie. Look to history to learn how empires of the past grew their pies.