Let’s discuss the right and the wrong answers.
At International Economic Forum today, Putin says, “Any country can at any moment be deprived of access to its legitimate assets, which are placed in dollars or euros, as well as to Western financial payment infrastructure.“
That is correct.
And it’s why there is global talk of dollar avoidance. But how easy is it?
Santiago Capital
The rest of the world can set up new currencies, new payment systems, and new financial infrastructure. But there is nothing they can do to make the USD fall vs its fiat peers if US does not want it to happen.
I am surprised by that answer because I believe Santiago Capital knows better.
I agree with Santiago on continued dollar dominance for reasons explained below.
However, I disagree with the idea other nations can do nothing if the US does not want it to happen.
China can force the dollar dominance issue.
Five Things China Can Do
- Float the yuan
- End capital controls
- Stop export subsidies
- Be willing to have trade deficits
- Build the world’s largest (or very large) global bond market.
China could do points 1-4 immediately, and there is not a thing the US could do about it. In fact, the US would cheer, and so would the rest of the world.
Point 5 would follow, eventually.
You might say China won’t do those things. And I agree. Which is why I expect US dollar dominance to continue.
And it’s why BRICS and BRICS-solutions are nonsense as well. BRICS won’t go anywhere without China, and China is going nowhere.
What About the Euro?
The Euro flunks point five. It is fundamentally flawed by design, and that design is etched in a treaty that’s nearly impossible to fix.
The structural flaw is a lack of eurobonds. There are only bonds of Germany, Spain, Italy, France, etc., all trading with different interest rates and different default risks.
Moreover, it takes the EU decades to do anything significant because of its consensus structure. One nation can, and frequently does, hold up trade agreements, budget proposals, and defense proposals.
And finally, Germany runs a persistent and massive trade surplus, exporting significantly more goods than it imports.
So, Germany flunks point 4 as well. The EU itself runs a trade surplus.
Questions of the Day
Q: Why does the world accumulate dollars?
A: The US runs a trade deficit with most of the word.
As a direct result of huge persistent trade deficits, the world accumulates US dollars.
Q: What does the world do with the dollars?
A: Recycles them into US assets mainly US Treasuries and Agencies.
Q: Is this why the US has the world’s biggest bond market?
A: Yes, that plus huge recurring fiscal debt and a mountain of debt held by the public to the tune of $31 trillion, $39 trillion total.
Q: Can the US do anything about this?
A: Only superficially, without a complete global financial rework.
Trump tried tariffs. Well guess what? Tariffs didn’t work and won’t.
Tariffs will not stop deficit spending in congress or the resultant flood of US dollars. And it did not even make huge dents in the trade deficit.
The US could implement capital controls, put a tax on buying US treasuries, or put negative interest rates on foreign held treasuries etc.
But all of those would involve serious risks and possibly start a currency crisis. Importantly, those non-solutions would not fix fundamental problems.
The Fundamental Problems
- There is no brake on deficit spending. Congress can and does keep raising the ceiling and spending more and more.
- There is no brake on trade deficits.
Gold provided those brakes. When Nixon closed the gold redeemability window in 1971, all brakes were removed.
The US consumer became the buyer of last result. Later on, there were no brakes on Chinese exports.
China can fix this but doesn’t want to. Germany does not want to fix its reliance on exports either.
There is a lot of moaning in all corners of the world. However, China, the EU, and the rest of the world are all more happy with the US being the consumer of last resort than they are to fix the fundamental problems.
Congress is happy to slosh around more dollars too. At the first sign of trouble Congress and the Fed are johnny$-on-the-spot. Republicans only preach fiscal conservative ideas when Democrats are in charge.
Heck, we have massive deficits and a mountain of debt further piling up without even being in recession.
What to Expect
Nonsense about BRICS has been endless for over a decade. And it will continue.
So will nonsense about the dollar heading to zero and countries doing something about the dollar.
But inflation is a problem. Stock market bubbles are a problem. Deficit spending is a problem.
Sustainability of the Setup
Q: Is this sustainable?
A: No.
Q: When does it end?
A: I have no idea, nor does anyone else.
Q: How does it end?
A: A global currency crisis.
Q: What’s the role of Bitcoin in the crisis?
A: None.
Q: What’s the role of gold following the crisis?
A: I don’t know.
Q: What about the petrodollar?
A: Good question. See below
On April 14, 2026 I commented The Petrodollar Theory Is Dead. It Never Made Sense to Begin With
Several readers asked me to discuss the petrodollar. Here are two pertinent theories.
Also see What Does CFR’s Brad Setser Say About Petrodollar Myth and Reality?
“The glory days of the petrodollar are over,” says Brad Setser.
That’s assuming there ever were glory days, something that Setser definitely hints at in his post.
Dollar avoidance is not that easy or it would have happened in a major way already.
Offshore US Dollars Surge Over the $14 Trillion Mark, Where’s De-Dollarization?
Finally, please see Offshore US Dollars Surge Over the $14 Trillion Mark, Where’s De-Dollarization?
Is de-dollarization happening? If so, where and how?
There is nothing strange about the surge in dollars. Indeed, it’s the expected behavior.
Expected Behavior Explanation
- The US runs trade deficits every year.
- Those dollars accumulate overseas
- Other US dollar funding originates overseas.
My 2019 post is still accurate.
Flashback September 19, 2019: Nixon Shock, the Reserve Currency Curse, and a Pending Currency Crisis
Forget the Yuan
Many expect China to overtake the US and for the yuan to replace the dollar as the world’s reserve currency.
Such talk is nonsense. The reserve currency holder needs to meet several requirements of which China meets none.
Reserve Currency Curse
The reserve currency irony is that despite protestations of US advantage, no country wants the alleged advantages the US purportedly receives.
Trump would be very pleased if the Yen, yuan, and Euro rose vs the dollar, and US exports rose.
Does Japan want a strong currency? China? The EU?
Since no one really wants it, having the reserve currency is best viewed as a “curse” not an “exorbitant privilege“.
Trade Wars and Currency Wars
If you peel off the layers hidden over the years, Trump’s trade wars are really an effort by Trump to shed the “reserve currency curse“.
Global Consumers of Last Resort
The US is stuck with the reserve currency because we have the largest, most open capital markets in the world, the world’s largest bond market, and a far better business climate than the EU, China, or Japan.
To ensure the US remains the curse holder, the EU and Japan have negative rates, China does not float the Yuan but props up corrupt SOEs, and Germany punishes the rest of the EU.
A currency crisis awaits as the current path is not sustainable.
Timing and conditions of the crisis are not knowable. It can start anywhere but I suspect the EU, Japan, or China as opposed to the US.
Meanwhile, I suggest holding at least some gold.
This is unsustainable but no one can tell you when the system finally has a heart attack over it.
Meanwhile, dollar avoidance is not that easy or it would have happened in a major way already.
China, in particular, is not interested in doing what it takes. It wasn’t interested in 2019 and it still isn’t today.
What Would It Take to End US Dollar Dominance Over Global Transactions?
Answer: Two and a half more years of Trump.
Getting him out of the Whitehouse is the first step in fixing every problem we have.
Trump’s policies like Tariffs and his aim for a Trade Surplus. Triffin’s Dilemma or Paradox clearly mansions that a Nation cannot have a Trade Surplus and an ability to supply its Currency for Global trade at the same time.
Countries that run USD surpluses (which is most of them) no longer necessarily need to recycle the USD back into Treasuries or US-based assets.
The BRICS are just holding the USD in their own banks and using them to finance their own trade, without the dollars going back to US banks. That is why Bessent and Tether are hand-in-hand trying to stop the practice in USDt, but it won’t matter in the long run. Next time the traders will just use different wallets, or move the money faster. Or use something besides Tether.
Everybody is happy to trade in dollars, and they will keep doing so. But everybody hates US banks, and they will keep going around them.
Maybe a bit off topic, but the linked missive is a good explanation of the effects of federal reserve foolish interest rate policy:
There Is No Reprieve in the Fed’s War on Savings | Mises Institute
I feel like stuff like this comes out of the 19th century. It just has nothing to do with the modern world. Credit creation is Bank mediated not Fed mediated. Deficit spending is stimulative but as a matter of accounting bond sales take Bank reserves out of the system.
The key to dollar dominance is offshore dollar credit, which is growing quite fast. I don’t agree with Mish the Middle Eastern dollar credit centers are mythical. Offshore dollar credit from the Middle East and Africa is growing faster than that from other regions.
Eventually, the eurodollar / offshore dollar credit system will get the “central bank” it needs. It’s just too important to too many people. That’s what the dollar swaps are about to it that is an ad hoc system.
Simple – when people of influence and authority decide they want something else.
Next question.
When does the status quo brake? Deficits, etc get serious?
My favorite answer has been from the legendary late Alan Ableson the great former Editor if Barrons: “It matters when they say it matters”.
“They” being the vox populi. The public’s voice on the markets. When the narative goes through a paradigm shift. But that’s also why it’s so dangerous. When the issue becomes mainstream that does not resolve easily or quickly.
Gold provided those brakes. When Nixon closed the gold redeemability window in 1971, all brakes were removed.
I have a little different take on the brakes. Gold was a brake with no emotion or political agenda, but when politicians were being disciplined via the draining of gold reserves, the observable part of its enforcement mechanism, politicians, namely Nixon, removed dollar convertibility to gold to protect the pile of gold rather than alter spending and protect US fiscal policy. (Note: the pile of gold may be gone given the energy spent to prevent an audit.)
There was still another brake, that being free market derived interest rates, or the cost to service the swelling debt. That break was working well in the late 1970’s into the early 1980’s, with Volker’s massive monetary tightening. Afterward, free market interest rate price discovery was ignored for roughly 40 years of fed fixing interest rates ever lower, economists promoting perpetual deficits if the economy being taxed was growing faster than the deficit, modern monetary theories were proposed to justify more spending, onset of we owe it to ourselves economic blasphemy, and we can always print our way to solvency. Obviously, none of the gimmicks worked or we would not be in our current mess.
Fiscal mismanagement has led us to the Fed’s catch-22 position we are in; abandon yield curve control let the free market determine interest rates and go broke trying to fund existing debt or print and buy federal debt destroying dollar purchasing power and every dollar denominated asset. Either path encourages misallocation and destructions of capital, the very resource needed most for repair. The ball is in Congress’ court to cut spending below revenue, a near political impossibility or Mr. Market will cut where we may least like cuts, that is a consequence when responsibility is shirked.
Volcker never tightened monetary policy until he imposed legal reserve requirements on NOW accounts in April 1981.
Wasn’t Volcker supposed to control nonborrowed reserves? Volcker targeted non-borrowed reserves (@$18.174b 4/1/1980) when at times over 100 percent of total reserves (@$44.88b) were borrowed (i.e., absolutely no change from what Paul Meek, FRB-NY assistant V.P. of OMOs and Treasury issues, described in his 3rd edition of “Open Market Operations” published in 1974).
I.e., monetarism has never been tried
Raising interest rates to around 20% isn’t tightening?
QE worked without creating the massive inflation people constantly predicted. MMT is inevitable. With an aging population and a huge debt there simply is no other alternative. Monetization across the globe must happen to deal with demographics if nothing else.
When you say MMT, people dismiss it out of hand but when people go all 19th century and opine about gold it’s taken seriously. I don’t understand why.
To answer the question of the title, CPI inflation of 15% might do it. That is very likely something that will not happen… at least until after the next recession brings forward the insolvency of SS/Medicare & the US has $50 billion in explicit federal debt to fund.
This situation about being a reserve currency is called Triffin dilemma, as you probably know. The reason for US leaving the gold standard was, that there were already too many dollars on the market compared with US gold possessions. The gold peg of dollar being a reserve currency was replaced by petrodollar, a monetary circulation, that has lost most of its meaning by now.
Problem with USD is the long interest rates have become almost uncontrollable without FED QE. If US trade and government spending (fiscal deficit) is reduced, dollar supply goes down and the demand for US debt goes down, which means interest rates go up, making dollar stronger and triggering global liqudity and loan crisis. Only way coming to my mind about getting out of Triffin dilemma is replacing current reserve currency status with something like Japanese model. If oil goes up to 200$, this could trigger it. Add some capital control and force some of the oil and AI windfall into government bonds, add a “small” round of FED QE, and “Smeagol is free”. Of course it is all a fantasy, but I Ibelieve your weasels in US can actually do it to save dollar, even if it comes at the expense of global fiscal collapse.
“If something cannot go on forever, it will stop.”
— Herbert Stein
Iranian state media: Supreme National Security Council has called an emergency session following Israel’s strike on Beirut’s Dahiyeh district.
They promised to strike Israel, cancel ceasefire if Israel strikes Beirut.
I never promised no new wars
https://www.tampafp.com/trump-denies-breaking-peace-pledge-vows-to-blow-the-hell-out-of-iran-if-nuclear-deal-fails/
“Any attack on Beirut will have severe consequences and will lead to a full-scale resumption of war,” Iran’s Foreign Minister Abbas Araghchi said three days ago.
This is entirely intentional on the part of Israel. Provoke a response from Iran, then run screaming to the Americans.
There are two storm clouds, no longer small and no longer on the horizon, that have the potential at some indeterminate future date to “wash” the U.S. $, and the foreign-E-$, “down the drain”. They go by the name of “foreign trade deficit” and “domestic federal deficit” (Twin Deficits Hypothesis).
These deficits have an insidious, if not an incestuous, relationship. Positive interest rate differentials are significantly responsible for the dollar’s exchange rate support (DXY Pivot ↑).
And an “overvalued” dollar in turn is the principal contributor to our burgeoning trade deficits (on-shore CNY Pivot ↓ and off-shore CNH Pivot ↓).
And as Professor Pettis puts it, “Excessive use of the U.S. dollar internationally actually forces up either American debt or American unemployment”. As: “many of the new cross-border investors were governments”…”foreign governments recycling the inflow of both foreign direct investment and current account surpluses.”
All prudential reserve banking systems (the E-$ market) have heretofore “come a cropper”.
“https://nationalinterest.org/feature/who-really-killed-the-gold-standard-12435
“Who Really Killed the Gold Standard? | The National Interest
Thx for link
Mish,
I think this article has a bias towards the way things work today. Prior to dollar dominance, there was pound dominance, and the UK didn’t meet the 5 points in the 19th and early 20th centuries. The US dollar was dominant from WWI through 1971 and the US didn’t meet the 5 points at that time.
Currency simply acts as an actual value transfer between two parties in a trade. If I want to make a trade where two items aren’t valued equally, currency allows me to make the trade anyway without either unfairly gaining or losing value. The dollar is just the currency of currencies today. A trade between Japan and India, between Yen and Rupees, may leave unnecessary value on the table, but both parties agreeing to use dollars allows for a fair exchange. Dollars act as a 3rd party currency abstraction.
One can easily imagine countries coming up with a different abstract trading currency. Maybe a global central bank crypto with strict rules that are automatically audited globally by multiple parties. The interesting part is how to use banking to create investment to create economic growth and allow the currency to grow at the same pace. You would want a system that is scalable. One that works fine regardless of the number of countries using it.
The reason there was no point 5 in the 19th and early 20th centuries is because all currencies were backed by gold. So it doesn’t make sense to compare things then to how they are now.
He was saying they did not meet the 5 points, not just point 5.
I think Brent Johnson displays good nuance on the interviews of him recently. I think his tweets are worded like that because every 1/3 article on Zhedge for the last 5 years is that the dollar is collapsing when it’s literally the opposite. He probably just wants to fluff his feathers. In financial world i really feel like Mish is one of the few showing the larger picture to the case, thanks for the article. I would say he should pick up more on what’s going on with stablecoins, that’s a big play I think for the US. Just reducing friction for trading of the US dollars is a big deal, and it’s crazy that only the US seems to be taking that seriously with things like the GENIUS act.
I believe that Brent has also said that Stablecoins will flourish.
The US dollars I use have lost serious value, not sure where you get the idea “that the dollar is collapsing when it’s literally the opposite”. The DXY index is not a measure of dollar value when the index compares various fiat currencies, all losing value.
Reply was meant for/to Spider Monkey.
Excellent article, Mish. Appreciate the blog a lot and the conversation it stimulates
The circle I can’t square on this topic is the contradiction between the Chinese wanting hegemony but not wanting to change their economic model. It seems to me one way or another they will have to eventually – but the when, why, and how are hard to discern. And historically it’s not usually a voluntary decision – because the downsides are real.
The Chinese have a lot of structural problems but they are also hell bent on being #1. And they have shown they are able, whether it’s a space station, AI technology, car technology, raw materials, etc. For the last 20 years they’ve proven the doubters wrong time after time
things that can’t go on won’t and the current dollar system will be a roadblock to Chinese aspirations, and they might be forced to deal with downsides of hegemony to meet their aspirations. Human nature is a bitch
“The Chinese have a lot of structural problems but they are also hell bent on being #1.” China is the global economic hegemon. I have no reason to believe they want to be a military one. They actually will do much better off without going that route if they can make the US taxpayer pay for a military that benefits global economic stability.
If you guys want to learn about the monetary system just tune to the YouTube channel and type Jeff Snider that might open your eyes…
I listen to Jeff Snider as well. He has a few Free Podcasts a week.
The Stock Market Is on the Verge of Doing Something Not Witnessed in 155 Years — and the Implications for Wall Street Are Frightening
https://finance.yahoo.com/markets/stocks/articles/stock-market-crash-under-president-082600233.html
US Global Dominance ends with the inability of foreign countries to service their US Denominated debt. The system is MAED with NOA. Mutual assured economic destruction with no other alternative.
1) The world borrows in dollars and needs dollars to pay back their own loans. It is not all about trade but capital movement. Collateral is needed in the form of treasuries for a piggy bank to service debt. The dollar is the great mover of capital around the world.
2) The Fed can make bank reserves and (borrow) money from banks and buy treasuries. The debt will always be serviced if there is money in the bank and the Fed is cooperative. The US will never default.
3) Trade imbalances should be taken care of with exchanges rates. Trade imbalances are therefore due to other factors including capital controls, government subsidies and other controls such as tariffs and regulations that interfere with markets. They work for a while but unintended consequences ripple through their economy.
The sheer mismanagement of the Chinese economy can be seen through the building craze, steel over production, solar panel over production, bullet trains with no riders. These are wastes of capital and the Chinese are starting to pay the price. Increased debt loads are returning less back and contributing to the demise of the Chinese economy. The Yuan should be half the current exchange rate. At some point, the cost of supporting the Yuan will be so great that in the future the exchange rate will normalize, the dollar denominated loans will double in Yuan terms. The same thing happened to Japan, South Korea and other multiple other countries. Does it make sense that Chinese and Indians are buying gold and silver?
4) Debt is money and if the United States slows the growth of debt(money). The dollar goes up. If the dollar goes up, it exports inflation. The world is already having trouble with the dollar at lower levels of 100 let alone at 115 during covid. India, Turkey and other countries are having problems getting dollars and is being reflected in their exchange rates. In turn affect their ability to service debt and attract capital(dollars).
5) One little known contributor to the Great Depression started with high-rate European bonds defaulting in US banks. The depression was started with the destruction on debt(money) lead by a shortage of collateral; think US Treasuries. We live in debt-based money system. Turning down the debt is turning down money supply.
Dollar dominance ends when credit cannot be extended in dollars and alternative means must be chosen. Mutual Assured Economic Destruction with No Other Alternative.
Excellent article!
The US owns he quoting system and credit rating system as well as the bank transaction clearing system. This combination underpins the relative stability that positions the dollar as a currency of unusual strength.
Sidebars: Musks latest offering fell flat as it was not admitted to the S&P 500 to force fund buying of the small float. Epic FAIL!
Bitcoin is testing $60,000 and looking weak…
Think “Wealth Effect” if Friday’s little 700 point down day has meaningful follow through.
This is a good article. Thanx for posting it. I agree with what you say, and find it refreshing when you say “I don’t know.” (saying “I don’t know” is the beginning of wisdom and science..) Given USA debt levels and trade deficits, the current global economic process-model really looks unsustainable. You suggest a “currency crisis” as the mechanism where failure-breakdown may occur. Makes sense – but what triggers that? It seems clear US-dollar will continue to be world reserve currency, right up until the day it isn’t. I’ve been trying to model what might happen to change the current – obviously unsustainable – structure. What could cause loss-of-confidence in the US-dollar? And I keep coming back to some kind of major military event. A 1940’s-style atom-bombing of New York City? The sinking of several US aircraft carriers? A series of Ebola-virus outbreaks in several US cities? I really have no idea what the trigger catalyst will be.
The Second World War ended the British Pound as a global reserve currency. The Brits had post-war capital controls right up to the 1970’s. They won the war, but lost the peace, was the view.
Could USA find itself in a similar situation? I don’t think so. The USA is large enough that it really could live fine with no international trade at all. Island nations like the UK and Japan have to trade, or go hungry.
But a GDP-changing military assault that was successful enough to move the economic needle for America, might impact dollar valuation, if the world suspects US hegemony was at risk. I worry about this, because history suggests this is how imperial models are taken down.
What will third world governments learn from Hormuz crisis? That it is better to invest their dollars into their own physical strategic reserves of oil&gas, fertilizers, grains, metals and oil refineries than keeping them in US Treasuries.
Think of countries like Vietnam, Thailand, Indonesia, India, etc.
That will limit the US Treasury funding base.
The infrastructure for those strategic reserves and refineries (tanks, pipes, pumps, elevators, steel) will be delivered and funded by Chinese companies in yuan.
Future of US dollar as a reserve currency? Slow crippling (not disappearance) by thousand cuts. Dollar will always be reserve currency because the US has vast newtork of vassals and it will always use tools like CIA and nuclear threat to coerce them using USD.
Big question is if US financial crisis hits and what its impact will be on dollar reserve status. Think of coverging avalanches of private credit bust (many AI related loans parked there), credit card+car loans+student loans melt-down, commercial+office real estate crisis and private equity refinancing launched by persistently high inflation and interest rates within the K-shaped economy which works well for 20% and rather badly for 80%.
If Trump decides to bail out financial sector US federal debt will baloon again and some foreign investors will get cold feet.
Dollar dominance will end. I know that because it’s happened a number of times to different dominant currencies. America is not solvent anymore. And in the next Great Depression, there will be an economic sea change. It won’t be good for Americans. I hope I don’t live to see it because it will look worse than the 1930s, and Americans are not used to that kind of hardship.
Agree. I think it will look different and has started already in some ways. The hardship starts with eating less and lower quality food. That leads to more diseases and health issues which leads to eventual death due to unaffordable health costs. Health care bills are still number 1 cause of bankruptcy.
Your title supports all the people that think there’s something magical about the need to acquire dollars in order to transact (like the petro-dollar). But the truth is that currencies are fungible and every few days the forex market turns over more money than the annual value of global trade. In fact you can transact in virtual dollars and people do. Even credit is conjured up in virtual dollars.
The crucial thing is the store of value function, people putting their money (reserves) into US treasuries and other assets. This is basically completely voluntary [aside from accumulated trade surpluses], and people will stop doing it as soon as there is a more convenient alternative [there isn’t, apparently]. The role of the dollar in transactions is an unavoidable downstream effect of the preference for dollar reserves. But there is no enforcement mechanism, as is widely believed and stated.
There won’t be another alternative ‘at scale’ until someone else (China or Euro) wants to run massive deficits and let the US run surpluses. In other words you can’t store surplus in Yuan unless China runs a deficit because how can you buy ‘debt’ from countries that don’t have any.
I agree. One thing is the currency used in trade and another the currency of reserves. It’s convenient if both are the same, but it’s not an axiom. As long as the reserves are liquid, say gold, they don’t have to be the same as the currency used for trade. Not to mention that the reserves may be in multiple currencies, like those of the major trading partners.
Another president like Trump and Europe will have to consider how to fund defence much more seriously. This may lead to some kind of common bond similar to what the EU did during covid.
However I suspect a more likely path is that the next president is more friendly to allies and so the EU defaults back to apathy. Although Trump thinks he is making the US look strong, having subservient countries that buy your weapons without developing their own capabilities is in the US’s advantage.
Europe would have no defense concerns worth talking about, but for America’s wars and empire.
Skip currency and trade physical goods in bulk. It’s slower, but the lack of debt stabilizes the financial system.
Investors need to understand what’s different about today’s gold environment.
Gold has become a reserve asset for the most knowledgeable of investors – Central Bankers!
Gold has returned to fulfill its role as a monetary asset to be used as collateral. Compared to
the amount of financial claims in the system, the amount of gold is microscopic. When investors
finally realize this – the game changes – and gold will look incredibly cheap!
Fair enough but the world can wreck dollar based sanctions by setting up alternatives
Keep taco in office will likely guarantee it.
Can’t you keep your Trump Derangement Syndrome out of a legitimate discussion on the dollar?
Calling something “Trump Derangement Syndrome” is an argument by thought terminating cliche.
I’m old enough to have been sure the breaking point was $20T deficit (and probably about $100T in unfunded liabilities back then). Obviously that didn’t happen and we’re approaching double that now. So I don’t know if nobody knows when it all falls down … but I know I don’t know.
Yes I always imagined $25T would do it. As it is the US gov had to find lenders for $11.8 T in 2025. That was $1.9T in current year deficits and $9.9T to fund previous security issues coming due. That is a lot of borrowing! At what point does the willingness to lend stop? Interest rates will go up first will which will create a cycle of ever increasing deficits and a debt spiral. One can look at Japan which compared to its GDP is the most indebted nation in the world. But in absolute dollars US is number one. The sheer volume of debt is difficult to comprehend. One way to look at it is that The total value of all of the real estate in New York City is $2.8T so the feds owe 14 New York Cities worth of debt.
I’m old enough too. America will collapse. The central bank has held it together with ZIRP, QE and other gimmicks. But in the end, when you ship your manufacturing off to a country that was your enemy for 50 years, that means you’ve lost the ability to make things like we used to. China is very advanced. The people suffer, they work hard, but they build amazing things in China and graduate 5 times as many engineers as we do.
Casino economies always fail
Always so informative! Love your work Mish, thank you!