Chapter 9
How To Collapse A Global Reserve Currency Without Really Trying
The United States dollar has dominated the global economy for nearly a century. Since the end of World War II, the dollar has been the world’s primary reserve currency — the unit of account in which oil is priced and international debts are settled. The dollar, and dollar-denominated debt, are the stores of value stocking central bank vaults around the world. This “exorbitant privilege” has given the U.S. immense geopolitical and financial power. It could borrow cheaply, spend freely, sanction adversaries at will, and export inflation without immediate consequence. But the dollar’s strength is also its weakness: It is built on ever-expanding debt. The U.S. does not have to save in order to spend. It simply borrows — and prints. Other nations are expected to work, save, and produce goods and services for export to the world — while the U.S. mostly exports paper currency, and inflation.
But this 80-year-old arrangement is showing its age. Logic dictates that the U.S. debt cannot grow forever. As discussed in Chapter 3, the national debt is now approaching $38 trillion, with no plan – and perhaps no possibility – to ever pay it down. We “manage” this debt by servicing the interest payments, and turning a blind eye to the principle obligation. And since we lack the political will and discipline to reduce the national debt or balance the federal budget, the gargantuan debt just continues to grow, every single year. For fiscal year 2025, interest payments on the national debt are projected to total about $952 billion, more than we’ll spend on healthcare ($889 billion), Medicare ($848 billion), or National Defense ($820 billion). How much larger can the debt get before the house of cards comes crashing down? No one seems to know. But with no plan whatsoever to keep it from continually expanding, it seems we’re destined to find out someday.
