The United States has never been more vulnerable to an economic shock, given the mounting national debt that could debilitate the nation’s ability to tackle a crisis, according to nonpartisan fiscal watchdog, Committee for a Responsible Federal Budget (CRFB).
The CRFB has sounded the alarm over the national debt, which is growing to 100% of the GDP, a level not seen since World War II, claiming the country is “woefully underprepared” to tackle its next emergency - which according to its reports is nearly imminent in the near future.
The Washington-based think tank compared the current fiscal situation to past crises and found it to be the most vulnerable ever. The report mentioned that when the COVID-19 pandemic hit, the national debt was 79% of GDP, while the deficit was 4.6% of GDP. During the Great Recession, the debt was 35% of the GDP, with deficits at 1.1%. Before the Dot-Com Bubble burst, debt was at a similar 34%, but the country was running annual surpluses.
Today, the debt is roughly 100% of the GDP with deficits at 6%. Historically, during each crisis, the government’s response left the economy in a worse fiscal position. During COVID-19, the national debt rose by roughly 20% of the GDP, and it spiked by 35% of the GDP during the Great Recession.
This means the country has never faced an economic crisis with debt levels as high as today and fiscal deficits as large. Thus, "our nation is in a worse fiscal position today than it has ever been going into any kind of economic downturn or emergency," the CFRB warned.
Isn’t this true basically any time we have a recession? The economy keeps growing and therefore our capacity to service the debt keeps growing as well. That being said, the last 5 years have been especially brutal for debt accumulation and is unsustainable long term for sure
That's the point. Deficit spending is based on the "grow your way out of debt" ethos. But that's not happening, even during the massive boom from 2010 to COVID and then the post COVID boom, debt has outgrown growth.
Debt service now exceeds the defense budget, by a lot. 100% of GDP debt is seen as a red line for most countries, and the U.S. has well exceeded that. We're now in uncharted waters.
What a recession, even a mild one, might do to an already tenuous situation is anyone's guess. What happens when GDP craters, or even just decreases a little bit, and debt to GDP reaches 120%, 130%, 140%? Combine that with the ongoing exit from USD as the default world currency, bond yields have to go higher, making that debt even more expensive to repay.
There's the possibility of a runaway effect that is truly terrifying.
Let’s not pretend that it doesn’t matter to Americans. It doesn’t matter to the billionaires who have completely brainwashed the maga base. They’ll burn this country to the ground to make a buck and they control the airwaves to ensure that maga is mad at anyone but them
Doom gloom sadness and misery. They’ve been screaming recessionary end times for the last 4 years. I’m sure if you keep going you’ll be right eventually!
The type of money that Biden spent to get the country out of the previous recession is being spent by sociopaths on a war designed to increase the price of gasoline.
Like it or not, there will have to be a period of austerity coming up.
I know it’s a dirty word to speak in these Freedom-Loving United States, but we got way over our skis, long ago. Our Federal Reserve is more or less powerless except to print more currency.
The social safety net is already cut down to the bone. Everyone is broke and nobody has functional health care anymore.
The groups who need to bear the overwhelming brunt of this austerity are billionaires, corporations, and the military-industrial complex. It's their turn to pay up, because they're the only ones left with any money at this point.
No, it is not needed. What's actually needed is for billionaires to pay their fair share of taxes and not be given hand outs by the federal government at the expense of public support programs.
We want the same result. I hate it when people try to sound smarter by saying this. Like, yeah, buddy. We all know. Democrats and the left want billionaires to actually pay the taxes that they should be paying. Yes! But also tax them more too.
EDIT: OOP! I thought I was replying to someone else.
Or.. Maybe I am running on little sleep.
Anyway! The idea still stands.
No. Cut your pre-Trump military spending in half and tax your fucking BILLIONAIRES FFS. This is NOT complicated! The only thing trickling down is Trump's leaky diaper.
that’s exactly what needs to happen!!! hahahhaha. fucking royally shame him in history. make it the war he started and then ran our economy into the great depression from it. because if we don’t have the balls to impeach him, why not go down for being the ones that got ultimately fucked because of it?
All part of the plan, put the country far enough in debt with corrupt looting and defense profit taking that no safety net is possible. That’ll whip the poors into shape.
> Facts matter. Reputable sources are important. The truth will prevail.
This is the OPs quote on the users page
But they flood us with slop fake journalism websites like MarketRealist, a dubious source with an author who studied and is likely based outside of the us and has no first hand boots on the ground context to shape their reporting. Really tired of these bs sites spamming articles about america.
I guess I should open up some websites and spam global forums with constant sky is falling garbage.
Market Realist has a HIGH FACTUAL REPORTING rating along with a HIGHLY CREDIBLE rating, due to proper sourcing and a clean fact check record from MediaBias/FactCheck. They are an American outlet headquartered in New York.
Also, the article accurately sourced highly factual economic figures from the nonpartisan fiscal report from the Committee For a Responsible Federal Budget (CRFB). Had you read the article, you’d know that.
Nice try on discrediting the source because reality hurt your feelings, bellend. Get your facts straight next time.
This doesn't help your case at all, when you not only insult someone who makes a fair criticism, but also word it in a AI-slop style.
ALERT:
u/T_Shurt/ has BLOCKED me because I made a fair criticism, preventing me from being able to criticise any further articles they post. This is shameful.
The claim is misleading because it treats the United States like a normal borrower. The US issues the global reserve currency and its debt is the primary collateral of the international financial system. Comparing today’s debt to earlier crises without accounting for that structural role distorts the picture.
During World War II US debt exceeded 120 percent of GDP and the country financed the largest mobilisation in history without a funding crisis. What matters is not the headline debt ratio but the ability to service the debt and the demand for Treasury securities. US debt is denominated in its own currency, interest payments remain manageable as a share of GDP, and global institutions actively need Treasuries as safe assets.
In fact, during every major crisis investors rush into US government debt, pushing yields down. Rising debt and persistent deficits may create long term political and inflation risks, but they do not imply that the United States is uniquely unable to respond to the next crisis. If anything, its monetary sovereignty and the structural demand for Treasuries give it far more fiscal flexibility than most countries with similar debt ratios.
While I agree with that historically, I’m not as confident this extrapolates with weakening of relations between US and every other country. The US being the reserve currency is only true as long as other countries continue to follow that. As countries pull out of USD this becomes more and more likely. Once it hits a tipping point where enough countries seek alternative an reserve currency it’s over.
I’m not an expert though, so if someone could explain why that wouldn’t happen I’d appreciate it.
Correct, and what happens if this causes not some tipping point, but you get a global economic meltdown, which we are trending toward, and the US is the one at the center of that?
Nations would be insane to return to, or put their trust back into a US led Financial hegemon.
And I would bet almost no citizenry in Europe or any non-aligned country would tolerate it.
What would come out of that IDK. China taking on that role? A new type of global financial system more intentionally managed to not allow a dominant currency to emerge? A global currency?
But if the US sets off a financial nuclear bomb due to this war and crashes the global economy, it becomes incredibly hard to see how even a plurality of nations just look at the wreckage and go, "yep, lets hop back on that bus as supplicants to American capital and leadership"
What alternative market today could absorb tens of trillions in global reserves, collateral, and trade settlement with the same liquidity and legal stability as US Treasuries if countries suddenly abandoned them?
Just because there is no off-the-shelf replacement on Day 1 of the crisis, you seem to assume the old system must be reassembled. This is a failure of political imagination and behavior.
History shows that after major systemic collapses (the Great Depression, the end of Bretton Woods), the new system is not a pre-existing, fully-formed alternative. It is built in the aftermath by the powers that emerge with their credibility and economic strength intact. A US-centered meltdown would leave the US with neither. A system held together by a sort of MAD dependency on US dollar hegemony, and the US detonates the bomb. Well at that point the logic of the MAD system breaks down. Other nations will seek to disarm the bomb, not continue to live under its shadow.
A severe enough crisis overcomes inertia. The question is not whether an alternative exists today, but whether the political will to create one would emerge from the wreckage.
The point is that if the U.S. detonates a global crisis from the center of the system, Treasury liquidity does not magically restore trust in American stewardship. In the short run, countries may still cling to the existing plumbing because they are trapped inside it. In the medium and long run, that kind of catastrophe would be a giant argument for building a more fragmented, regional, and less U.S.-dependent order - even if no single successor can replace Treasuries overnight. Which has never been the case in the immediate aftermath of global events that disrupted pre-existing world orders.
Your argument assumes that after a crisis countries could simply decide to build a new monetary order, but global finance cannot pause while that happens. Banks, central banks, trade finance, derivatives clearing, and reserve management all require a liquid safe asset every single day.
The transition from sterling to the dollar took decades and occurred while sterling was still functioning as a reserve. Even Bretton Woods was negotiated before the war ended and relied on an already dominant US balance sheet.
So the question is simple: if the US system collapses and a new one must be “built,” what asset immediately replaces Treasuries as the safe collateral and settlement backbone for the world economy during the many years it would take to create that new system?
I literally just said to you In the short run, countries will likely still cling to the existing plumbing because they are trapped inside it.
Your argument seems to be entirely predicated that because of that short term dependency that nothing can change long term and that the only way to change is to have a ready made alternatives day one. It's preposterous and ignores basic economic history.
Countries that gain more energy independence and seek solar, wind, electric vehicles, nuclear power, and geothermal simply will have less of a need for converting their currency into US treasuries to maintain a sufficient reserve for the petrodollar system. If GCC states now come to see that the US is not holding up their end of the arrangement providing security, maybe some of the GCC accelerate a move to BRICS and trading in alternative currency further erodes the petrodollar.
If America crashes itself into a depression, consumer demand is simply not where it once was and simply put, there is less need to maintain dollar reserves and conduct trade in dollars. As countries shift supply chains and trading partners to be more independent of US products or demand, the amount of transactions taking place in dollars decreases, with it the need to hold reserves.
All things that are already happening, would happen, and by all accounts would accelerate under a US led global depression scenario.
And that is the point you keep dodging.
You are treating emergency reliance during the collapse as proof of permanent legitimacy after the collapse. Those are not the same thing.
No one is saying global finance just pauses and everyone meets in a room for a week and invents a new reserve architecture from scratch. What happens is much messier: countries use the old plumbing in the immediate shock because they have to, while simultaneously accelerating every possible effort to make sure they are never this exposed to the same hegemon again.
That means more regional reserve arrangements, more bilateral currency swaps, more trade settled outside the dollar, more diversification into other assets, more capital controls, more industrial policy aimed at reshoring or friendshoring supply chains, more energy independence, and more political pressure to build institutions that dilute US leverage over time.
You keep asking “what replaces Treasuries immediately?” as though that settles the argument. It doesn’t. The better question is: after a US-centered catastrophe, why would nations choose to rebuild the same degree of dependence on the very system that just blew up in their face?
History shows time and time again that after such great shocks, especially ones that foment massive popular anger from the population, change will be at the forefront of most country's long term agenda.
I understand your basic point. It's logical and one of the first thoughts many people have when getting into economic theory: "what happens if the rest of the world just loses confidence in the dollar as global reserve currency".
But you need to understand that the dollar system persists because global finance runs on dollar collateral, primarily US Treasuries, which underpin repo markets, bank balance sheets, derivatives margining, and reserve management at a deep, deep level.
Even if trade shares shift or energy becomes less dollar linked, financial institutions still need a massive pool of safe, liquid assets to run the system. There is currently no market anywhere close to that scale or reliability. That's not just a little problem we'll work around, it's absolutely key.
You also treat political frustration as if it can quickly rewire financial infrastructure. History shows the opposite. After crises, countries complain about the system but still return to the deepest and safest liquidity pool available. After 2008, which was a US originated crisis, global demand for Treasuries increased, not decreased. The same happened during COVID. The reason is structural dependence, not ideological loyalty. Tied to the US industrial military complex, there's nothing close to the scale of liquidity necessary to be a store of wealth needed for countries to park their wealth.
The key weakness in your scenario is that diversification does not equal replacement. Countries can incrementally reduce exposure, but the system still requires a dominant collateral base. Until another market exists that can provide trillions in safe, liquid assets with open capital markets, rule of law, and deep repo markets, the global system cannot meaningfully detach from the dollar regardless of political sentiment.
And saying something new will emerge long term is a non point, because every financial system eventually evolves; the question is not whether change happens over decades, but whether there is any realistic alternative capable of replacing the scale, liquidity, and legal reliability of the dollar system in the foreseeable future.
If a meaningful and scalable alternative already existed, countries with the strongest incentive to escape the dollar system, such as China and Russia, would already be using it extensively. Instead, despite years of rhetoric about de-dollarisation, both still operate heavily within the dollar based financial infrastructure because there is no other market that offers the same depth, liquidity, legal certainty, and collateral function as US Treasuries. That reality shows the constraint is structural, not political.
All of that can change incredibly fast if we end up in a global recession created by said Financial hegemon.
All of that is backstopped by the petrodollar and the sense of America as the lender of last resort/the ultimate safety net. With the logic that if US treasuries are crashing, if the US is in economic turmoil everything is already crashing.
And if that is where we are heading, and it seems more and more likely by the day, once the global economic nuclear bomb goes off, set off entirely by the US's idiocy, the next question for every nation affected will be why would we tether ourselves going forward to such an insane nation that brought this upon us?
America will likely be able to maintain some meaningful leverage through the petrodollar, necessitating nations to have some large quantity of US reserve currency for this purpose, but beyond that things are far less clear, and ironically when it comes to the petrodollar this illegal war in Iran is likely to accelerate the adaption of alternative energy from places like China.
Right now everything is predicated on a sort of MAD situation economically, where everyone is to one extent or another codependent to the US economy and financial system. If we hit a huge crash that is entirely driven by American insanity and untrustworthy leadership, you just detonated the bomb and there is going to be every incentive to not be put back into that position.
That argument assumes the world could quickly abandon the US financial system if confidence drops. It cannot. The global system runs on US Treasuries because they are the deepest and most liquid collateral market in existence. Banks, central banks, insurers and pension funds rely on that collateral to operate. There is no alternative market capable of absorbing tens of trillions in reserves and safe assets at scale.
History also contradicts the claim. In every crisis linked to the US, including 2008, the euro crisis spillovers and COVID, investors rushed into Treasuries and yields fell. The system is structured so that stress increases demand for US debt rather than destroying it. Complaints about US leadership or policy do not change the basic plumbing of global finance.
The real constraint on the US is long term inflation risk or domestic political dysfunction. But the idea that one large crisis would cause countries to suddenly untether ignores the fact that they depend on the same system for their own financial stability and there is no viable replacement ready to take its place.
The U.S. still has extraordinary fiscal and monetary flexibility in the short term because the global system remains dollar-centric and Treasury-centric. But that privilege is not a law of nature. It is a historically specific hegemonic arrangement that can quickly erode if America repeatedly proves itself unstable, weaponizes finance too aggressively, and unilaterally triggers a crisis that goes much deeper than just lending and financial markets. Where the core logic of US Treasuries as a safe asset inverts and it becomes seen as a long term liability.
Which we are on a path to as we speak. One where it goes beyond just financial markets, it is in the process of creating food shortages, energy crisis greater than any in the post WWII era, and if things escalate even more, potentially the destruction of entire water systems. Where at the heart of that is the dollar-centric system as a structural vulnerability to the rest of the world.
Those crisis you mention, while severe, Those crises, did not fundamentally challenge or call into question the legitimacy and leadership of the United States and this system the way this would.
You are making the mistake of thinking what is true today must remain true tomorrow.
If something on the magnitude of the great depression hits with the added issues of US caused food and energy shortages, every country on Earth will be seeking to diversify away from US dependency. Maybe not over night, but the notion that US debt financing is some near ironclad law of the planet is peak American Exceptionalism mindset.
As just one example I already mentioned there is the petrodollar. Regardless of anything else, countries are already as we speak attempting to make massive pushes to find alternative energy sources. That only weakens the petrodollar. And a weakened petrodollar chips away at US financial hegemony and liquidity, even without any sort of organized deliberate push to move away from the US dollar.
Man, if only we had some sort of agency who was tasked with the job of setting banking policy in order to prevent recessions from happening through careful monetary and lending policy, like a bank, but centralized.
Soooo at what do we just cut programs but also don’t add other programs or adjust money to other programs in its place? We just keep spending money that we no longer have
[OP] T_Shurt | 3 hours ago
From the article:
The United States has never been more vulnerable to an economic shock, given the mounting national debt that could debilitate the nation’s ability to tackle a crisis, according to nonpartisan fiscal watchdog, Committee for a Responsible Federal Budget (CRFB).
The CRFB has sounded the alarm over the national debt, which is growing to 100% of the GDP, a level not seen since World War II, claiming the country is “woefully underprepared” to tackle its next emergency - which according to its reports is nearly imminent in the near future.
The Washington-based think tank compared the current fiscal situation to past crises and found it to be the most vulnerable ever. The report mentioned that when the COVID-19 pandemic hit, the national debt was 79% of GDP, while the deficit was 4.6% of GDP. During the Great Recession, the debt was 35% of the GDP, with deficits at 1.1%. Before the Dot-Com Bubble burst, debt was at a similar 34%, but the country was running annual surpluses.
Today, the debt is roughly 100% of the GDP with deficits at 6%. Historically, during each crisis, the government’s response left the economy in a worse fiscal position. During COVID-19, the national debt rose by roughly 20% of the GDP, and it spiked by 35% of the GDP during the Great Recession.
This means the country has never faced an economic crisis with debt levels as high as today and fiscal deficits as large. Thus, "our nation is in a worse fiscal position today than it has ever been going into any kind of economic downturn or emergency," the CFRB warned.
Straight_Document_89 | 3 hours ago
The person that has caused a lot of the debt is in power currently. 8 trillion his first term and why 2-3 trillion already?
Glad-Veterinarian365 | 3 hours ago
Isn’t this true basically any time we have a recession? The economy keeps growing and therefore our capacity to service the debt keeps growing as well. That being said, the last 5 years have been especially brutal for debt accumulation and is unsustainable long term for sure
AreaPrudent7191 | 3 hours ago
That's the point. Deficit spending is based on the "grow your way out of debt" ethos. But that's not happening, even during the massive boom from 2010 to COVID and then the post COVID boom, debt has outgrown growth.
Debt service now exceeds the defense budget, by a lot. 100% of GDP debt is seen as a red line for most countries, and the U.S. has well exceeded that. We're now in uncharted waters.
What a recession, even a mild one, might do to an already tenuous situation is anyone's guess. What happens when GDP craters, or even just decreases a little bit, and debt to GDP reaches 120%, 130%, 140%? Combine that with the ongoing exit from USD as the default world currency, bond yields have to go higher, making that debt even more expensive to repay.
There's the possibility of a runaway effect that is truly terrifying.
Momoselfie | an hour ago
>What happens when GDP craters, or even just decreases a little bit, and debt to GDP reaches 120%, 130%, 140%?
Basically if there's an AI crash, we're screwed.
Ok-Pumpkin-6203 | an hour ago
Which there will be at some point. Like search engines in the 90s, when people would Yahoo/AskJeeves/Google, there is now a single dominant player.
AI will go in a similar direction.
jellyhessman | 36 minutes ago
No, the extremely expensive technology that they still haven't figured out how to monetize will save us all! /s
MrE134 | 2 hours ago
Nearly imminent in the near future? That's pretty imminent I guess.
LimpAd4924 | 2 hours ago
Don’t worry. Trump’s billionaire and corporate tax cuts (2x now!) will trickle down any moment!
calpianwishes | 48 minutes ago
Been waiting since Reagan
BeYourselfTrue | 2 hours ago
There must always be an emergency. Climate, Covid, Ukraine, Gaza, Venezuela and now Iran. Almost like it’s an excuse to print money.
Xeynon | 3 hours ago
And guess what? This war and the resulting oil shock are a stagflation bomb that's about to detonate and plunge us into one. A big one.
Trump is doing for the US what he did for his casinos, his airline, his magazine, his fake university, etc. - completely ruining it.
Romano16 | an hour ago
This was all brought up for the past decade but it doesn’t matter to America.
AstroScoop | 42 minutes ago
No, you see we must wait until everything breaks to fix it ofc /s
layeofthedead | 9 minutes ago
Let’s not pretend that it doesn’t matter to Americans. It doesn’t matter to the billionaires who have completely brainwashed the maga base. They’ll burn this country to the ground to make a buck and they control the airwaves to ensure that maga is mad at anyone but them
Preme2 | an hour ago
Doom gloom sadness and misery. They’ve been screaming recessionary end times for the last 4 years. I’m sure if you keep going you’ll be right eventually!
RoosterMedical | 3 hours ago
The type of money that Biden spent to get the country out of the previous recession is being spent by sociopaths on a war designed to increase the price of gasoline.
naijaboiler | 2 hours ago
biden spent less than trump did
KryssCom | 2 hours ago
But have you considered the plus side though: like 6 transgender athletes can't compete anymore!
dinosaurkiller | 2 hours ago
Don’t forget the tax cuts!
Rattus_NorvegicUwUs | 2 hours ago
Get the republicans out.
They don’t know how to lead this nation anywhere but the dirt.
Restore law and order. Restore justice and accountability. Restore professionalism and integrity.
Vote Democrat. Or it could be your chance to cast a vote.
Top-Acadia-1936 | 3 hours ago
Like it or not, there will have to be a period of austerity coming up.
I know it’s a dirty word to speak in these Freedom-Loving United States, but we got way over our skis, long ago. Our Federal Reserve is more or less powerless except to print more currency.
Austerity: coming soon.
KryssCom | 2 hours ago
The social safety net is already cut down to the bone. Everyone is broke and nobody has functional health care anymore.
The groups who need to bear the overwhelming brunt of this austerity are billionaires, corporations, and the military-industrial complex. It's their turn to pay up, because they're the only ones left with any money at this point.
TakuyaLee | 2 hours ago
No, it is not needed. What's actually needed is for billionaires to pay their fair share of taxes and not be given hand outs by the federal government at the expense of public support programs.
mungobungo2221 | 45 minutes ago
We want the same result. I hate it when people try to sound smarter by saying this. Like, yeah, buddy. We all know. Democrats and the left want billionaires to actually pay the taxes that they should be paying. Yes! But also tax them more too.
EDIT: OOP! I thought I was replying to someone else. Or.. Maybe I am running on little sleep. Anyway! The idea still stands.
Momoselfie | an hour ago
At this point it will probably require both austerity and taxing the elite.
TakuyaLee | an hour ago
Maybe. Let's tax the elite first and go from there
Top-Acadia-1936 | an hour ago
I guess you’re right, and we’re both dealing in fantasy.
I’d start with wrecking the ENTIRE tax code, but I know that’s not palatable either. So, we just keep on doing what we’re doing, I guess.
mungobungo2221 | 50 minutes ago
No no no! It will be tax the fuck out of the billionaires time! I ain't paying for their dumbassery.
Top-Acadia-1936 | 46 minutes ago
😂😂😂. We already are paying for it!!!😂😂😂
😢🔫
Tribe303 | 28 minutes ago
No. Cut your pre-Trump military spending in half and tax your fucking BILLIONAIRES FFS. This is NOT complicated! The only thing trickling down is Trump's leaky diaper.
Hilda_aka_Math | 3 hours ago
that’s exactly what needs to happen!!! hahahhaha. fucking royally shame him in history. make it the war he started and then ran our economy into the great depression from it. because if we don’t have the balls to impeach him, why not go down for being the ones that got ultimately fucked because of it?
thegooddoktorjones | 2 hours ago
All part of the plan, put the country far enough in debt with corrupt looting and defense profit taking that no safety net is possible. That’ll whip the poors into shape.
ktaktb | 3 hours ago
> Facts matter. Reputable sources are important. The truth will prevail.
This is the OPs quote on the users page
But they flood us with slop fake journalism websites like MarketRealist, a dubious source with an author who studied and is likely based outside of the us and has no first hand boots on the ground context to shape their reporting. Really tired of these bs sites spamming articles about america.
I guess I should open up some websites and spam global forums with constant sky is falling garbage.
[OP] T_Shurt | 3 hours ago
False ❌
FOR FACTS SAKE: ✅
Market Realist has a HIGH FACTUAL REPORTING rating along with a HIGHLY CREDIBLE rating, due to proper sourcing and a clean fact check record from MediaBias/FactCheck. They are an American outlet headquartered in New York.
Also, the article accurately sourced highly factual economic figures from the nonpartisan fiscal report from the Committee For a Responsible Federal Budget (CRFB). Had you read the article, you’d know that.
Nice try on discrediting the source because reality hurt your feelings, bellend. Get your facts straight next time.
defaultedebt | 2 hours ago
This doesn't help your case at all, when you not only insult someone who makes a fair criticism, but also word it in a AI-slop style.
ALERT:
u/T_Shurt/ has BLOCKED me because I made a fair criticism, preventing me from being able to criticise any further articles they post. This is shameful.
FluidGolf9091 | 3 hours ago
The claim is misleading because it treats the United States like a normal borrower. The US issues the global reserve currency and its debt is the primary collateral of the international financial system. Comparing today’s debt to earlier crises without accounting for that structural role distorts the picture.
During World War II US debt exceeded 120 percent of GDP and the country financed the largest mobilisation in history without a funding crisis. What matters is not the headline debt ratio but the ability to service the debt and the demand for Treasury securities. US debt is denominated in its own currency, interest payments remain manageable as a share of GDP, and global institutions actively need Treasuries as safe assets.
In fact, during every major crisis investors rush into US government debt, pushing yields down. Rising debt and persistent deficits may create long term political and inflation risks, but they do not imply that the United States is uniquely unable to respond to the next crisis. If anything, its monetary sovereignty and the structural demand for Treasuries give it far more fiscal flexibility than most countries with similar debt ratios.
R0N_SWANS0N | 3 hours ago
The rest of the world wasn't exactly in a position to compete that time
foolish-ambitions | 3 hours ago
While I agree with that historically, I’m not as confident this extrapolates with weakening of relations between US and every other country. The US being the reserve currency is only true as long as other countries continue to follow that. As countries pull out of USD this becomes more and more likely. Once it hits a tipping point where enough countries seek alternative an reserve currency it’s over. I’m not an expert though, so if someone could explain why that wouldn’t happen I’d appreciate it.
NOLA-Bronco | 3 hours ago
Correct, and what happens if this causes not some tipping point, but you get a global economic meltdown, which we are trending toward, and the US is the one at the center of that?
Nations would be insane to return to, or put their trust back into a US led Financial hegemon.
And I would bet almost no citizenry in Europe or any non-aligned country would tolerate it.
What would come out of that IDK. China taking on that role? A new type of global financial system more intentionally managed to not allow a dominant currency to emerge? A global currency?
But if the US sets off a financial nuclear bomb due to this war and crashes the global economy, it becomes incredibly hard to see how even a plurality of nations just look at the wreckage and go, "yep, lets hop back on that bus as supplicants to American capital and leadership"
FluidGolf9091 | 2 hours ago
What alternative market today could absorb tens of trillions in global reserves, collateral, and trade settlement with the same liquidity and legal stability as US Treasuries if countries suddenly abandoned them?
NOLA-Bronco | 2 hours ago
You keep falling into the same box
Just because there is no off-the-shelf replacement on Day 1 of the crisis, you seem to assume the old system must be reassembled. This is a failure of political imagination and behavior.
History shows that after major systemic collapses (the Great Depression, the end of Bretton Woods), the new system is not a pre-existing, fully-formed alternative. It is built in the aftermath by the powers that emerge with their credibility and economic strength intact. A US-centered meltdown would leave the US with neither. A system held together by a sort of MAD dependency on US dollar hegemony, and the US detonates the bomb. Well at that point the logic of the MAD system breaks down. Other nations will seek to disarm the bomb, not continue to live under its shadow.
A severe enough crisis overcomes inertia. The question is not whether an alternative exists today, but whether the political will to create one would emerge from the wreckage.
The point is that if the U.S. detonates a global crisis from the center of the system, Treasury liquidity does not magically restore trust in American stewardship. In the short run, countries may still cling to the existing plumbing because they are trapped inside it. In the medium and long run, that kind of catastrophe would be a giant argument for building a more fragmented, regional, and less U.S.-dependent order - even if no single successor can replace Treasuries overnight. Which has never been the case in the immediate aftermath of global events that disrupted pre-existing world orders.
FluidGolf9091 | 2 hours ago
Your argument assumes that after a crisis countries could simply decide to build a new monetary order, but global finance cannot pause while that happens. Banks, central banks, trade finance, derivatives clearing, and reserve management all require a liquid safe asset every single day.
The transition from sterling to the dollar took decades and occurred while sterling was still functioning as a reserve. Even Bretton Woods was negotiated before the war ended and relied on an already dominant US balance sheet.
So the question is simple: if the US system collapses and a new one must be “built,” what asset immediately replaces Treasuries as the safe collateral and settlement backbone for the world economy during the many years it would take to create that new system?
NOLA-Bronco | an hour ago
No it is not assuming that at all.
I literally just said to you In the short run, countries will likely still cling to the existing plumbing because they are trapped inside it.
Your argument seems to be entirely predicated that because of that short term dependency that nothing can change long term and that the only way to change is to have a ready made alternatives day one. It's preposterous and ignores basic economic history.
Countries that gain more energy independence and seek solar, wind, electric vehicles, nuclear power, and geothermal simply will have less of a need for converting their currency into US treasuries to maintain a sufficient reserve for the petrodollar system. If GCC states now come to see that the US is not holding up their end of the arrangement providing security, maybe some of the GCC accelerate a move to BRICS and trading in alternative currency further erodes the petrodollar.
If America crashes itself into a depression, consumer demand is simply not where it once was and simply put, there is less need to maintain dollar reserves and conduct trade in dollars. As countries shift supply chains and trading partners to be more independent of US products or demand, the amount of transactions taking place in dollars decreases, with it the need to hold reserves.
All things that are already happening, would happen, and by all accounts would accelerate under a US led global depression scenario.
And that is the point you keep dodging.
You are treating emergency reliance during the collapse as proof of permanent legitimacy after the collapse. Those are not the same thing.
No one is saying global finance just pauses and everyone meets in a room for a week and invents a new reserve architecture from scratch. What happens is much messier: countries use the old plumbing in the immediate shock because they have to, while simultaneously accelerating every possible effort to make sure they are never this exposed to the same hegemon again.
That means more regional reserve arrangements, more bilateral currency swaps, more trade settled outside the dollar, more diversification into other assets, more capital controls, more industrial policy aimed at reshoring or friendshoring supply chains, more energy independence, and more political pressure to build institutions that dilute US leverage over time.
You keep asking “what replaces Treasuries immediately?” as though that settles the argument. It doesn’t. The better question is: after a US-centered catastrophe, why would nations choose to rebuild the same degree of dependence on the very system that just blew up in their face?
History shows time and time again that after such great shocks, especially ones that foment massive popular anger from the population, change will be at the forefront of most country's long term agenda.
FluidGolf9091 | an hour ago
I understand your basic point. It's logical and one of the first thoughts many people have when getting into economic theory: "what happens if the rest of the world just loses confidence in the dollar as global reserve currency".
But you need to understand that the dollar system persists because global finance runs on dollar collateral, primarily US Treasuries, which underpin repo markets, bank balance sheets, derivatives margining, and reserve management at a deep, deep level.
Even if trade shares shift or energy becomes less dollar linked, financial institutions still need a massive pool of safe, liquid assets to run the system. There is currently no market anywhere close to that scale or reliability. That's not just a little problem we'll work around, it's absolutely key.
You also treat political frustration as if it can quickly rewire financial infrastructure. History shows the opposite. After crises, countries complain about the system but still return to the deepest and safest liquidity pool available. After 2008, which was a US originated crisis, global demand for Treasuries increased, not decreased. The same happened during COVID. The reason is structural dependence, not ideological loyalty. Tied to the US industrial military complex, there's nothing close to the scale of liquidity necessary to be a store of wealth needed for countries to park their wealth.
The key weakness in your scenario is that diversification does not equal replacement. Countries can incrementally reduce exposure, but the system still requires a dominant collateral base. Until another market exists that can provide trillions in safe, liquid assets with open capital markets, rule of law, and deep repo markets, the global system cannot meaningfully detach from the dollar regardless of political sentiment.
And saying something new will emerge long term is a non point, because every financial system eventually evolves; the question is not whether change happens over decades, but whether there is any realistic alternative capable of replacing the scale, liquidity, and legal reliability of the dollar system in the foreseeable future.
If a meaningful and scalable alternative already existed, countries with the strongest incentive to escape the dollar system, such as China and Russia, would already be using it extensively. Instead, despite years of rhetoric about de-dollarisation, both still operate heavily within the dollar based financial infrastructure because there is no other market that offers the same depth, liquidity, legal certainty, and collateral function as US Treasuries. That reality shows the constraint is structural, not political.
NOLA-Bronco | 3 hours ago
All of that can change incredibly fast if we end up in a global recession created by said Financial hegemon.
All of that is backstopped by the petrodollar and the sense of America as the lender of last resort/the ultimate safety net. With the logic that if US treasuries are crashing, if the US is in economic turmoil everything is already crashing.
And if that is where we are heading, and it seems more and more likely by the day, once the global economic nuclear bomb goes off, set off entirely by the US's idiocy, the next question for every nation affected will be why would we tether ourselves going forward to such an insane nation that brought this upon us?
America will likely be able to maintain some meaningful leverage through the petrodollar, necessitating nations to have some large quantity of US reserve currency for this purpose, but beyond that things are far less clear, and ironically when it comes to the petrodollar this illegal war in Iran is likely to accelerate the adaption of alternative energy from places like China.
Right now everything is predicated on a sort of MAD situation economically, where everyone is to one extent or another codependent to the US economy and financial system. If we hit a huge crash that is entirely driven by American insanity and untrustworthy leadership, you just detonated the bomb and there is going to be every incentive to not be put back into that position.
FluidGolf9091 | 3 hours ago
That argument assumes the world could quickly abandon the US financial system if confidence drops. It cannot. The global system runs on US Treasuries because they are the deepest and most liquid collateral market in existence. Banks, central banks, insurers and pension funds rely on that collateral to operate. There is no alternative market capable of absorbing tens of trillions in reserves and safe assets at scale.
History also contradicts the claim. In every crisis linked to the US, including 2008, the euro crisis spillovers and COVID, investors rushed into Treasuries and yields fell. The system is structured so that stress increases demand for US debt rather than destroying it. Complaints about US leadership or policy do not change the basic plumbing of global finance.
The real constraint on the US is long term inflation risk or domestic political dysfunction. But the idea that one large crisis would cause countries to suddenly untether ignores the fact that they depend on the same system for their own financial stability and there is no viable replacement ready to take its place.
NOLA-Bronco | 2 hours ago
The U.S. still has extraordinary fiscal and monetary flexibility in the short term because the global system remains dollar-centric and Treasury-centric. But that privilege is not a law of nature. It is a historically specific hegemonic arrangement that can quickly erode if America repeatedly proves itself unstable, weaponizes finance too aggressively, and unilaterally triggers a crisis that goes much deeper than just lending and financial markets. Where the core logic of US Treasuries as a safe asset inverts and it becomes seen as a long term liability.
Which we are on a path to as we speak. One where it goes beyond just financial markets, it is in the process of creating food shortages, energy crisis greater than any in the post WWII era, and if things escalate even more, potentially the destruction of entire water systems. Where at the heart of that is the dollar-centric system as a structural vulnerability to the rest of the world.
Those crisis you mention, while severe, Those crises, did not fundamentally challenge or call into question the legitimacy and leadership of the United States and this system the way this would.
You are making the mistake of thinking what is true today must remain true tomorrow.
If something on the magnitude of the great depression hits with the added issues of US caused food and energy shortages, every country on Earth will be seeking to diversify away from US dependency. Maybe not over night, but the notion that US debt financing is some near ironclad law of the planet is peak American Exceptionalism mindset.
As just one example I already mentioned there is the petrodollar. Regardless of anything else, countries are already as we speak attempting to make massive pushes to find alternative energy sources. That only weakens the petrodollar. And a weakened petrodollar chips away at US financial hegemony and liquidity, even without any sort of organized deliberate push to move away from the US dollar.
Dry-Cry-3158 | 2 hours ago
Man, if only we had some sort of agency who was tasked with the job of setting banking policy in order to prevent recessions from happening through careful monetary and lending policy, like a bank, but centralized.
Losreyes-of-Lost | 3 hours ago
Soooo at what do we just cut programs but also don’t add other programs or adjust money to other programs in its place? We just keep spending money that we no longer have