The US may never "go broke" in the way a household does, since it issues its own currency and always meets its dollar-denominated obligations. But here’s the twist: this very strength comes with a tricky catch. The US is caught in a policy trilemma that forces tough choices. And trust us, these choices aren’t without global ripple effects. 🤔
Imagine three paths: First, if the US opts for austerity to ease bond market jitters, the outcome could shrink its economy, heighten inequality, and strain the social fabric. Second, sticking to the current fiscal expansion means issuing bonds to balance every dollar spent, which might inflate the financial sector and erode trust in US Treasuries as the ultimate safe asset. Third, a bold reform—severing the bond-deficit link—could restore fiscal sovereignty but might unsettle the global reputation of the dollar.
For the Global South, the stakes are high. Economies across South and Southeast Asia, where tech hubs and innovative startups are shaping the future, are watching closely. This isn’t just about numbers and bonds; it’s about a shift in global economic power. Just as fintech is transforming traditional finance here at home, emerging markets now see an opportunity to rethink reliance on a system that might be on shaky ground.
The conversation is just beginning. While the US navigates its complex fiscal dilemma, the Global South could be paving a new route toward more stable, self-reliant economic futures—a move that could resonate well with a generation eager for change and innovation.
Reference(s):
Beyond the dollar: The Global South's exit from US fiscal fragility
cgtn.com
