Krugman has this to say about it:
For those not familiar with how financial markets work, US Treasuries are the ultimate safe asset, used as collateral for everything. Even a hint that some Treasuries might not be honored could bring everything to a screeching halt
Musk and Trump are both in the habit of stiffing people they owe money. If markets even suspect that this habit will extend to Treasuries, God help us
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The 14th Amendment clause about debt validity exists precisely because of this flavor of posturing oligarchs – now we’ve got bargain-bin John Galt cosplayers auditing T-bills between meme stocks. Trump’s “irregularities” schtick is just sovereign citizen logic scaled to national debt levels, complete with DOGE bros LARPing as forensic accountants.
Declaring chunks of debt illegitimate isn’t fiscal policy – it’s a wealth incinerator disguised as a spreadsheet error. Markets would implode if taken seriously, but the real damage is normalizing this circus as governance. Treasury raids morphing into TikTok challenges where the prize is collapsing the dollar’s reserve status.
Constitutional bedrock becomes optional when your economic advisors mainline 4chan threads. The only “irregularity” here is the cognitive dissonance required to bankrupt a superpower for clout.
So for those unaware. If followed through this would be the biggest economic crisis worldwide, since the great depression. No hyperbole.
US treasury bonds are the way the US government borrows money. They are most of the debt. They are also the “safe asset”. Because it was assumed that the US, being the sole superpower and the biggest economy, would always pay back its debts. Because of this whenever organizations needed to park money super safely, they would use US government bonds.
Around 30 trillion worldwide, that is 1/3 of the world’s GDP, is held in US bonds.
You know who the biggest borrowers of US debt are? Pension funds. And you know the biggest one of all of them? Social Security. US social security holds around 3 trillion of US debt. Debt that would suddenly be worth nothing anymore.
In total, around 27 trillion of treasury bonds are held in the US by pension funds, local governments, etc. These would be gone.
Other countries would suddenly lose 3 trillion, biggest of which are Japan, China and the UK. Belgium Luxembourg and Switzerland hold a huge share compared to their economy, and could collapse completely.
But hey, at least the national debt is gone, right?
Well… No one would borrow the US money anymore. Who would trust them anymore? Likely, this would be the end of the USD as the worlds reserve currency. With that, I doubt military spending could be upheld. The US would collapse as a superpower.
Every avenue they are speed running self immolation. I’m pretty convinced they want to burn this country down so they can rebuild it in their images. A narcissist and foolish lot. We won’t be able to weather this storm. Other nations aren’t going to just sit by while we’re down. Somebody will take advantage of the situation but it isn’t going to Trump, Musk, Thiel, et al.
Burning the US down to divvy it up amongst themselves so they can run their own little technofiefdoms is all but their stated goal. They’re talking about network states and crypto-resever currencies, and salivating at the prospect of having entire populations that they control outright to be the grist for their techno-futurist fantasies of being the sole owners of the cyberpunk dystopian mega corps.
“We are proud to announce that we have created the Cyberpunk future from ‘Please Don’t Create This Cyberpunk Future’.”
It’s really difficult to tell to what level and for what end they’re trying to collapse the country. Is the goal just a grift? Is it to secure permanent corporate governance? Is it to collapse the US for techno feudalism? Is it to utterly annihilate the US on behalf of a foreign nation? All of the above by different individuals?
God, the US would collapse as a country. It runs a huge deficit, what would it be without the dollar?
Trump coin run through X of course lol.
Living in Finland, this sounds like a win to me with less repercussions for us than the USA. Wouldn’t this make the Euro the strongest world currency, have Switzerland join the EU (along with Norway because of Petrodollars?) + Canada and Australia would be even more interested (because the commonwealth would be weakened), karmicly mess up China, free some Central American countries like El Salvador, speed up independence from fossil fuels, and also stop Israel’s genocide campaign?
I could be wrong, but that’s just my understanding based on what you said.
If you think the global superpower can collapse without devestating repercussions around the world, you do not understand how interconnected financial markets are and how much thing like “being able to have food at the local supermarket” depend on things going predictably. This is less “USA knocked off the board” and more “kicking out a leg of the table holding the board up”
Okay, but does that mean the things I mentioned are wrong, and if so, how and why? I’m trying to figure it out here but I’m not an economist. I’m just thinking back to when something similar happened in history with the UK.
So, a lot of the things the contemporary world depends on requires significant amounts of shipping. Like, honestly kind of mind-boggling amounts, and things that you often think are produced nearby go through planet-spanning supply chains. Now, consider that, as a part of the rebuilding in the post-World-Wars was based on funnelling world oil through US refineries, and backing the world economy on US Dollar, much of the world economy is run on the idea that “the US is good for it”, and whatever business is done relies by and large on the US continuing to make timely debt payments (this is distinctly not the US paying off debts).
So, what happens if that stops happening? The whole economy comes crashing to a halt as people no longer have the guarantees they need to do worldwide business. Sure, the Euro exists and it’s the second largest reserve currency, but over half of the world does business in USD, but that is a lot of guarantees that would have to shift basically immediately, and something is going to fall through as there just isn’t the resources on hand to take it on all at once.
So, how does that wind up hurting Finland, the Euro and everyone, and not just collapse around them? Because im the mad dash to not be the “last ones out of USD” there’s going to be something of the global supply chain that doesn’t have somewhere to go, and as you may remember from the issues with the global supply chain in 2020, everything is set up to be “Just In Time” with no one having to keep inventory on hand. But when parts of the supply chain can no longer deliver “Just In Time” that doesn’t just stop there. Other parts of the supply chain wind up depending on those things arriving when they were supposed to, and have little to no recourse when they don’t.
If you want to understand how bad this can get, look at what happened in the 2008 financial crisis, and realize that a significant part of what stopped it from being more of a collapse is the U.S. stepping in and saying “the U.S. is good for it” despite how questionable of a call that may have been.
Okay, I get all that.
But, what you’re describing sounds more like Covid lite, and this time the worst hit country is USA, which is more a service and software country that industrialized production one, rather than China, which is mostly material goods.
I suppose oil yes, but I mentioned how that could also be a positive in a way, and EU has been weaning off oil fast already due to Russia. Sounds like if anything this would really help slow down climate change by crashing oil production logistics of anything.
It also sounds like the Euro would greatly increase in value, enough to get a good deal of countries to join the EU that have good production and materials as well and balance out the severe deflation and get some supply chains back on quickly.
Also the '08 financial crises in the USA helped the EU in the long run too.
I think you’re vastly underestimating the scale, and underestimating how much damage will be suffered in the short term. It’s honestly not all that surprising that you would come to that answer, though, because it’s the same mindset that’s leading Trump and his oligarch cronies to what they’re doing. But both COVID and 08 were backstopped by the US economy. We’re looking at the situation where those happen, but the US is unable to be that backstop. Might the Eurozone become that backstop? Potentially, but the severe economic impacts that the US weathered as a result would be borne completely by Euro, which only holds up a fraction of the the world markets that the US. Might the Euro, might Finland, might even you specifically come out on top? Maybe! But it wouldn’t be on top of this economy, but one that has undergone a severe change because a simply massive portion of the global economy that exists at this moment would simply no longer be there.
A third of what the dollar does isn’t too bad (and better in SWIFT).
I don’t think Trump and his people are thinking much at all though, since doing what they’re doing sounds like it would wipe out most of their wealth.
And I know it would be a different economic system. What I’m asking is, is that actually bad in the long term?
What has this system brought us? Excessive production accelerating climate destruction (how much will the economy matter then?), dependence on fossil fuels, and a rise to fascism?
If the USA goes through Balkanization, would that truly be the worst outcome for the future of the world as a whole?
Or put another way - is keeping the US empire worth the stability of the world economy as is? I think not, at least, especially with how things are going.
That the EU could potentially come out on top is an optimistic take as far as I can see.
It’ll be terrible for the USA, but I still don’t see how it would be terrible for the world. I’m old enough to remember countries that didn’t rely on the dollar as much, and things were more affordable for the people of those countries then than now. The biggest influencer to me in economic growth seems to be improvements in science and technology rather than in dollars being used more.
Maybe instead you could describe this damage for me, then, in a way I can better understand. If you have the time
If you look at the “Great Recession” in 2008. That was an economic crisis that more/less started in the US, but the end result was millions lost jobs, the PIGS debt crisis in Europe, etc.
That would be a drop in the bucket if US treasures disappeared.
We collapsed the economy of Iceland…op is significantly stupid to think their euro blocs economy wouldn’t collapse.
As far as I understand, the recession that occured in 2008 era in Europe at least was in part due to lowered exports to the USA. But this time the EU economy is more diversified in part because of that event, and preparations had already been made because of Trump’s first term.
Again, not an economist, but my understanding is still this wouldn’t impact us that much compared to others.
And even the last recession that happened in the USA wasn’t the worst that affected Europe. That was '92.
So he is starting the groundwork for sewing doubt and getting ready for a push to crypto as our currency? Sounds like something the Xitler Youth could convince him of.
It seems like Elon is controlling Trump even in this. Isn’t devaluing to swing markets an Elon move? He probably wants to sell a bunch of stock and simply trying to crash the EV market wasn’t enough if a wave for him to become the first trillionaire. Crashing the dollar it is I guess?
This breaks the economy.
If the US defaults on its loans, its creditability drops, which will probably destabilize the global value of the US$. China and Russia will benefit most. Every nation with financial ties to the US will suffer for it.
When trying to understand why certain decisions are made, follow the money. Donald Trump is a foreign asset.
Something most people don’t get is that China holding a significant portion of our debt gives them an incentive to protect USD. By defaulting, there is no reason for them not to do everything in their power to destroy USD. This is literally the only meaningful economic tool the US has and he wants to devalue it.
Only usa can have total control no other currencies could ever replace it because they are not as good at being world leaders? Or something like that? All wealth would just move, probably half china half eu, and even then, it may already have happened mostly because this isn’t news to anyone with a brain
Russia has already defaulted on some loans. China’s second biggest trade partner is USA (EU is first but trade is more balanced between the two than USA), so this would hurt China greatly as well.
Seems to me EU would benefit the most.
If you mean he is working for them… nah. He wouldn’t do what they ask, or would screw it up. They get smarter people to manipulate him into doing things in thier favor. I suppose that could be called a foriegn asset to. Not sure though.
2nd week in a row he has tried to crash the market over the weekend for Monday morning.
I’m guessing all his hedge fund asshole/twat stain friends already purchased their puts and agent orange is providing the catalyst.
I think the “freeze all federal spending” from a couple weeks ago could also qualify.
Why betting on stocks to fail is allowed in the US and elsewhere is beyond me, it always leads to this type of rich people trying to game the system to get even richer at the cost of everyone else around them. It’s a sign that the wealth-concentration and inequality is out of control + captured the mechanisms that should be regulating and preventing this from happening altogether.
What was the previous attempt? I’m falling behind in this gish gallop.
Tariffs
Last weekend it was the Mexico/Canada “25% tariffs” that he pussied out on and reversed his decision on both countries by Monday morning.
Just as a note Tariffs are back on (but only for steel/aluminum).
Hello. English new just learning for me. Please, what is twat stain?
Twat is slang for a woman’s vagina.
… Trump seems to be basing this on some analysis from the DOGE boys. This appears to have been one of the DOGE boys’ main goals at Treasury, getting access to details about what kinds of payments Treasury makes, the answer being close to everything the U.S. government does outside of the Pentagon and some of the Pentagon stuff too. The Treasury also services the U.S. debt, which is what we’re talking about here. I’m less clear on what access to which part of the Treasury Department these guys could have gotten to get information about how the Treasury Department sells and services Treasury notes. But all that detail aside, imagine thinking that by downloading a ton of data and having a few days to analyze it you could make the determination that a significant amount of the U.S. national debt wasn’t real and didn’t have to be paid. It’s hardly the craziest thing we’ve seen over recent days. But it’s still worth noting how nuts that is.
I’m lost for words.
I disagree with that author, this is definitely one of the craziest things seen in recent days. This is on par with going to war with Canada as one of the quickest ways to speed run the demise of the US… It probably would be quicker. Debt can be downgraded overnight, war takes time.
Betting Putin told trump to just take whatever and he’d back trump…if trump lets Putin take Ukraine and the rest of NATO down with it.
Assuming he doesn’t talk that back really fucking quick that’ll literally implode the bond market.
My guess is that this is just him leading up to trying to refuse payment. A few days is hardly enough time to make any real assessment of the debts the treasury services, but all he has to do is say words and the rest of the idiots fall in line.
And the Democrats present a New Deal in 2028
Green new deal was like 2016 or 2018…
Too bad they had Manchin piss away all their credibility for them.
Or start a war.
A lot of countries have defaulted without doing that. I’m a lot more concerned that it’ll cause an interest rate spike, with associated stock market crash, and bring on a sharp cut in business investment and employment.
Countries are already looking for alternatives to trading with America, the felon is speedrunning Brexit along with everything else.
He’s trying to crash the dollar for cryptobros. Or Putin.
He either crashes the economy or putin releases the pee tape.
This could trigger a Minsky moment. And a world wide financial meltdown. Then he’ll just say haha just kidding. Once that genie is out of the bottle though, there’s no going back.
Elon won’t say anything until Minsky starts to screw him over
Why would he even say this? Usually there’s a pretty clear motivation to his lies but this one just seems suicidal
At this point I’m pretty sure destroying the country is the point. I would not be the slightest bit surprised to hear he has muskrat whispering in his ear about buying literally everything after the collapse.
Wouldn’t completely destroying the economy make their billions near worthless as well?
No, it’s just converting money into power. Same thing they’ve been doing for years
They’re high on their own supply. A lot of these techbros seriously believe they’ll be new monarchs after societal collapse.
Depends on how much money they have in assets other than $USD.
It’s yet another barganing chip he is trying to create. Somebody with these things doesn’t do what he wants, he just declares the ones they have are fake. Person, country… as others have pointed out, this will tank the value of them as well, and probably trigger inflation. Both of which in a way reduce the federal debt so he can claim he did that. It just also causes a lot of much bigger issues.
“I have reduced the US’s debt by X” claims are one potential option. It could also be any other number of things.
Sort of funny that as soon as the greatest generation died their children, who were too stupid to understand what they had built, destroyed their empire
Boomers have never once in their miserable little lives understood that their favorite Facebook meme calls them the weak men.
I picked a fine week to give up sniffing glue.
i’m going to guess that this is somehow related to making money on cryptocurrency
Yea he’s possibly trying to get more people to buy into his stupid cryptocoin
Anything that devalues the dollar makes crypto go up.
Ha, if that were true, Monday markets will be such a blood bath those of us without publicly traded industry or non profits will be fucked too
