Is sovereign debt finally catching up?

For decades, the American right has prophesized (a) the takeover of America by socialism/communism and (b) hyperinflation due to US debt. Neither has happened yet. America is a firmly as ever in the grip of plutocratic capitalist oligarchs, and while the GOP-fueled nation debt is skyrocketing, US treasuries are still selling.

So will the pearl-clutching right ever be right?

“In the United States, yields on 30-year Treasury bonds are nearing 5 percent, despite—or perhaps causing—the department’s shift to a shorter-term financing strategy. As its options narrow, the Treasury is rolling over its borrowing more frequently to avoid paying rising rates on long-term debt. More worrisome, it is increasingly relying on primary dealers (mainly big banks) to refinance its debts, implying that other investors have less appetite for its securities.

 

“Indeed, since debt levels began to scrape all-time highs and inflation rates started to chip away at the value of currencies, investors have been looking for safe havens outside of the major markets. Faced with a chain of devaluations, they would essentially be playing a financial game of musical chairs. With currencies declining all around them, the goal would be to put their money in the last assets that maintained their value.

 

“Among the traditional favorites, gold stands out. Since the U.S. Federal Reserve’s tightening campaign kicked off in 2022, its price in dollars has risen 70 percent. Meanwhile, the Swiss franc has risen 17 percent against the dollar and 7 percent against the euro. Bitcoin, though much more volatile, has almost tripled in value. And some investors still see euro-denominated securities as a safe haven, likely assuming Germany will be the backstop.

 

“For now, the markets are relatively quiet. But the IMF expects the pressure on government budgets to grow as tariffs restrain global growth, and economic experts in the D-7 continue to warn of fiscal crises. Without the realistic prospect of reducing their debts via higher taxes or lower spending, D-7 countries are still on the path to devaluation.” 

Is the dollar’s status as the world’s reserve currency about to be deposed? The problem with all the pearl-clutchers is that they could never explain where that money would go. The EU? The renminbi? Gold? Crypto? Investors aren’t just going to stuff their wealth in a mattress or bury it in their back yard. Waving the bloody shirt of debt isn’t economic analysis.

https://foreignpolicy.com/2025/08/06/dollar-euro-currency-crisis-japan/?tpcc=must_read_email&utm_source=Sailthru&utm_medium=email&utm_campaign=%5BMust-Read%5D%20Currency%20Crisis%20081225&utm_term=one_off_currency_crisis_081225

 

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