Since his return to office, US President Donald Trump has been systematically destroying markets’ faith in the dollar and the US economy. If he refuses to heed their warnings, as seems likely, the US should brace for a dollar and bond-market crisis in the run-up to next year’s midterm elections.
WASHINGTON, DC – When he was France’s finance minister in the 1960s, former French President Valéry Giscard d’Estaing famously complained about the “exorbitant privilege” that the dollar’s position as the world’s leading reserve currency conferred on the United States. This meant, essentially, that the US could borrow at low interest rates, run persistently large trade deficits, and print money to finance its budget deficits. He never could have imagined that the US would end up letting these advantages slip through its fingers.
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