Hi Jessica, I’m an econometrician and IR theorist whose main focus has been currency substitution theory. My personal findings can be summarized by saying simply that there exists a gentle but constant gravitic like economic pull towards currency unions that arises in heavy correlation with increases in fast & free trade and fast & free transfers of financial assets across political borders.
For odd reasons we’ll put aside here, I became a student of Trump in the early 90s and have followed his dealings (and his many failures) closely ever since.
His grasp of all things economic is abysmal of course, but he is convinced that the dollar is bad for America and has been confident in his ignorance on that since at least the late 80s. I’m not a conspiracy theorist, but I have thought for a long time that, aside from laundering money for each other, he and Putin share this goal. It’s been the unspoken and unprovable quid pro quo all along since he announced his bid for the presidency. They are tightly aligned in this. Trump is Trying to destroy the dollar and take command of the world’s supply of oil. He believes in a commodity based currency system and his one intention beyond grift for himself is to move our country to that. “He who has the oil has the currency that matters” is likely his thinking. And that is frankly crazy & obviously wrong on many levels. Not the least of which is that we don’t have the military capability to run a world wide oil policing operation. His plan will go no better than his war with Iran, and likely much worse as the whole world comes together to oppose us/him.
What you’re noticing in the bond market is a knock on from this plan. The bond market’s investors are slowly awakening to what he’s doing. They are becoming aware that Trump is intentionally undermining the basis of a financial and economic system that’s been around about 100 years; or at least since 1970-71. He’s not just racking up debts. He’s aiming for the geopolitical reorientation I speak of here. We are headed for something much worse than a debt spiral I’m afraid and it will include the loss of our dollar hegemony among other things.
Paul Krugman says "We basically stopped imposing progressive taxes that limited the growth of enormous fortunes." He should read the Brookings 2026 Chart Book and learn.
Hi Jessica. As usual, a very comprehensive and well-written piece on the issue. Yes, the growing share of government spending on the interest on the debt will eventually be a very important problem - though complex to discuss at this juncture. Stay tuned.
Congratulations! – as you several years ago warned that the low rates of the time would not continue – contrary to what many were saying at the time.
I believe most of the recent interest rate increases are due to the changes in expectations for Fed policy to be tighter, not concerns about the debt. For example, Robin Brooks – your Brookings colleague - - attempts to measure this by comparing the 20 year to the 10 year – the concept being that the 10 year is more reflective of Fed policy expectations while the 20 year is more reflective of longer-term concerns. That difference has actually declined marginally over the past couple of weeks and is lower than, say, at the end of 2025.
Separately, you say “As the government absorbs a growing share of the economy’s annual savings.” As you might recall, I have explained that this important point is apparently not true. Government deficits correspond with an equal increase in private sector saving– in this sense the deficits are self-funded and we don’t have to worry about where the money to fund future deficits is going to come from. That’s one key reason why the “crisis” never shows up for nations such as the U.S. There are many ways to explain this key point. Here is a simple one: All economists agree that Spending = Income - as it is an identity. Thus, when the government sector spends more than its income (a deficit or dissaving), the non-government (private) sector must equally receive more income than it is spending, i.e., save. This is not my opinion, your opinion, or a theory. It is just accounting. And the data published by the BEA (NIPA) on saving corresponds exactly with the accounting. My humble point is that the Spending/Income identity and the Crowding Out theory can’t both be correct. Am I missing something? Please consider. Thanks.
(And, to be clear, this point is not saying that deficits and debt do not create potential economic dangers. It is just pointing out that one of these dangers does not appear to be valid.)
Good article, Jessica, but an abysmal future unless there is drastic change. Thank you!
Thanks :)
Hi Jessica, I’m an econometrician and IR theorist whose main focus has been currency substitution theory. My personal findings can be summarized by saying simply that there exists a gentle but constant gravitic like economic pull towards currency unions that arises in heavy correlation with increases in fast & free trade and fast & free transfers of financial assets across political borders.
For odd reasons we’ll put aside here, I became a student of Trump in the early 90s and have followed his dealings (and his many failures) closely ever since.
His grasp of all things economic is abysmal of course, but he is convinced that the dollar is bad for America and has been confident in his ignorance on that since at least the late 80s. I’m not a conspiracy theorist, but I have thought for a long time that, aside from laundering money for each other, he and Putin share this goal. It’s been the unspoken and unprovable quid pro quo all along since he announced his bid for the presidency. They are tightly aligned in this. Trump is Trying to destroy the dollar and take command of the world’s supply of oil. He believes in a commodity based currency system and his one intention beyond grift for himself is to move our country to that. “He who has the oil has the currency that matters” is likely his thinking. And that is frankly crazy & obviously wrong on many levels. Not the least of which is that we don’t have the military capability to run a world wide oil policing operation. His plan will go no better than his war with Iran, and likely much worse as the whole world comes together to oppose us/him.
What you’re noticing in the bond market is a knock on from this plan. The bond market’s investors are slowly awakening to what he’s doing. They are becoming aware that Trump is intentionally undermining the basis of a financial and economic system that’s been around about 100 years; or at least since 1970-71. He’s not just racking up debts. He’s aiming for the geopolitical reorientation I speak of here. We are headed for something much worse than a debt spiral I’m afraid and it will include the loss of our dollar hegemony among other things.
Thanks Auguste, interesting.
Paul Krugman says "We basically stopped imposing progressive taxes that limited the growth of enormous fortunes." He should read the Brookings 2026 Chart Book and learn.
Hi Jessica. As usual, a very comprehensive and well-written piece on the issue. Yes, the growing share of government spending on the interest on the debt will eventually be a very important problem - though complex to discuss at this juncture. Stay tuned.
Congratulations! – as you several years ago warned that the low rates of the time would not continue – contrary to what many were saying at the time.
I believe most of the recent interest rate increases are due to the changes in expectations for Fed policy to be tighter, not concerns about the debt. For example, Robin Brooks – your Brookings colleague - - attempts to measure this by comparing the 20 year to the 10 year – the concept being that the 10 year is more reflective of Fed policy expectations while the 20 year is more reflective of longer-term concerns. That difference has actually declined marginally over the past couple of weeks and is lower than, say, at the end of 2025.
Separately, you say “As the government absorbs a growing share of the economy’s annual savings.” As you might recall, I have explained that this important point is apparently not true. Government deficits correspond with an equal increase in private sector saving– in this sense the deficits are self-funded and we don’t have to worry about where the money to fund future deficits is going to come from. That’s one key reason why the “crisis” never shows up for nations such as the U.S. There are many ways to explain this key point. Here is a simple one: All economists agree that Spending = Income - as it is an identity. Thus, when the government sector spends more than its income (a deficit or dissaving), the non-government (private) sector must equally receive more income than it is spending, i.e., save. This is not my opinion, your opinion, or a theory. It is just accounting. And the data published by the BEA (NIPA) on saving corresponds exactly with the accounting. My humble point is that the Spending/Income identity and the Crowding Out theory can’t both be correct. Am I missing something? Please consider. Thanks.
(And, to be clear, this point is not saying that deficits and debt do not create potential economic dangers. It is just pointing out that one of these dangers does not appear to be valid.)