US Economy’s Growing Debt Threatens Dollar’s Dominance

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US Economy’s Growing Debt Threatens Slow Growth, Challenges Dollar’s Global Dominance

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Washington, Sep 25: The United States’ economic trajectory appears to be mirroring that of China, with surging debt levels eclipsing sluggish growth. The considerable surge in federal spending, which has exceeded $8 trillion since 2021, has raised concerns about the nation’s financial stability. Moreover, the once-unrivaled global dominance of the US dollar faces challenges, as regional blocs in Asia and Europe express a growing preference for conducting trade in their own currencies.

The mounting debt burden could cast a shadow over the US economy, leading to what experts term a “long, slow grind.” Despite the apparent boost to the American economy driven by trillions of dollars in government spending, the repercussions of accumulating debt could ultimately weigh it down.

The Rockefeller International chair expressed surprise at the US economy’s resilience against aggressive interest rate hikes by the Federal Reserve. However, the foundation cautioned that the surge in federal spending, under the Biden administration, could eventually take its toll.

Notably, many nations have regretted extensive stimulus campaigns in the past, as the resulting debt has impeded economic growth. China, a prominent example, played a critical role in stabilizing the global economy after the 2008 financial crisis but has since encountered slow growth.

The Times observed, “Post-miracle, the US will face similar headwinds. When the stimulus and other temporary boosts wear off, the American economy could settle into a long, slow grind.”

Simultaneously, an anti-dollar movement, led by Asian nations, has gained momentum in Europe. France, in particular, has shown discontent with the dominance of the greenback. Experts highlight that the emergence of regional groups like BRICS, SCO, and ASEAN poses a substantial challenge to the supremacy of the US dollar as trade within these groups increases.

The US dollar’s preeminent position in global trade faces mounting challenges, with several countries contemplating the use of local currencies in commerce. Russia and Iran are collaborating on the creation of a gold-backed stablecoin, while France has pursued trade agreements with China using the Yuan. Numerous nations, including China, Russia, India, and Brazil, are exploring avenues to trade in non-dollar units, ranging from local currencies to a gold-backed stablecoin and a new BRICS reserve currency.

Even Europe seems to be joining the anti-dollar movement, with French President Emmanuel Macron recently cautioning against the continent’s reliance on the greenback, as noted by Business Insider.

As this global trend to reduce the dollar’s dominance gains momentum, the status of the greenback as a reserve currency has eroded, with 2022 seeing a tenfold decline in its pace compared to the past two decades, according to Eurizon SLJ Asset Management.

Last week, US debt reached an all-time high of $33 trillion, with the debt-to-GDP ratio projected to reach a new record later this decade. In China, authorities are cautious about increasing economic aid through additional debt, given the challenges faced by its real estate market and sluggish consumer activity resulting from economic overheating and the lingering effects of stimulus measures dating back to 2008.