Economics

POTUS seems hell bent on strengthening the dollar

honest question— with bond yields already as high as they are, what keeps a stronger dollar from sending us into a debt spiral? (other than time)

https://www.reuters.com/business/companies-race-ship-goods-us-ahead-potential-tariffs-2025-01-30/

Foreign demand. POTUS is establishing early in this term that the U.S. is still the dominant power. No other country is even close to replacing the USD as the world’s reserve currency. With the U.S. flexing, demand for dollars (and U.S. assets) will only strengthen. Hopefully enough to avoid a debt spiral 😅

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Servicing debt is the key, but foreign demand helps by keeping borrowing costs in check. If Europe slows down, capital flight into USD still props up demand—regulation or not, money moves where it’s safest. Surprisingly that’s still USD (until countries get behind BTC 😉)

"Hopefully enough to avoid a debt spiral 😅"

can't that only be done by servicing debt. Assume Europe has a economic down and won't be too tight into USD outside of capital flight into USD until the EU regulates that away

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Fair— Foreign selling happens, but let’s not ignore capital inflows—especially if GDP growth picks up. POTUS is actively pushing for onshoring + higher tariffs, both of which boost domestic production and GDP (if successful). Stronger growth attracts more investment, keeping demand for USD assets high.

The real risk isn’t the strong dollar itself—it’s whether we capitalize on it through productivity and investment, or keep pretending we don’t have a debt problem

time and again we see that when the dollar is strong foreigners *dump* US stocks and bonds to cover their own USD liabilities and stabilize their local currencies. a strengthening dollar increases borrowing costs at a time when demand for US bonds is already low and debt-to-GDP is at 123%.

we can’t afford raising rates because of high debt payments. normally this is a time for financial repression but high inflation remains a looming issue. 

we need GDP growth. a strong dollar is already deflationary. lowering demand for US goods coupled with hawkish immigration policies exacerbate the US debt crisis.