European leaders are considering dumping $2.34 trillion in US debt if Trump abandons Ukraine, potentially triggering an economic crisis worse than 2008
European leaders are considering dumping $2.34 trillion in US debt if Trump abandons Ukraine, potentially triggering an economic crisis worse than 2008
I’m no economist and will probably get this wrong, but since there is nobody else here… least I can do is give you enough an answer that someone more knowledgeable will come and correct me.
Basically, governments can print magic slips of paper called “bonds” that people will want to buy for two primary reasons: (1) they get interest when they hold the bonds (interest paid by taxes), and (2) the bond is considered a safe way to store value (like how a house is considered a safe way to store value). The government, in return for selling those magic pieces of paper, gets the money used to buy the bonds. It’s the Treasury Bond market.
Now here’s two important details about the bond market: (1) Bonds have an inverse relationship with cost and interest rates. If stockpiles of bonds get sold, that increases the supply of bonds which causes price to fall — adversely causing interest rates to hike up. (2) Because U.S. Treasury bonds are considered risk-free, all other interest rates in the economy (mortgages, car loans, corporate debt) are built on top of the Treasury yield (Example: If a 10-year Treasury yields 5%, a bank might offer a 10-year mortgage at 5-6%). Basically, Treasury rates set the floor for almost all borrowing costs.
So if a foreign state sells massive quantities of bonds, interest rates everywhere can shoot up. That can make all of our existing debt too difficult to pay back. We’d be stuck with three options if it gets bad enough: (1) default on the debt, (2) debase our currency by printing enough money to push the problem down the road, or (3) balance the governments budget.
From what I understand, we’ve already pushed the limits of option 2 during the Housing Crisis and COVID. Printing more money is talked about as though it’s impossible without causing more harm than good. Honestly, I don’t know what happens if the bond market cracks at this point… a depression comparable to TGD?
Also 3 is infeasible because the rich own congress and the poor are struggling really bad right now. You can’t cut the fat off someone skinny and we’ve spent the majority of 2025 cutting large chunks of muscle off to get a bit of fat. The only realistoc options to balance the budget are to cut military spending (including ice and police), or to start levyying massive taxes that will either impoverish the middle class or actually do a dent in the rich.
1 is somehow actually the worst option of the three though. The united states’ wealth comes in part because we always pay our debts. This is how we got here. Borrowing money is extremely low cost for us so we just do it constantly. It became politicized with the two santas strategy, but we rely on cheap debt to have the power to do things. If we default shit like high speed rail, a border wall, single payer health care, war with Venezuela, and even mythical non partisan expensive projects become financially impossible without taking on self destructive amounts of debt.
Unfortunately, I don’t think the administration understands any of that. Trump will print money, cut medicaid entirely, and demand we all go hungry for his vanity while he eats his newly hundred dollar big mac
Thank you.
The neoliberal claim that the amount of money printed directly influenced inflation has been tested and couldn’t be proven so far.
Hyperinflation is either caused by too much demand or too little supply of goods, or by greedy fucking billionaires price fixing.
They still keep making that claim and neoliberal governments (pretty much all of them) still act on it because it makes rich people richer. Nations sell their public infrastructure or make other bad deals to beg private actors for money, those earn interest and dividends.
As long as the USD is the de facto world currency it also seems highly unlikely that any amount of money printing would hit it’s value too hard. There’s always demand for dollars. On the other hand, Trump is working hard on incentivizing the world to use different currencies.