Krugman has this to say about it:
For those not familiar with how financial markets work, US Treasuries are the ultimate safe asset, used as collateral for everything. Even a hint that some Treasuries might not be honored could bring everything to a screeching halt
Musk and Trump are both in the habit of stiffing people they owe money. If markets even suspect that this habit will extend to Treasuries, God help us
Okay, I get all that.
But, what you’re describing sounds more like Covid lite, and this time the worst hit country is USA, which is more a service and software country that industrialized production one, rather than China, which is mostly material goods.
I suppose oil yes, but I mentioned how that could also be a positive in a way, and EU has been weaning off oil fast already due to Russia. Sounds like if anything this would really help slow down climate change by crashing oil production logistics of anything.
It also sounds like the Euro would greatly increase in value, enough to get a good deal of countries to join the EU that have good production and materials as well and balance out the severe deflation and get some supply chains back on quickly.
Also the '08 financial crises in the USA helped the EU in the long run too.
I think you’re vastly underestimating the scale, and underestimating how much damage will be suffered in the short term. It’s honestly not all that surprising that you would come to that answer, though, because it’s the same mindset that’s leading Trump and his oligarch cronies to what they’re doing. But both COVID and 08 were backstopped by the US economy. We’re looking at the situation where those happen, but the US is unable to be that backstop. Might the Eurozone become that backstop? Potentially, but the severe economic impacts that the US weathered as a result would be borne completely by Euro, which only holds up a fraction of the the world markets that the US. Might the Euro, might Finland, might even you specifically come out on top? Maybe! But it wouldn’t be on top of this economy, but one that has undergone a severe change because a simply massive portion of the global economy that exists at this moment would simply no longer be there.
A third of what the dollar does isn’t too bad (and better in SWIFT).
I don’t think Trump and his people are thinking much at all though, since doing what they’re doing sounds like it would wipe out most of their wealth.
And I know it would be a different economic system. What I’m asking is, is that actually bad in the long term?
What has this system brought us? Excessive production accelerating climate destruction (how much will the economy matter then?), dependence on fossil fuels, and a rise to fascism?
If the USA goes through Balkanization, would that truly be the worst outcome for the future of the world as a whole?
Or put another way - is keeping the US empire worth the stability of the world economy as is? I think not, at least, especially with how things are going.
That the EU could potentially come out on top is an optimistic take as far as I can see.
It’ll be terrible for the USA, but I still don’t see how it would be terrible for the world. I’m old enough to remember countries that didn’t rely on the dollar as much, and things were more affordable for the people of those countries then than now. The biggest influencer to me in economic growth seems to be improvements in science and technology rather than in dollars being used more.
Maybe instead you could describe this damage for me, then, in a way I can better understand. If you have the time