Over the last fifteen years, the U.S. national debt has skyrocketed to over $36 trillion, a figure that might sound alarming to most observers. Conventional economic wisdom holds that such massive levels of debt are a liability, a ticking time bomb that threatens the financial stability of the United States. However, contrary to this popular narrative, the U.S. dollar has strengthened dramatically during this period, especially against smaller currencies. In some cases, other currencies have hyperinflated into irrelevance, while the dollar’s dominance has only grown. This paradox raises an intriguing question: Could the U.S. national debt actually be a strength rather than a weakness?
Here’s why the answer might be yes—and why America’s growing debt could, counterintuitively, be a cornerstone of its global economic dominance.
The Unique Role of the U.S. Dollar
The U.S. dollar isn’t just a currency; it’s the backbone of the global financial system. As the world’s primary reserve currency, the dollar is used for international trade, investment, and as a store of value. Over 60% of global foreign exchange reserves are held in dollars, and a significant portion of global trade is invoiced in the currency.
This unique status creates an insatiable demand for dollars. Central banks, multinational corporations, and sovereign governments all need dollars to function in the global economy. When U.S. national debt rises, it creates more dollar-denominated assets (such as Treasury bonds), which are highly sought after for their perceived safety and liquidity. In essence, the debt fuels the global supply of the dollar—a supply that the world needs.
Why the Debt Doesn’t Hurt (and May Even Help)
1. Safe-Haven Status:
The U.S. government has never defaulted on its debt, and its economy remains the largest and most dynamic in the world. U.S. Treasury bonds are considered the safest investment globally, and during times of crisis, investors flock to them, pushing up demand for dollars. Even as the debt rises, the world views the U.S. as the safest place to park money.
2. Interest Payments Recycle Into the Economy:
Critics often point to the cost of servicing the debt as a burden, but those interest payments don’t disappear. They are redistributed into the U.S. economy, benefiting bondholders, pension funds, and other entities, many of which reinvest that money into economic activity.
3. No Viable Competitor:
The euro, yen, and yuan have all been floated as potential alternatives to the dollar, but none has gained significant traction. The eurozone faces internal political and economic challenges, the yen suffers from Japan’s stagnant growth, and the yuan is limited by China’s capital controls and lack of transparency. The dollar remains unchallenged as the global reserve currency, ensuring that demand for it—and for U.S. debt—remains high.
4. Printing Money Without Consequences (For Now):
Because the U.S. borrows in its own currency, it can theoretically print dollars to meet its obligations. Unlike countries that borrow in foreign currencies, the U.S. cannot be forced into default. While excessive money printing can lead to inflation, the global demand for dollars has so far absorbed much of the increased supply, keeping inflation relatively controlled (with exceptions like the pandemic-era spike).
Could the Dollar Become the World’s Only Currency?
As smaller currencies falter or hyperinflate, the dollar’s dominance grows stronger. In some regions, the dollar is already effectively replacing local currencies for everyday transactions. If this trend continues, the dollar could become the de facto global currency, used in almost all countries for trade, savings, and commerce.
This would give the U.S. unparalleled economic power. A fully dollarized world would mean that the U.S. could essentially finance its debt indefinitely, as it could always issue more dollars without fear of losing credibility. This would also enable the U.S. to inflate away its debt over time, as a larger global economy would naturally absorb higher levels of debt.
The Debt as a Growth Engine
A rising national debt isn’t inherently problematic if the debt fuels productive economic growth. Much of the U.S. debt funds infrastructure, defense, technology, and other sectors that drive innovation and global influence. Furthermore, U.S. companies—many of which dominate global markets—benefit from the dollar’s reserve status, which reduces their borrowing costs and enhances their competitiveness.
In a world where U.S. corporations and financial institutions dominate, the growing debt acts as a lubricant for economic expansion. The more debt issued, the more dollars circulate globally, deepening America’s economic reach and influence.
The More Debt, The Better?
If the U.S. continues to leverage its unique position as the issuer of the world’s reserve currency, rising debt levels may not only be sustainable but could actively strengthen its global dominance. As long as there is no viable alternative to the dollar and the U.S. economy remains strong, the national debt could function as a powerful tool rather than a burden.
Of course, this theory comes with caveats. Excessive reliance on debt, geopolitical shifts, or mismanagement of inflation could erode confidence in the dollar over time. However, the past fifteen years suggest that, far from being a weakness, the U.S. national debt is a cornerstone of its economic strategy. In a global economy that runs on dollars, more debt might just mean more power.
Creative Solutions: Gold and Bitcoin
While the current system of dollar dominance appears sustainable, the U.S. has additional tools at its disposal to manage or even negate its national debt.
1. Revaluing Gold
The U.S. holds the largest official gold reserves in the world, totaling over 8,000 metric tons. By revaluing gold—raising its official price—the U.S. could significantly reduce the real value of its debt. For example, if gold were revalued to $10,000 per ounce, the dollar value of U.S. gold reserves would surge, providing a mechanism to offset debt obligations while maintaining dollar stability.
2. A Bitcoin-Backed Dollar
As Bitcoin emerges as a new asset class, the U.S. could acquire a dominant share of global Bitcoin reserves. Once in control, the U.S. could transition the global economy onto a fractionally reserved Bitcoin-backed dollar. This would maintain the dollar’s global reserve status while benefiting from Bitcoin’s deflationary properties.
By controlling a majority of Bitcoin, the U.S. could ensure its leadership in this new monetary system, providing a hedge against fiat currency instability and reinforcing the dollar’s centrality in global finance.
Conclusion
The U.S. dollar’s dominance and the insatiable global demand for dollar-denominated assets create a self-reinforcing cycle: rising U.S. debt fuels global liquidity, which in turn strengthens the dollar and reinforces America’s economic power. In this light, the U.S. national debt isn’t a problem to be solved—it’s a feature of the global financial system that America has uniquely mastered.
The more the U.S. issues debt, the more dollars circulate, cementing its place at the center of the global economy. In this paradoxical way, the U.S. national debt might not just be sustainable—it could be the key to America’s enduring dominance in the 21st century.
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