According to Desmond Lachman, a former deputy director of the Department of Political and Check Department of the International Monetary Fund, the world loses confidence in the dollar, and the United States could suffer a financial crisis next year.
In A Project syndicate Split On Monday, he found that the US fiscal situation was already shaky before President Donald Trump began his second term.
But his tax cuts in the megabill, which has just been signed in the law, will add trillions to the deficit. In the meantime, his tariffs and the pressure on the Federal Reserve to lower interest further weakened the confidence in the dollar by depressing inflation concerns, Lachman, a senior scholarship holder at the American Enterprise Institute, explained.
“In addition, there is the obvious disregard for the rule of law, and the markets see little reason to trust the United States,” he added.
In his view, the dollar in the first half of the year fell 10% compared to other global currencies and marked the worst performance of the Greenback since 1953.
The jump came despite the tariffs and the wider premium between the US tariffs and those of other top people who would normally increase the dollar.
Gold’s increase of more than 25% this year is another sign of the trust of the market in the United States, as is the government bonds that remain despite market turbulence, said Lachman.
All of this results in a clear trust of the financial markets in the Trump administration’s economic policy.
“The problem for Trump is that, unlike politicians, the markets cannot be put under pressure or primed,” he said, referring to the risk of disobedience of legislators about primary elections. “If he refuses to consider the warnings of the investors, the United States should prepare for a dollar and bond market crisis in advance of the interim elections of the next year. The days of the world that live America over its remedies will quickly come to an end.”
Of course, many have triggered alarms on Wall Street in relation to tariffs, inflation, expansion of deficits, not sustainable debts, dollars and demand for US state bonds.
But so far have tariffs failed to trigger an increase in inflationWhile the revenue collected from the tasks this year can be achieved at 300 billion US dollars.
And despite the warnings that “binding wackilants” express displeasure with financial policy by calling for higher yields for bonds, this does not have to come about. In fact, the recent finance ministries have shown that it is still after the healthy demand for US debt.
In addition, many analysts see the dollar that maintains its status as the world’s primary reserve currency, although it tries to advance alternatives.
John Queen, manager with a fixed income sports folio manager at Capital Group, said in A Newer note that the bond markets adapt to higher levels of debt and added that the interest market is “incredibly efficient” when pricing risks.
While he is concerned about the size of the debts and its effects on the credit costs, it is not known when these worries about reality will be.
“Many people have predicted that a disaster is just around the corner and one of them is right one day,” wrote Queen. “Unfortunately, they only advise, so I will not predict that. Instead, I will say that I think the market is good in these concerns.”
