Warning to Trump: "This would blow up the US fiscal system"

Economic historian Harold James raises concerns about the potential impact of a weaker US currency, as sought by Donald Trump . According to James, this could have serious consequences, particularly for the US fiscal balance.

Potential risks of a dollar devaluation:

• High national debt: A devaluation of the dollar could cause foreign investors to lose interest in US securities.
• Rising interest rates: Without foreign investment, interest rates rise, increasing the cost of servicing debt.
• Fiscal Strain: The United States is already in a situation where debt service spending exceeds military spending. Further strain could destabilize the entire fiscal system.

Current developments in the dollar exchange rate:

• The dollar has depreciated by eleven percent against the euro since the beginning of the year.
• A weaker dollar could improve US export opportunities but reduce the attractiveness of the US economy for foreign investment.
• Trump is putting pressure on the US Federal Reserve to lower interest rates despite the threat of inflation, which increases uncertainty about future economic policy.

Europe as a stable investment location:

• Economic historian James predicts a shift of capital in favor of Europe.
• From the investors' perspective, Europe is seen as a more stable market, which could lead to increased investment activity.
• Developments in the US could accelerate European reform processes, particularly in the areas of banking and capital markets union and the coordination of defense spending.

Harold James' analysis makes it clear that current US policy not only creates internal challenges but also generates global shifts and opportunities. Europe could benefit as a stable haven while the US grapples with the risks of a dollar devaluation.