Find out how the explosion of US debt with China pressures countries to flee the dollar

The national debt of the United States, which recently surpassed US$36 billionpresents increasing financial risks, especially for developing countries.

According to an editorial in Global Timesthis accelerated debt expansion requires immediate attention and the adoption of long-term strategies to mitigate possible global economic repercussions.

Data Treasury Department indicate that the American national debt reached US$34 trillion in early January 2024 and reached US$35 trillions at the end of July, before reaching a record US$36 trillion in just three months.

This rapid increase signals a worrying acceleration in the growth of US federal government debt, which could result in a greater fiscal burden in the future, with significant implications for the country’s economy and social development.

The editorial points out that the growing tax burden could undermine confidence in US Treasury bonds, resulting in greater volatility in global financial markets.

For developing countries, this situation can translate into capital outflows, depreciation of the local currency and increased borrowing costs, further hindering the economic development of these nations.

Furthermore, the editorial highlights that the US debt problem is not a short-term trend, but rather a long-term challenge arising from complex and persistent economic, political and social issues.

As the US dollar is the world’s main reserve currency, any swing in confidence regarding the US’s ability to manage its debt could have significant knock-on effects around the world, raising borrowing costs and increasing international financial volatility.

The Global Times suggests that one of the alternatives for developing countries would be to reduce dependence on the US dollar as a way of protecting against these risks. This strategy could help stabilize their economies against the uncertainties of global financial markets and fluctuations in the US economy.

This complex dynamic between U.S. debt and global economic stability underscores the need for vigilance and strategic planning by world leaders and financial institutions to navigate this uncertain and interconnected landscape.