What happens when Americans and foreign creditors do not believe that the U.S. government is stable, well-managed, and worthy of long-term investment?
They walk, and then run, for the hills.
The U.S. is run by a man with serious mental problems who has surrounded himself with others who want to benefit from his madness and ability to provide them with lucrative jobs, a free rein to steal whatever they can carry away, and to avoid future prosecution.
This is all being done publicly. Foreign leaders and many Americans see it happening every day.
Look at this description from Bloomberg contributor David Drucker, who acknowledges this same problem: “The ubiquitous use of the word ‘rigged,’ and all that it implies, however, is particularly unhealthy for the body politic. It undermines voters’ faith and trust in government and institutions and implies that only suckers bother to protect the crucial elements of our economic and electoral systems. Accusations of ‘rigging’ also give voters the impression that the challenges they face are intentional and intractable, rather than the offspring of policy failings that the US government and its institutions are equipped to remedy.”
So, what does this mean for average Americans who go to work every day and have to wait until the next election in November 2029 to see if their madman leader will be replaced?
By then, many Americans will see that Trump has wrecked the national governance system, which should take two generations to repair. By 2030, when a Democrat takes office, barring a likely coup attempt by MAGA loyalists who will take shelter in Trump’s $1 billion ballroom-bunker, the damage will be so severe that a variety of bad outcomes will be unleashed.
These bad outcomes could include a recession, civil disputes between MAGA loyalists and their opponents, a sell-off in U.S. bonds, foreign nations that don’t believe the U.S. is the leader of the free world, abandoned allies, and an outbreak of a pandemic due to inadequate protections from the federal health agencies that have been gutted of money and personnel.
There are more worst-case scenarios, but this is a good beginning.
Already, we have the beginnings of a remaking of the 1945 Bretton Woods agreement that Treasury Secretary Lloyd Bessant publicly said at a recent meeting. A re-making of this agreement means the U.S. needs a new monetary policy to address the $39 trillion in debt, which increases daily by the $1 billion spent on the Iran War. The U.S. is spending $1 trillion annually just to meet interest expenses on the debt, and the MAGA Republicans in Congress see no need to even address the debt.
The goal of the MAGA Treasurer and the Republicans to address the debt is to decrease the value of the U.S. dollar, according to financial experts. This will make the U.S. dollar more attractive to foreign buyers and increase exports, especially to Japan and Germany. This is what happened in the Plaza Accords of 1985 when federal officials reduced the value of the dollar by 9%.
But things did not turn out as expected.
By 1986, the Japanese Yen had doubled in value in less than two years, making Japanese goods less attractive in foreign markets. This created a crisis in Japan, forcing the Japanese to cut their discount rate on bonds, so corporations borrowed money at low rates and plowed it back into the stock market. This produced the stellar increase in Japanese stocks, golf club memberships, and land, which rose to astronomical levels. This turned into a bubble, which was brought down by raising interest rates in 1989.
By 1990, the Japanese stock market and real estate had crashed. This brought down many Japanese banks that were bailed out by the government. This produced a deflationary spiral and destroyed a generation of Japanese workers who could not find work, leading to a fatal economic stagnation. About 25 years later, the Japanese economy recovered. This is what the Japanese call the “Lost Generation.”
Could this collapse of the Japanese economy happen again in the U.S.?
No Faith in the U.S. Government
So, what does a devalued dollar mean to average Americans?
It means the dollar buys less than it does today. This will decrease 401(k) accounts, not in nominal terms, but in what a retiree will spend for the same amount of goods they can buy today.
Outside the U.S., nations are reducing their exposure to the dollar and increasing their gold holdings at the expense of the dollar. Trump’s threat against some NATO nations, including not supporting them if they are invaded, is certainly an invitation to Russia or other aggressors. The shorthand here is that Trump’s MAGA administration cannot be trusted to abide by long-standing treaties. This helps propel the model for non-U.S. governments to build portfolios with decreased exposure to the U.S. dollar.
Do Trump’s verifiable mental problems and the criminal gang in his Cabinet have a role in cutting exposure to the U.S. dollar?
Certainly.
The U.S. dollar and Treasury instruments are backed by “the full faith and credit” of the U.S. government. Do you think investors and non-U.S. governments have faith in the Trump administration, especially when it is run by a man with mental problems who surrounds himself with others who are also sub-standard executives?
Would you invest $100 with Trump? Based on his history as a failed businessman and as a leader, would you ever expect to get that $100 back?
No way.
So, imagine if you are an investment manager or government official outside the US.S., where would you put your money? China looks like it is on the rise. Gold is also attractive compared to an investment in U.S. dollars, especially when there are plans to devalue the greenback.
So, when Americans see that Trump has mental problems and that his corruption is openly flaunted, they should remember the U.S. is part of a global community. When criminal fanatics take over the U.S. government, people outside the U.S. have choices. They can invest elsewhere. They can take vacations elsewhere. They can avoid threats against their nations and insults against their leaders. They can avoid Trump’s insanity.
It’s pathetic that one-third of American voters elected Trump, a convicted criminal, under investigation for rape, and other self-serving crimes, twice as president. This says more about the sad condition of Americans than anything else.
And all this is happening as Americans prepare to celebrate the 250th anniversary of the 1776 Independence Day. On July 4, 2026, Americans who can see what Trump is doing to the nation should drape black bunting along streets and parade routes to remind fellow citizens that the country of 1776 is in serious trouble and would be unrecognizable to the Founders.
