Turkey is the canary in the coal mine for a $106 trillion global financial system on a headlong collision course with the Donroe Doctrine. For decades, the structural assumption of international finance has been that American sovereign debt and fiat currency were the ultimate safe harbors. But when imperial wars disrupt the global economy’s supply chains, paper promises evaporate. Pushed to the brink by the Trump administration’s miscalculations, sovereign states are being forced to abandon those promises and retreat to material bedrock.
It’s worth delineating hard problems vs soft problems. A hard problem are things like climate change. Fundamental, unavoidable issues with systemic consequences for everyone.
Then there are soft problems. where man made systems abused by man made corruption become unstable. They really boil down to who is holding left holding the bag. The rich wants to be bailed out and leave the poor to suffer the consequences. The poor think the rich who shit the bed can lie in it.
Debt bombs are a soft problem. Nothing to get worked up over. Just be ready to practice what you preach when the soft problems come.
I think this is a worthy distinction but while debt is a soft problem the shock from rapid dedollarization will not be soft. The rapid acceleration to a new paradigm is threatening genuine chaos.
Nobody wanted to dedollarize this fast, even the enemies of the US. Now nobody has any choice but to proceed as rapidly as possible towards dedollarizing and this kind of situation is bad news for global stability.
All True. But the severity of consequences, who feels them and how do we fix or replace the systems are all soft problems. They all have solutions, and aren’t any harder than we want to make them.
It’s complicated - money is fake, but debt is less fake.
The faster debt is forced to move in large shifts, the more real it is.