“…As US President Donald Trump’s tariffs and military adventurism chip away at the dollar’s credibility, the privilege may be all China’s.
The reference here is to the phrase coined by France’s finance minister in the 1960s, Valery Giscard d’Estaing, to criticize the dollar’s dominant role in the global economy. America’s “exorbitant privilege” enables it to sell 10-year US debt at 4.1% yields, even as the national debt nears US$40 trillion.
Trump’s trade war, regime-change gamble in Venezuela and joining hands with Israel to attack Iran also give investors valid reasons to worry about the stability of US assets. So do Trump’s attacks on the Federal Reserve, the most globally respected US institution.
It’s no coincidence that foreign central banks’ holdings of US Treasury securities are now the lowest since 2012.
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China has a literal trump card. The ways in which Trump World is taking a wrecking ball to US institutions risk forfeiting Washington’s exorbitant privilege altogether…”