Hacker News Reader

Comment by nabla9 | Hacker News Reader

>They want to repudiate foreign held debt, or devalue it, by revaluation of the USD

Devaluing dollar does not reduce debt measured in dollars. It only makes US debt less valuable to forefingers.

Devaluing dollar can work well only if foreign investments into US stop or reverse. "foreign investors at the end of last year owned 18% of U.S. stocks, according to Goldman Sachs" The trend has already reversed https://www.reuters.com/markets/us/foreign-demand-us-assets-... Killing foreign demand for US assets more permanently is possible but it means financial market crash.

What WILL happen is recession. Atlanta Fed GDPNow dropped from -2.8 to -3.7 percent in a week. https://www.atlantafed.org/cqer/research/gdpnow?date=2025-04...

View on HN

https://www.nordea.com/en/news/mar-a-lago-accord-explained-a...

https://think.ing.com/articles/mar-a-lago-accord-10-question...

https://www.forbes.com/sites/eriksherman/2025/02/23/why-trum...

https://www.lowyinstitute.org/the-interpreter/unpacking-mar-...

I certainly don't understand enough of economics, but:

- If everything overnight costs 20% more for the American consumer, it equals 20% less disposable income and less purchasing power.

- US companies, even the few ones not directly affected by tariffs, are going to be hit by less demand, and that in the aggregate is going to affect the performance of all American companies.

- So, it makes sense to dump as much American stock (and perhaps other instruments) as rationally possible.

The rest of the world is also going to feel the shock, though at this point is unknowable to what extent, and it also depends on the policies governments outside USA enact. In Sweden for example, we react to imported USA inflation by increasing central bank rates and catapulting the country into recession, and I totally see that happening in the next few weeks. Even it does not, it is what the public expects, and already many may be reigning in on consumption and investment. And dumping American stocks like crazy.

Foreign countries like Japan and China own around $1.8T in US bonds. These are valued in dollars, like stocks.

Yes. That's what I said "Devaluing dollar does not reduce debt measured in dollar"

The US would still have to pay the debt in Dollars. Devaluation affects currency exchange rates. Debt would be less valuable in Yen and Renminbi but just as expensive for the US government.

Doesn't Europe and Japan have dollar swap lines with US? So ultimately it is US buying its own bonds through Japan to create an illusion that there exists enough external demand.

I thought the US gov is hoping that debt is relinquished as part of negotiations, is that not the case?

That's a crazy showertought. WH might actually consider it.

After hypothetical successful debt relinquish negotiations, any new US debt would have similar interest rate to Argentinian debt, 30% or so. Wall Street would shrink and London (or Frankfurt) would become new global financial center.

In reality, countries do just as what they do now. They raise counter-tariffs. The US faces coutertariffs from everyone. Other countries only from the US. Trade between countries other increase and they gradually adjust. Europeans start buying less iPhones and buy more Androids made in South Korea. Less Fords more Nissan.

> Europeans start buying less iPhones

I wonder... they're all made in China anyway. And shipped from there directly, not through the US. I'm sure that either the US tariffs won't apply to them, or Apple will shuffle some subsidiaries so they don't.

Buying goods from American corporations is going to leave a sour taste in the mouth for Europeans now.

Yeah but for smartphones you have two choices, both American.

Don't tell me it matters who makes the hardware, it's the OS that sets the experience.

Samsung and apple?

Apple and google. Read both lines of my post.

Most (if not all) Fords bought in Europe are actually made in Germany (AFAIR).

Reply on news.ycombinator.com