Governments that have issued debt that’s denominated in dollars could have serious problems if the U.S. currency continues to rise.The rally in the US dollar could lead to the next global debt crisis
If the U.S. dollar continues to rise, governments that have issued dollar-denominated debt securities could face serious problems.
The U.S. dollar shows the strongest rally since 2016. Some analysts claim that this is only a rebound in the bear market. However, the facts suggest otherwise.
The law of involuntary consequences
Taken separately, a bounce in the currency in which you are paid (the dollar) is a good thing.
However, there are involuntary consequences. The problem of the giant toad (bufo marinus) in Australia is a classic (non-financial) example of unintended consequences.
In 1935, Australia imported toads to control the mountain pine beetle. The problem is that toads are toxic, can weigh more than 2 pounds and have no natural enemies. Today, Australia does not know how to eliminate giant toads.
Could a steadily rising U.S. dollar become the "giant toad of the financial world"?