Comment by epistasis

One thing about being the world reserve currency is that there needs to be enough currency out in the world to circulate. When there's not enough currency of a certain type, people switch to other things. As the world has become much richer, it has a huge demand for US dollars, mostly in the form of T-bills. That's "free money" for the US government to take from others in the world.

The USD as reserve currency has enabled lots of extra spending and growth in the US, in a virtuous cycle of being the reserve currency because the US has the strongest and greatest economy, and then the reserve status increases our economic strength. Over the past 75 years the US spent a huge amount of effort to place itself into such a privileged and lucky position.

There will be some point where the currency might be devalued on the world stage because of spending. But what is happening right now because of Trump is a huge devaluing of the currency because of loss of trust in the US:

https://www.morganstanley.com/insights/articles/us-dollar-de...

The true death spiral will happen when the rest of the world fully loses trust in the US. Right now we are too big to fail, but it doesn't have to be that way if we keep on pulling back from the rest of the world. The biggest losers from this pull back is the US itself, and the enormous economic privilege it gave us.

That big spike in deficit spending came from the initial Trump tax cuts in term one, and it looks like we'll be getting an even bigger spike in deficit spending now in term 2 with even bigger tax cuts for the wealthiest in the US, with zero relief for regular people (except those in real estate.... let me tell you about all the special tax benefits for real estate investors you see when you start doing your taxes as a sole proprietor, whew....)

Anyway, we will have to wait for another Democratic president before there's any addressing the deficit, if history is any guide. We only see deficit reduction under Democratic presidents and massive deficit increases under Republican presidents. But as I started, it remains to be seen if deficits are a bad thing inherently; it's more about the quantity of the deficit and whether we lose power or gain power economically from the deficit. Military spending is mostly "dead" money that does nothing to expand the economy, but research and funding the poor ends up increasing economic activity and growth.

Edit: and destroying small things like USAID greatly lessens trust in the US, and costs us far far more in dollars than we spend on it. And that's ignoring all the good for humanity that feeding starving people does.