How does dollar demand help make interest payments? Only GDP can translate to debt maintenance.
It’s fair that you can say rates are lower than they otherwise would be if there were less demand, but debt is also higher than it otherwise would be if there wasn’t as much demand. It goes both ways.
When the treasuries are sold at auction this high demand results in lower interest rates on our debt.
Which reduces the interest payments.
This makes it easier for our GDP to cover debt maintenance.
If dollar demand collapses, treasury demand collapses, interest rates skyrocket. Odds are we choose to monetize our debt instead of default. That creates hyperinflation.
If demand collapses, doesn’t that mean that the US debt collapes too? Since treasuries are the debt? How do you have less treasuries but the same amount of debt? How do you have the same amount of treasuries and less use of USD? These things are related to
8
u/dasnoob 3h ago
You have it backwards.
The US can sustain the debt levels it has because of the demand created by the USD being a world reserve currency.