Part 4/11:
More worrisome than tariffs are concerns over the stability of American institutions. Confidence in US democracy, the reliability of the legal system, and the independence of the Federal Reserve are foundational to the dollar’s strength. When doubts emerge about these pillars, the dollar’s appeal as a safe haven diminishes.
Mounting US Debt
Another major factor is the soaring US national debt, now exceeding $37 trillion — the highest since World War II. The recent congressional spending bill added an additional $20 trillion. Growing debt raises fears about the country’s fiscal sustainability and leads to expectations of higher interest rates, which can further weaken the dollar.
The Impact of a Weakening Dollar
A decline in dollar strength produces mixed outcomes: