On havoc – The Economist:

‘In 1990s japan the worst days of a market crisis brought about a “triple yasu” loss: a fall in stockmarkets, a rise in bond yields and a declining currency. It is now America that must stomach this noxious combination. Although President Donald Trump’s tariff pause provided a brief respite, the triple yasu has made an unwelcome return. Most alarming lately have been movements in the bond and currency markets. In total since April 1st the dollar has fallen by more than 4% against a basket of major currencies, at the same time as yields on ten-year Treasury bonds have risen by 0.3 percentage points (see chart).’

(…)

‘Moreover, America’s budget is already in an awful state. Global demand for the dollar and Treasuries has enabled America to run a more extravagant budget than that which sparked the crisis in Britain. This special status is known as “exorbitant privilege”. The federal government’s net debts are worth about 100% of gdp. In the past 12 months, America has disbursed 7% of gdp more than it borrowed, and spent more on interest payments than on national defence. Over the next year officials must roll over debt worth nearly $9trn (30% of gdp).’

(…)

‘Market moves could force further course corrections, by Mr Trump or by Congress. On April 11th the administration exempted smartphones and other consumer electronics from supplementary levies on China. But profound damage may already have been done. In recent years, economists have warned that exorbitant privilege, by making borrowing cheap, might induce America to take on too much debt, thereby making the dollar financial system fragile and vulnerable to a run. On this theory, it could collapse, much as the dollar’s peg to gold did in 1971, when the Bretton Woods system of fixed exchange rates imploded. Little more than a week ago King Dollar’s reign looked secure and such a calamity seemed highly remote. It is a measure of Mr Trump’s havoc that it now appears possible.’

Read the article here.

Maybe by the time that summer comes time King Dollar is back on its throne – what are the alternatives? Euro, yen yuan? – but it’s also possible that the havoc is more permanent.

Sovereign debts are not necessarily a problem, a state cannot go bankrupt, but you can exaggerate your exorbitant privilege.