Hillary Clinton, a former first lady and the U.S. Secretary of State from 2009 to 2013, has issued a warning about the potential disastrous outcomes that could result from the U.S. defaulting on its debt obligations. In an opinion piece published by the New York Times on Monday, Clinton stressed that the risk of the dollar losing its status as the world’s reserve currency could lead to a global financial meltdown.
Clinton described the debt ceiling debate as an issue not about authorizing new spending, but rather about Congress paying debts it has already incurred. She emphasized that refusing to pay would have global consequences similar to skipping out on a mortgage payment.
Clinton highlights the crucial role that the United States and the dollar play in the international economy, noting that defaulting on debts could spark a worldwide financial meltdown. Pointing out that the competition between democracies and autocrats is growing increasingly intense, the former first lady is warning that undermining America’s credibility and the pre-eminence of the dollar plays right into the hands of Xi Jinping of China and Vladimir Putin of Russia.
According to Clinton, the USD is central to international transactions conducted by people, companies, and governments worldwide. They invest in U.S. Treasury bonds and rely on U.S. banks because they trust that America pays its debts, upholds the rule of law, and guarantees stability. This trust has allowed the U.S. to impose sanctions, such as those against Iran and Russia. Clinton stressed that playing games with the debt ceiling could imperil the dollar’s pre-eminent position in the global economy and the power it gives the United States.
Clinton also warned that if Congress keeps flirting with default, calls for dethroning the dollar as the world’s reserve currency will grow much louder, not just in Beijing and Moscow but all over the world. A growing number of countries are already ramping up efforts to shift away from using U.S. dollars in trade settlements, including ASEAN countries, while the BRICS nations (Brazil, Russia, India, China, and South Africa) are reportedly creating a new currency that reduces their reliance on the USD.