Is this how the dollar dies? Investment banker sounds alarm as China divests from US debt

What happens when the world’s largest borrower slowly begins to default? According to investment banker Sarthak Ahuja, this question could soon define the global economy – as major nations begin to withdraw their money from the United States and the IMF warns that America’s debt spiral is “out of control.”

Ahuja’s LinkedIn post is sparking debate in financial circles because of its stark warning: “The United States owes more than the combined GDP of Europe, Africa, and South America. That’s more than $100,000 in debt per American.”

The alarm follows the IMF’s recent alert on the US federal debt of $36 trillion, largely fueled by post-2008 bailouts, record defense spending and pandemic-era stimulus. Now America’s biggest lenders want their money back.

China, Japan, the United Kingdom and Canada began quietly dumping US Treasuries. “China, the largest lender to the United States, has already started,” Ahuja writes. “Japan is doing the same.”

To retain investors, the United States raises interest rates. But it’s making the crisis worse: Annual interest payments now exceed $1 trillion, more than even the Pentagon’s budget.

This change is already visible in global capital flows. Central banks are turning to gold and the Chinese yuan is gaining ground as a trading currency in emerging markets.

What’s left in the United States? Ahuja suggests higher taxes on the rich, but notes that tax breaks continue. Cutting spending on defense, health or social protection could trigger unrest. In reality, the fallback appears to be reducing tariffs and immigration, measures that risk further isolating the United States.

“If this continues,” Ahuja warns, “the dollar could start to be devalued – and the world could move forward.” »