Dickson C. Igwe. Photo: VINO/File

The USA is the world’s largest and most secure market for consumer goods. US capital markets dominate. US citizens cocoon in an affluent culture of technological innovation, easy credit driven by a cheap Dollar that is the world currency, and media pressure to consume unrelentingly. It is a market that is unlimited in its appetites, with consumers with deep pockets: big spenders. The USA is the world’s greatest mall. 

The US consumer is critical, especially for major net exporters such as Mexico, Canada, Germany, China, and Japan. Most countries export to the USA, and that is a reason it has a vast trade deficit with the rest of the world. One example is the Caribbean: American tourists are two-thirds of tourists in the Caribbean. If the US tourist disappeared, that would spell doom for the Caribbean economy. 

US trade deficits finance world trade through an imbalance with countries that export products to the USA, that investors in US Dollars assets deem sustainable. That trade imbalance has driven a spiralling national debt, from annual trade deficits of over $1 trillion. It is indeed a paradox. The world needs an indebted USA to thrive. 

The US national debt figure is nearing the $36 trillion mark. The US government spent $6.8 trillion in 2024 mainly on welfare and Medicaid. Defense was the next vast expense at $850 billion. 

The deficit: the amount of cash the US government borrowed to cover the spending gap was $1.8 trillion, which is cash, derived from investors through bonds and Dollar assets. The majority of the spending comes from income tax and government receipts such as social security payments.

However, the national debt costs the USA over $1 trillion Dollars in interest payments that adds to the annual deficit.

The USA is able to go on this eternal borrowing spree solely on the basis that it possesses the world’s reserve currency: the Dollar. The Dollar is essentially a limitless credit card the USA possesses, backed by investors in US Dollar assets. 

Borrowing in the USA is cheaper than elsewhere owing to the fact it produces the Dollar: the world’s reserve currency. That difference in the cheap cost of finance in the USA and higher costs elsewhere is the Dollar’s profit margin. The world further pays the USA for using Dollar payment systems. 

As of today, the Dollar runs things!