Authors: Eric Edward Albers
This paper examines the relationship between interest payments as a percentage ofgovernment revenue and the stability of reserve currencies, identifying critical thresh-olds that historically preceded currency crises or the loss of reserve currency status.Through detailed analysis of cases including the British pound sterling, Argentine peso,Greek drachma, and Japanese yen, we identify a consistent pattern where fiscal crisesemerge when interest payments reach 20-30% of government revenue. This thresh-old appears remarkably stable across different historical periods, economic systems,and levels of development. These findings have profound implications for the UnitedStates, where interest payments are projected to rise from 19.5% of revenue in 2024to 63.4% by 2028, far exceeding historical crisis levels. The paper analyzes both do-mestic challenges (including demographic pressures, political gridlock, and structuraleconomic issues) and international pressures (such as de-dollarization initiatives, dig-ital currency development, and changing geopolitical dynamics) that could acceleratea potential crisis. We examine potential policy responses across fiscal, monetary, andstructural domains, while acknowledging the significant political and practical chal-lenges to implementation. The analysis suggests that the convergence of these factorscreates an unprecedented risk to dollar stability, potentially requiring preventive actionbefore critical thresholds are breached to avoid a disorderly adjustment in the globalmonetary system.
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[v1] 2024-10-27 16:43:26
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