The Worst-Case Scenario for the U.S. Debt Crisis: If Trump Orders a Debt Default!

Analysts from Nomura and others warned that if the U.S. opts to stop debt repayments under Trump's orders, it would damage the credibility of the U.S. dollar. This could lead to investors demanding higher risk premiums for U.S. Treasury bonds, potentially causing a sharp increase in government interest payments.

Without large-scale fiscal consolidation, the Federal Reserve might lose its monetary policy independence, and the government might implement stringent financial controls to push real yields on U.S. debt into deeply negative territory to liquidate federal debt.