"On the last legs" – Economist Sinn warns of US national bankruptcy

WELT "On the last legs" – Economist Sinn warns of US national bankruptcy 1 hour • 2 minutes reading time What's really behind the US tariff threats? Economist Hans-Werner Sinn believes that US President Trump has long been fighting against an impending bankruptcy. If he fails, the consequences will be dramatic, warns the former Ifo President. Former Ifo President Hans-Werner Sinn warns of an American national bankruptcy with dramatic consequences for the global financial system. "Word has gotten around that the US is on its last legs," Sinn told the news magazine "Focus." "Hardly anyone wants US government bonds anymore. Large investors reacted with horror when they realized how poor the US credit rating is." President Donald Trump's advisors have already explored measures "that the rating agencies would classify as insolvency for private debtors." The 77-year-old economist continued: "But of course, the goal is to avoid open insolvency. In my interpretation, that's precisely what the tariff threats are intended to do." "This creates bankruptcy risks," warns Sinn. America has been living beyond its means for decades, Sinn explains in the magazine interview: "It has imported consumer goods from the rest of the world and paid the resulting current account deficit with promissory notes. The result was rapidly rising foreign debt and even faster rising interest burdens. The net foreign debt of the US economy amounts to an incredible $26 trillion, and every year more than another trillion, or $1 trillion, is added. The interest the US has to pay on its national debt already corresponds to 13 to 14 percent of the national budget. In Germany, it only accrues about 2 percent." The consequences of a US national bankruptcy would be dramatic, warns the economist. "When US government bonds lose value, it impacts banks around the world. Banks suffer price losses and have to adjust the value of the securities on their balance sheets downwards. This creates a risk of bankruptcy. With the dollar, the US had the exorbitant privilege of borrowing in a currency it could print itself. It is now becoming apparent that the US has overexploited this privilege – with serious consequences for the entire global economy."