To think of a possible and simple explanation for the question, you have to first quickly read this article of the famous American economist, Paul Krugman:
….. “Most historical examples of debt crises took place in countries that borrowed in another country’s currency”… says Paul Krugman.
What a diabolically ingenious way indeed to defend and shore up the U.S. Dollar in the face of the impending threat of BRICS plan to float its own global reserve currency in the decade ahead very soon !
The Krugman Doctrine is intended really to encourage all countries of the world today to keep borrowing — as they have been doing for well over 4 debates now —- USD currency knowing that if the U.S. govt . debt is not going to repaid , they too will not have any compulsion to do so either at anytime …
So long as their foreign debt in USD is kept serviced and redeemed at periodic maturity without any major default, the principal debt is not going to be a problem at all even if it keeps ballooning . Not for the debtor country . Not the Uncle Sam , the world’s super lender.
This is the exactly the kind of macroeconomic monetary theories that enslaved the whole world under American financial hegemony since the Bretton Woods plan after WWII was blueprinted for IMF and the World Bank and later got expanded into the foundation for all the global financial financial institutions.
Little does America and the likes of Krugman understand that BRICS too is expanding (Turkey will join it soon) and will at some point of time in the next 2 decades compete strongly with the hegemony of the U.S. Dollar as reserve currency .
The theory that Debt doesn’t matter at all and can be endlessly issued so long as it is in one’s own domestic currency which is also the predominant global reserve currency is born out of endless hubris and irresponsible, almost perverse academic thinking. If Krugman’s theory that the U.S. Government need not bother to ever repay or reduce its $34 trillion debt is going to be embraced by the US FED, on the assumption that the U.S. petrodollar can never be replaced as global reserve currency, then later than sooner, America is certainly going down a black hole of economic woe.
The problem however is that before the U.S. goes down the black hole , it might first push the rest of the world into it ! That’s the real and present danger for the whole world !
And that’s why most central banks of major economies of the world today are rejigging their own basket of reserves holdings … They’re slowly but steadily reducing their U.S. dollar holdings and moving away into gold and non-USD assets.
Now you will understand why India only recently even transferred 100 tons of its own gold reserves kept for so long in the UK Central Bank vaults back into its own Treasury vaults in India .
Jai Hind ! 👍🙌 🇮🇳
Sudarshan