Last week, when Avril Haines, the Director of National Intelligence, testified in front of Congress, she had something to say about the body’s toying with the debt ceiling. Their little game of chicken, she said, was playing right into the hands of America’s main adversaries, Russia and China. “It would be almost a certainty that they would look to take advantage of the opportunity,” she said, to play up “the chaos within the United States, that we’re not capable of functioning as a democracy.” A debt default, she added, would unquestionably “create global uncertainty about the value of the U.S. dollar and U.S. institutions and leadership, leading to volatility in currency and financial markets and commodity markets that are priced in dollars.”
In fact, both Moscow and Beijing have already been hard at work spinning the debt ceiling standoff into domestic propaganda. Kremlin-owned television has been reveling in every single U.S. bank failure. “The U.S. banking system is shaking like it has a bad fever,” one anchor crowed upon delivering the news of First Republic’s demise. Other reports are predicting that an American default could happen any day now, which would finally usher in the kind of world Vladimir Putin has been pushing for for years: one not denominated in the U.S. dollar.
Chinese state media is on a similar kick, running cartoons about the U.S. drowning in debt alongside various reports about how many Chinese bilateral trade deals are now denominated in the renminbi, rather than the dollar. Russia, Saudi Arabia, and Brazil are willing and eager participants. Others are licking their lips at an impending American financial collapse and the opportunities it would open for China. “A possible U.S. default, which may take place as early as June… will severely damage [an] already shattered U.S. credit and financial system, while push more international investors to shift to other countries’ assets,” declared one article in the Global Times, the C.C.P.’s English-language rag. “It serves as a reminder of the accumulated risks of the U.S. financial system as the result of U.S.’s reckless monetary policy. It will spur the internationalization of the yuan as a more reliable and trustworthy currency… When the U.S. dollar hegemony starts to crumble amid developing economies’ shift to other currencies for settlement to fend off the risks of the reckless U.S. monetary policy, the U.S. may find even harder to peddle its treasury bonds.”