Volume XLVI – Number 1
Mart Moora
Abstract: Following the twenty-first century Great Recession, academics have been divided on the hypothesis that an increasing accumulation of foreign debt is detrimental to American national security interests. Although the hypothesis remains unproven, this paper argues that, if proven, US officials will shift foreign policy stratagem from Neoliberalism to Realism in order to offset short-term fiscal losses. The hypothesis is based upon two notions. The first is that authoritarian states, like China, will exploit regional investment firms—known as Sovereign wealth Funds—and foreign shares of US liabilities to constrain US foreign policy options. Second, the devaluation of the US dollar undermines US national security by dissuading the purchase of dollar-denominated debt, consequently eroding American soft-power. Considering the post-WWII predominance of Keynesian theory in American political though and policy, deficit spending has become a mainstay of prevailing domestic policy. As a result, political officials, regardless of partisan affiliation, espouse a commitment to curtailing the decline of US economic supremacy as they continue deficit spending.
