A US debt default risks depleting financial markets of a safe, liquid asset like the dollar, according to Paul Krugman. on Sunday, the Nobel economist shared a chart showing how the US government has to borrow money at higher interest rates compared to other countries, including France, Germany and Japan – and how that could pose a risk to financial markets if the US defaults on its debt.
"The risk from a debt default is *not* that some other currency will take over the key role now played by dollar securities. It is that *no* currency will be available to play that role — that financial markets will be disrupted by the lack of any safe, liquid asset," Krugman added.
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