Fair is foul, and the US reserve currency status is likely to be seen in hindsight as a curse rather than a blessing. The Fed’s ability to print money stems partially from the hubris of long-past geopolitical successes. Those successes, combined with a level of economic dominance, fostered an appetite from foreign markets for all things dollar-denominated. Increasingly, that no longer appears to be the case, but the domestic tendency to print and spend has not abated in the least.
Those who continue to invest in US government bonds—despite the deranged fiscal recklessness of Congress and the improvisational monetary policy of the Fed—must do so with regard for the creditworthiness of the borrower and the soundness of its currency. As treasury yields go up, dependent markets—including stocks and housing—are likely to be impacted as well. Investors of all stripes would, therefore, do well to remember how currency regimes decline and asset bubbles pop—gradually, then all at once.
To answer the unasked question, “Yes, we did it to ourselves, with very little outside help!” We let the banksters run wild with few to no reserves in their lending and the Federal Reserve Bank encouraged feckless behavior on the state and everyone else’s part.