That's how it could create a runaway snowball effect. The first few countries to sell off their US bonds would be in the best position, after that the bonds' value starts to dip. Other countries see that and decide to sell off now before it gets worse, and the value dips further, accelerating as more and more countries realize they need to dump their US bonds asap cause it's only going to keep plummeting. The last ones to notice or act on it will be stuck with worthless bonds that will never recover their value.

That's how it would result in total economic collapse for america, and knowing that the sooner you drop the hot potato the better is what will create the rush to sell them off as soon as possible. How many initial sell-offs it would take to precipitate this effect is the question.

And since the crashed dollar will lower the purchasing power of anyone whose wealth or income is primarily in US dollars, anyone who drops these assets ahead of the game will be in the best shape. That's why a lot of US banks are currently buying gold; it's very likely to hold its value and is a very stable asset.

Assuming countries drop their USD-based assets before the crash, the relative values of their currencies should remain similar. For instance, the EUR to GBP conversion rate wouldn't change much. The more heavily invested in USD a nation's economy, the more detrimental the impact would be on their currency.

Commodity prices measured in USD for example would skyrocket, because the relative value of the USD would be crashing, but any currency that untethers from the US economy in time should remain stable relative to commodity prices, or possibly see some advantage if it gains value as a result of the USD crashing.

This is all contingent on countries dropping their US bonds and other assets, of course. The more dependent their wealth is on the US economy, the more detrimental the USD crash-out will be to that country and its currency. All the more incentive to be among the first to drop their US assets.

Even if they decide collectively not to do this, the AI bubble is going to burst sooner or later, and the further they kick the can down the road the worse the crash is going to be. Along with other trends like the US reversal of green energy initiatives while the fossil fuel industry is beginning to show cracks, the impending collapse of oil prices, etc., investing in USD is just really bad fiscal policy. People are only still doing it because they believe they can hold the jenga tower up long enough to grow their portfolios just a little more. Their greed will kick them in the ass if they hedge their bets too far...

Yeah..... The really bad part is that it would be most harsh on countries with unstable currencies. The USD is basically the foreign currency reserve that backs most poorer nations currency.

Countries could slowly start exiting the US bond market, but they would have to find a replacement, and nothing has been as stable or financially open to scrutiny as the USD.

Even if more countries switched over the yuan it'd have to be a slow process. There would also be a lot more blind trust involved since there's a lot of things done behind the curtain between the national bank and local government banks.

Every sale requires a buyer