Two years ago, I introduced the idea of a Strategic Default a thesis suggesting that the United States might someday use its growing debt load not as a fiscal liability, but as geopolitical leverage.
Today, that vision is beginning to materialize but not in the way many imagined. While I still believe the core logic of the Strategic Default remains intact, the mechanics have shifted. We are not heading toward an outright refusal to pay the debt. We are witnessing something quieter, more elegant, and arguably more powerful.
I now call this thesis: The Great Rotation.
Congressional accounting tells a story that directly contradicts the White House narrative. The House’s passage of the so-called Big Beautiful Bill offers a textbook example of how debt rotation might operate under the guise of conventional fiscal policy. Supporters champion it as a debt-reduction package, but official projections tell a different story: a debt-to-GDP ratio climbing to 123.8% over the next decade up from the current baseline of 117.1%.
Meanwhile, administration officials claim the bill will bring debt down to 94% of GDP by 2034, largely through supposed deficit cuts and growth-driven revenue. But independent analysis tells us otherwise: $2.4 trillion in new deficits over ten years driven by aggressive tax cuts and inflated assumptions about future growth.
So what’s really going on here?
The Strategic Default framework once proposed that the U.S. might exploit its debt position by threatening nonpayment. But today, a more subtle strategy is in motion: not to stop paying the debt, but to change who holds it. Instead of foreign governments like China and Japan holding the bag, we are watching a quiet rotation of creditors toward domestic fintechs and stablecoin issuers who are buying Treasurys to back digital dollars.
This is not a default. It’s a controlled reassignment of leverage.
The Big Beautiful Bill, for all its fiscal noise, may simply be the signal that The Great Rotation has begun. Trillions in new borrowing are no longer just about stimulus or deficits they are about rebuilding the structure of who owns America’s debt, and by extension, who gets to influence America’s future.
The Big Beautiful Bill: What It Claims to Do
The One Big Beautiful Bill Act stands as President Trump’s legislative masterpiece for his second term. Congress passed this comprehensive package in July 2025, weaving together the administration’s economic philosophy into a single, sweeping framework. The legislation operates on multiple levels, each designed to address specific constituencies while advancing broader strategic objectives.
Tax cuts and deregulation promises
President Trump’s signing ceremony emphasized the bill’s role in delivering “the largest tax cut in history for middle- and working-class Americans”. The legislation extends and amplifies provisions from his 2017 Tax Cuts and Jobs Act, creating a more aggressive tax reduction architecture. The policy framework includes several targeted relief mechanisms:
- Elimination of tip taxation (projected benefit: $1,300 per tipped worker)
- Overtime pay tax exemption (annual value: $1,400 for hourly workers)
- Social Security benefit tax elimination
- Child Tax Credit expansion to $2,200 (reduced from initial $2,500 House proposal)
- Standard deduction doubling to $31,500 for families
The legislation also recalibrates the state and local tax (SALT) deduction cap from $10,000 to $40,000 for households earning under $500,000. This modification directly targets high-tax states while maintaining middle-class appeal.
Stated goals of economic growth
White House economists project the bill will usher in “the Golden Age of America”. Administration modeling suggests typical families will capture up to $10,900 in additional take-home pay. These projections rely heavily on dynamic scoring assumptions and multiplier effects. The legislation’s economic architecture targets job market dynamics through multiple channels. Officials project protection for 7.2 million existing positions while generating 1 million new jobs annually through small business expansion. The Trump administration’s Council of Economic Advisors forecasts GDP growth reaching 4.6-4.9% over four years. Energy policy integration represents another key component. The bill promises “energy dominance” through expanded oil and gas development access. Manufacturing incentives aim to prevent American job migration overseas, creating what economists call reshoring incentives.
Public messaging vs fiscal reality
The administration’s fiscal messaging emphasizes responsible spending. Officials claim the bill will “restore fiscal sanity by cutting $1.5 trillion in spending”. Yet independent budget analysis reveals a starkly different fiscal trajectory. The Congressional Budget Office projects the legislation would add $3.4 trillion to federal deficits over the next decade. This figure reflects reduced revenues exceeding any spending reductions. The Committee for a Responsible Federal Budget calculates primary deficit increases of $2.4 trillion over ten years, with total impact reaching $3 trillion including interest costs.
Economic modeling becomes even more concerning when considering policy permanence. Should temporary provisions become permanent without offsetting revenue, the fiscal impact could reach $5 trillion. The Tax Foundation projects debt-to-GDP ratios increasing by 9.6 percentage points by 2034. This disconnect between messaging and fiscal mathematics suggests deeper strategic considerations. The administration’s emphasis on growth-driven revenue generation assumes economic expansion will offset tax reductions. Yet the underlying fiscal architecture appears designed to accelerate debt accumulation rather than constrain it.
Debt Acceleration as a Hidden Strategy
The numbers don’t lie even when the messaging does. The Big Beautiful Bill represents a masterclass in fiscal misdirection, where trillion-dollar debt increases are dressed up as economic relief.
How the bill increases national debt
Congressional Budget Office projections reveal the true scope of this financial engineering. The legislation would increase deficits by $2.4 trillion over the 2025–2034 period. This stems from a $3.7 trillion reduction in revenues, offset by only $1.3 trillion in spending cuts. The debt service math compounds from there interest payments alone would add another $551 billion over the decade, pushing the total deficit impact to $3 trillion.
Senate negotiations pushed the envelope further. Their version would add $4.1 trillion in new debt by 2034. Should temporary provisions become permanent—a near certainty given political incentives—that number jumps to $5.5 trillion.
Debt-to-GDP projections
America’s fiscal trajectory is sobering. Debt held by the public currently hovers near 100% of GDP. Under the House version, CBO projects this figure will hit 123.8% by 2034. The Senate bill projects a rise to 127%.
And yet, the White House claims the opposite. Their internal forecasts predict a debt-to-GDP ratio of just 94% by 2034. Outside observers offer a more grounded perspective:
Yale Budget Lab: 183% by 2054
Tax Foundation: 120% by 2034
Committee for a Responsible Federal Budget: 124% by 2034
No growth scenario can overcome the simple math. Rising interest costs devour whatever gains GDP expansion might provide.
Why rising debt may be intentional
The pattern suggests design, not dysfunction. The bill explicitly raises the debt ceiling by $5 trillion maximizing borrowing capacity within the shortest possible timeframe. Under a permanent Senate version, annual interest payments could approach $2 trillion exceeding defense and Medicare combined.
At first glance, this looks reckless. But zoom out, and it starts to resemble strategy.
Foreign entities currently hold over $7 trillion in U.S. Treasury securities. That turns America’s debt from a domestic burden into a global lever. Each additional trillion borrowed is no longer just a cost it becomes a geopolitical tool: too catastrophic for foreign creditors to let default, too central for the U.S. to relinquish.
This isn’t incompetence. It’s monetary statecraft positioning the United States not to refuse its debt, but to control who holds it.
From Strategic Default to Strategic Reassignment
The original Strategic Default thesis suggested that the U.S. could someday threaten or withhold debt payments to gain geopolitical leverage. But that’s no longer necessary. The real play is more elegant: a controlled shift in creditors, not payments.
By allowing domestic fintechs like stablecoin issuers and digital banks to absorb the debt that was once held by China, Japan, and BRICS nations, the U.S. regains strategic control without triggering panic. The debt doesn’t vanish it rotates.
Default isn’t the weapon. Custody is.
What is a strategic default?
The mechanics are still strategic just no longer confrontational. In a classic default, borrowers walk away from obligations they can technically afford because the structure of the debt no longer serves their interests. But today’s play is more subtle. Rather than refusing to pay, the U.S. is enabling a quiet rotation of its creditors. Foreign governments are gradually reducing their holdings of U.S. Treasurys, while stablecoin issuers and domestic fintech custodians are stepping in as the new buyers. It’s not about defaulting on debt it’s about replacing the counterparties. The strategic logic remains the same: shift financial leverage away from adversaries, consolidate control, and reshape the financial architecture on your own terms.
Game Theory
The logic becomes clear when viewed through game theory. Why continue payments on an asset worth less than its debt? The answer: you shouldn’t.
How foreign-held debt becomes a weapon Foreign-held national debt creates a different dynamic entirely. China holds approximately $760 billion in U.S. Treasury debt. This arrangement creates mutual vulnerability that can be exploited.
Chinese military officers demonstrated this thinking in 2010. General Luo suggested China could retaliate by “dumping some U.S. government bonds”. Such actions carry significant potential consequences:
- Drive down the dollar’s value
- Increase interest rates
- Disrupt economic recovery
- Damage America’s credit rating
Historical precedent supports this approach. Sovereign debt has frequently intertwined with geopolitics. Bulgarian experiences before World War I demonstrate how debt creates political dependencies. The creditor-debtor relationship becomes a tool of statecraft.
Emergency powers and selective servicing
The debt ceiling mechanism provides additional strategic opportunities. Unlike spending limits, it prevents borrowing for existing obligations. This creates artificial constraints that prove useful for negotiation purposes. Politicians regularly deploy debt ceiling threats to advance agendas or defund programs. Financial obligations become political leverage. The constraint transforms into a feature, not a bug.
Debt ceiling manipulation as a tactic
Republicans have long argued the debt ceiling represents one of few tools available for enacting spending reductions. The debt ceiling becomes powerful bargaining leverage.
Critics contend this approach merely postpones inevitable confrontations with unsustainable spending. Yet debt ceiling battles consistently demonstrate how financial obligations become negotiating tools. The threat of default creates leverage that extends far beyond fiscal policy.
The Big Beautiful Bill’s $5 trillion debt ceiling increase creates ideal conditions for strategic positioning. Moody’s already downgraded U.S. credit rating over debt concerns. This downgrade signals that further leveraging becomes not just possible, but potentially inevitable.
The stage is set for a different kind of financial warfare—one where America’s creditors discover their investments have become hostages in a much larger game.
Global Fallout: BRICS, Dollar Hegemony, and the New Order
The geopolitical consequences of America’s fiscal reengineering extend far beyond its borders. While headlines focus on domestic debt and deficits, the real impact lies in how this debt is being redistributed and what that means for global power structures. Ironically, the nations most eager to dethrone the dollar may find themselves most exposed to the consequences of The Great Rotation.
BRICS nations’ vulnerability to U.S. debt repositioning
Nearly $7.6 trillion in U.S. Treasurys is held by foreign governments about 31% of all outstanding marketable debt. China alone holds $760 billion. These holdings, once viewed as economic leverage, now risk becoming strategic liabilities. BRICS nations have long sought to reduce reliance on the dollar through de-dollarization initiatives and alternative currency blocs. But this very resistance may deepen their vulnerability.
As the U.S. gradually shifts debt custody away from foreign sovereigns and toward domestic institutions and stablecoin issuers, these countries find themselves holding legacy debt instruments in a system they no longer control. Their dollar exposure becomes less an instrument of leverage and more a geopolitical hostage.
Economic interdependence amplifies the risk. Many BRICS economies maintain critical trade relationships with the United States. Any shock to the dollar whether through market volatility or systemic rotation would cascade through their economies, destabilizing imports, exports, and debt servicing obligations.
Impact on global trade and currency systems
If the structure of dollar liquidity continues to shift inward toward tokenized systems controlled by U.S.-regulated issuers global commerce could face significant friction. Stablecoins like RLUSD, USDC, and others could become the new access points to dollar liquidity, displacing traditional channels like SWIFT or correspondent banks.
This would accelerate the fragmentation of international finance. Companies and countries unable or unwilling to adapt to tokenized dollar rails could be sidelined from global trade. Payment systems would bifurcate. Supply chains, already strained, would face new chokepoints. And a world once unified under a dominant reserve currency would begin to splinter into regional or protocol-based ecosystems.
Gold-backed CBDCs and financial realignment
BRICS nations are attempting to preempt this shift. Russia and Iran have floated gold-backed digital tokens as cross-border trade solutions. China’s Digital Yuan is active in 26 cities. India’s E-Rupee is expanding in both wholesale and retail markets.
But these efforts reveal more insecurity than strength. Gold-backed currencies require deep reserves, offer little monetary flexibility, and may not withstand the scale of a global dollar realignment. In the event of a true dollar rotation, these systems risk becoming isolated islands functioning but detached from the deeper liquidity of U.S. markets.
The role of central banks and market signals
Central banks are racing to digitize but many still lack coherent frameworks. Poor CBDC implementation could actually increase demand for U.S. stablecoins, reinforcing dollar dominance in a new form. As in 2008, central banks may be forced into extraordinary measures buying sovereign debt, stabilizing currencies, and attempting to calm markets destabilized by America’s shifting debt structure.
But unlike 2008, this time the destabilizer isn’t a housing bubble it’s a monetary transformation.
Potential for economic fragmentation or reset
Moody’s Analytics projects that even the perception of U.S. fiscal instability could wipe out millions of American jobs and trillions in wealth. But the global consequences would be even more severe. As the U.S. replaces foreign creditors with domestic, digitized infrastructure, nations with legacy exposure to U.S. bonds and dollar-based trade may be forced to build parallel financial systems or submit to the new rules of access.
Whether this transition results in collapse, reset, or realignment will depend on how quickly global actors can adapt. What’s certain is this: the United States is no longer asking permission to remake the system. It’s doing so by quietly changing who holds the keys.
Global Finance Chessboard
The precision of the Big Beautiful Bill’s debt trajectory suggests intentional design not fiscal miscalculation. On the surface, it reads like conventional economic policy. But beneath, it functions as infrastructure for a new kind of financial statecraft. Rather than fiscal irresponsibility, it represents a deliberate shift in how the United States wields its debt not to default, but to rewire who holds the power it represents.
The era of Strategic Default envisioned a world where the U.S. might threaten nonpayment as leverage. But now, the strategy is more sophisticated. Foreign creditors are not being denied they’re being displaced. China’s $760 billion in Treasury holdings no longer represents American vulnerability. Instead, it’s a geopolitical imbalance waiting to be corrected.
The $5 trillion debt ceiling increase is not a blunder it’s positioning. Every new trillion borrowed becomes a lever not because the U.S. intends to walk away from the debt, but because it is actively choosing new creditors. Stablecoin issuers, institutional custodians, and domestic fintechs are emerging as the next generation of debt holders ones more aligned with U.S. interests, more programmable, more controlled.
Domestic Consequences
Market indicators already hint at this shift. Moody’s downgraded U.S. credit ratings, while central banks across the world continue to accumulate gold a sign of growing unease with dollar structures they no longer influence. But gold is a hedge, not a strategy. The real play is happening inside the United States, where the architecture of debt distribution is being rebuilt in real time.
Yes, domestic consequences remain: higher interest payments, volatile markets, and political backlash. But the administration appears willing to trade short-term discomfort for long-term control. This is no longer about paying or not paying the debt it’s about deciding who holds it, how it’s accessed, and under what rails it moves.
Implementation mechanisms already exist. Emergency powers could restrict access to foreign-held securities. Stablecoins backed by Treasurys could become the primary international access point to dollar liquidity. And the debt ceiling, once a constraint, now serves as a pressure-release valve in geopolitical negotiations.
Traditional economics treated debt as obligation. This new paradigm treats debt as infrastructure a framework through which power, liquidity, and access are distributed globally. The Big Beautiful Bill is not just stimulus. It is the opening chapter of The Great Rotation a quiet reordering of global finance, where America’s burden becomes its edge.
Digital Engines of The Great Rotation
This month marks a decisive turning point in the Great Rotation. Several major developments now confirm that the United States is not preparing to default it is preparing to reassign, digitize, and consolidate control over its debt infrastructure. The pieces are falling into place in real time.
Ripple and BNY Mellon: Institutional On-Ramp for RLUSD
Ripple has appointed BNY Mellon as the primary custodian for its new enterprise-grade stablecoin, RLUSD, which has already surpassed $500 million in reserves. This isn’t just a custody arrangement it’s an institutional signal. With Ripple also pursuing a national bank charter and a Federal Reserve master account, RLUSD is being positioned not as a crypto experiment, but as a compliant, regulated digital dollar integrated with U.S. financial infrastructure. It is designed to operate inside the system, not against it.
This move puts Ripple in a category few others can claim: a U.S.-anchored stablecoin issuer with custody trusted by the largest institutional player in the game. In the context of the Great Rotation, this development represents a realignment of trust from foreign creditors and offshore exchanges to U.S.-regulated rails and domestic financial institutions.
Tether, Circle, and the Rise of the Stablecoin Backbone
Stablecoin liquidity is quickly becoming the scaffolding of the new dollar system. Circle’s IPO surged out of the gate, raising over $1 billion and attracting heavy institutional interest. While analysts warn of short-term overvaluation, the core reality is clear: Circle is now a publicly traded monetary utility, and USDC is a financial product backed by Treasurys and regulatory compliance.
Tether continues to dominate global liquidity, particularly in emerging markets, and holds tens of billions in U.S. government debt. As these entities scale, they are absorbing the very debt foreign central banks once controlled. The result is a private, digital layer of Treasury demand that is highly liquid, always-on, and increasingly programmable.
This is not de-dollarization it is re-dollarization through new rails.
The Genius Act, XRP ETF, and Crypto Week
The policy infrastructure is catching up fast. The Genius Act, passed this month, provides a legal framework for payment stablecoins and sets the stage for widespread institutional integration. Its passage signals bipartisan support for a digitized dollar ecosystem with regulatory clarity and clear consumer protections.
The anticipated launch of an XRP ETF likely the next major milestone will cement XRP’s role not just as a speculative token, but as a digital asset with infrastructure-level utility in cross-border payments and liquidity management. Once this ETF launches, XRP joins Bitcoin and Ethereum as institutional-grade tools for asset rotation, settlement, and collateralization.
Crypto Week in Washington is further accelerating this trend, bringing together policymakers, fintech leaders, and capital allocators. What once felt fringe now feels inevitable.
The Great Rotation Has Begun
The Great Rotation was never about panic or collapse. It was about reengineering power quietly. It was about replacing creditors, not rejecting them. And it was about using digital infrastructure to reassert U.S. monetary dominance without firing a shot.
Ripple. Circle. Tether. Coinbase. BNY Mellon. The Genius Act. The XRP ETF.
These aren’t isolated events they are parts of a new financial machine being assembled in full view of the world. As the global economy fixates on inflation, deficits, and growth, the United States is doing something more fundamental: it is rebuilding the plumbing of global finance and choosing who gets access.
This is the true nature of the Great Rotation. The debt stays. The holders change. And the system resets
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