Old Ideas, New Chaos

Since January 20, 2025, when Donald Trump was sworn in as the 47th President of the richest democracy of the world that will celebrate the 250th anniversary of the signing of the Declaration of Independence in 2026, he has been following two controversial doctrines to ‘Make America Great Again’ (MAGA). The first one - the Madman Theory - was proposed by Niccolò Machiavelli (1517), who argued that sometimes it was “a very wise thing to simulate madness”. The second one is the theory of ‘Manifest Destiny’ - the 19th-century doctrine or belief that the expansion of the U.S. throughout the American continents was both justified and inevitable.

Madman Theory (Unpredictable Doctrine)

Political scientists argue that the Madman Theory (Unpredictable Doctrine) is a doctrine in which a world leader seeks to persuade his adversary that he is temperamentally capable of anything to extract concessions. Trump believes this strategy is paying dividends, getting the US’ allies where he wants them. Contrary to his expectation, this controversial doctrine is not working for Trump.

The major threat to the US economy is its mounting debt, which has crossed USD 38 trillion in October this year. The IMF predicts the US will see its debts climb from 125 per cent to 143 per cent of annual income by 2030. The Debt-GDP ratio at the end of June 2025 was around 119 per cent. Trump increased US government spending and cut federal taxes in the “big, beautiful bill”, passed by Congress in the summer. It is forcing the White House to rely more heavily on borrowing to fund annual spending. Increased spending could push the budget deficit higher by USD 7 trillion a year by the time Trump is due to leave office in January 2029. The federal debt rose by USD 1 trillion in a little over two months- the fastest rate of growth outside the pandemic. Interest payments on the national debt now total roughly USD 1 trillion per year. Over the last decade, the government spent USD 4 trillion on interest, and it will balloon to USD 14 trillion over the next 10 years, which will crowd out important public and private investments in future. As of May 2025, Japan held more than USD 1.1 trillion, or 3.1 per cent, of the country’s total debt. Following Japan were the United Kingdom (USD 809.4 billion, or 2.2 per cent) and China (USD 756.3 billion, or 2.1 per cent).

The steep rise in US debt and faltering economy has weakened the US dollar against major currencies. The dollar index, which measures the greenback against a basket of currencies of the U.S.’ major trading partners, fell about 11 per cent from January through the end of June - the biggest decline since 1973. Morgan Stanley Research estimates the U.S. currency could lose another 10 per cent by the end of 2026. That decline also marked the end of a structural bull cycle for the dollar, which started in 2010 and ended in 2024 with an accumulated gain of about 40 per cent. According to The Guardian’s columnist Eduardo Porter, Trump’s economic team appears willing to sacrifice the dollar’s supremacy in global finance, a move that could weaken US influence and threaten global financial stability. A weaker dollar could mark the beginning of the end for America’s decades-long financial dominance, and its so-called “exorbitant privilege.” However, if one asset class was poised to outperform during the second Trump administration, it was cryptocurrencies. Trump had pledged to make America “the Bitcoin superpower of the world and the crypto capital of the planet”. A trade truce with China on May 12 sent bitcoin to a record high. It remains above its level when Trump took office, reports The Economist.

An analysis of the US Treasury Department data reveals that between July 2024 and July 2025, Trump’s tariff war has polarised the world into two sections. One section, comprising the original members of the BRICS bloc, including India, China and Brazil, and a few other emerging economies, has been reducing their holdings of the US treasury bonds. But most advanced economies, including the UK, Japan and France, have continued to buy US government securities. While India reduced its dollar reserve by 8 per cent, China reduced its holdings by 5.9 per cent between July 2024 and July 2025. The reduction by Brazil was higher (12 per cent), and Saudi Arabia saw a reduction of 7.7 per cent. In contrast, economies such as Japan (5.3 per cent), Germany (2.7 per cent), France (34.7 per cent) and the UK (22.6 per cent) witnessed a large increase in their US government bond holding, observes The Hindu Business Line.

The Chinese Yuan is fast emerging as an alternative to the US dollar trade among the emerging nations. China’s cross-border goods trade, settled in the yuan in the first three quarters of 2025, rose 12 per cent year-on-year to 9.97 trillion yuan (USD 1.4 trillion) and made up roughly 30 per cent of the total trade volume for the period. At the turn of the decade, BRICS agreed to set up the BRICS Payments Task Force to develop systems to facilitate transactions between member countries. Then, at the Kazan Summit in 2024, BRICS leaders underscored the importance of “strengthening correspondent banking networks within BRICS and enabling settlements in local currencies in line with the BRICS Cross-Border Payments Initiative” or BRICS Pay. It is the most concrete step that the grouping has taken to explore the possibility of reducing their dependence on the “SWIFT network”, the messaging system used by over 11,000 banks and financial institutions worldwide for international money transfers.

In September, the Yuan’s share in global payments reached 3.17 per cent, up from 2.93 per cent in August. This marks continued progress in the internationalisation of the Yuan, in line with the growing adoption of the currency in cross-border transactions amid the global economic transition. A recent report from the Bank for International Settlements confirmed the Yuan’s status as the world’s fifth-largest trading currency, with its global transaction share at 8.5 per cent, up 1.5 percentage points from 2022, the largest rise among all currencies. Once the BRICS Pay is established, the US dollar will face a real challenge from the Yuan and other currencies of the BRICS member countries. In seeking to weaponise the US economy and financial system against China, Russia, and many other countries, Trump has picked a fight that has already boomeranged back on it, observes Harold James, Professor of History and International Affairs at Princeton University. According to him, it is much easier for other countries to develop alternatives to the dollar than for America to suddenly develop its own rare earths industry. Trump’s truce with Xi Jinping at the APEC Summit is a case in point.

Trump’s Madman Theory (Unpredictable Doctrine) has pushed the US economy to the edge. Since he took office in January 2025, most of the economic indicators have worsened. Unprecedented ‘Federal shutdown’ for over six weeks has worsened the situation. Here are a few indicators:

The University of Michigan’s consumer sentiment index dipped modestly in October to 53.6, down by 1.5 points from September, but it’s massively down from October 2024, when it was 70.5.

According to a Harris poll, commissioned by The Guardian, a majority of Americans (53 per cent) believe the economy is getting worse. The poll also reported that 75 per cent of respondents had seen their monthly household costs rise by more than USD 100.

The annualised increase in the consumer price index rose to 3.0 per cent in September from a low of 2.3 per cent in April.

Monthly job creation has been fading since Trump took office, with the figures turning negative in June, August and September.

Farm bankruptcies have also been rising throughout the Trump term, with 93 filings in the second quarter that ended September 30, up from 88 in the first quarter and from only 47 at the end of 2024. The prices of such key crops as corn, wheat and soybeans have been falling as Trump’s trade war shrinks foreign demand for American produce.

Consumer spending growth fell to 0.5 per cent in the first quarter of this year and to 1.4 per cent in the second quarter, a serious slowdown from the 3.7 per cent and 4.0 per cent growth rates in the third and fourth quarters of last year, before Trump took office.

Manifest Destiny

Trump’s mention of ‘Manifest Destiny’ in connection with his endeavour to put the US flag on Mars, generated serious concerns among pacifists as, under Manifest Destiny, it was believed that the United States had the divine right to expand — and that all such exploration and expansion was God-ordained. It may be recalled that Trump began his second presidency by insulting Canada, saying it should become the 51st state of the US and declared that he was prepared to consider using military force to annex Greenland, an autonomous territory of America’s ally Denmark. Trump, in his Presidential address, confirmed that he would change the name of Denali — the traditional Native Alaskan name of the highest mountain peak in North America, to Mount McKinley. He also confirmed to change the name of the Gulf of Mexico to the Gulf of America and reiterated that his administration would seek to reassert control over the Panama Canal.

In perpetuation of Trump’s Manifest Destiny Doctrine, since September, American forces have repeatedly struck alleged drug-running boats in the Caribbean and threatened to bomb Venezuela. The effort to overthrow the country’s strongman, Nicolás Maduro, is scarcely disguised as the USA is eyeing Venezuela’s huge oil reserve. Since 1971, America has spent over a trillion dollars enforcing its drug policy. Despite this, drug use in the U.S. is climbing once again. According to many experts, the war on drugs has done more harm than good, reports CNBC. It is estimated (2024)that the annual cost of the fight against drugs is 100 billion dollars, and the drug market’s annual illicit drug trade would be USD 330 billion. The war on drugs turns out to be a profitable business, as drug trafficking itself and the groups that receive multimillion-dollar profits from this.

As in the past, Venezuela would resist the USA’s military adventure. Its President, Nicolas Maduro, has already asked Russia, China and Iran for military assistance. In particular, he asked Russia for missiles, radars, and aircraft repairs amid a U.S. military build-up in the Caribbean. Thanks to its oil reserve, Venezuela has become one of China’s closest partners, and Russia maintains a strategic partnership with Venezuela. Beijing unveiled a “zero-tariff” trade agreement with Caracas at the Shanghai Expo 2025, which covers roughly 400 tariff categories, removing duties on Chinese and Venezuelan goods. In a significant development, the US Secretary of State faced criticism from his fellow G7 foreign ministers about the legality of the US strikes in the Caribbean on ships, which were suspected of carrying drugs. The French foreign minister criticised the military operations, saying they could contribute to instability in the region.

Trump’s nostalgic obsession with the worldview of 19th-century America is leading it to 17th-century Spain, when the powerful European empire struggled with burgeoning debts, rampant inflation, and economic stagnation. The crown’s usual resort to short-term loans from Genoese and German bankers created a precarious debt structure. The inability to service these debts led to multiple declarations of bankruptcy, notably in 1607, 1627, and 1647. The emerging economies of other European nations, namely Great Britain, France, and Holland, posed as major challengers to Spain’s hegemony. After four centuries, the USA is facing similar challenges from China and other emerging economies of BRICS. The 21st century demands a new philosophy of governance. Trump will never achieve his MAGA objective with 19th-century colonial doctrine.