The Author is former Chief of Staff of a frontline Corps in the North East and a former helicopter pilot. He earlier headed the China & neighbourhood desk at the Defence Intelligence Agency. He retired in July 2020 and held the appointment of Addl DG Information Systems at Army HQ.

When individuals and corporates face bankruptcies, say like Nirav Modi or Mehul Choksi or corporate groups like Jet Airways or Bhushan Steel or Kingfisher Airlines, the state can intervene, confiscate assets and find buyers as insolvency procedures kick in. But what happens when states themselves are on the verge of bankruptcies? Especially if it involves the biggest economy in the world. Too big to fail?

What happens when states themselves are on the verge of bankruptcies? Especially, if it involves the biggest economy in the world. Too big to fail?

The common perception would be that small third world countries which are routinely accused of corruption, nepotism, mismanagement and misrule by the US led West, especially the rich G7 or the 38-member advanced economies called the Organisation for Economic Co-operation and Development (OECD) face maximum bankruptcy. The reality is very different. Nearly half of the countries of the European continent declared bankruptcy during the previous two centuries while it was 40 per cent of the countries of Africa, and 30 per cent of the countries of Asia.

Argentina declared bankruptcy in 2001 with a debt of $145 billion. Mexico defaulted state loan worth $80 billion in 1982. Unable to repay its $51 billion foreign debt, the Sri Lanka government declared it was defaulting in April 2022. Pakistan is essentially running on foreign loans, an economic model that only leads to borrowing more, which eventually results in bankruptcy. Between February 2023 and June 2026, Pakistan will have to repay around $80 billion in foreign debt. Hence its brinkmanship, leveraging decades old deep ties with the CIA.

Debt, Denial and the Dollar

France with a debt of $3,400 billion is witnessing violent mass protests in the streets of Paris while the state attempts to tighten the belt with cuts in pensions and social security. The same situation prevails in the UK, also burdened with a $3.4 trillion debt. Over 1,10,000 protesters clashed with police in an anti-migrant' rally on September 13, 2025 in London. So, what about a country with a humungous $37,000 billion debt? The US isn't much worried, at least in terms of appearances. Instead it has just hiked its defence budget to cross $1,000 billion for the first time in history.

A pattern of brazen attitude and denial is being witnessed. The Dow Jones is moving north as if the economy is going great guns. The ability of the US to keep printing money and splurge despite the humungous debt has been made possible due to the status of the USD as the global reserve currency since the end of WW II. When the US went broke due to the heavy expenditure it incurred in waging the war in Vietnam and many countries wanted gold in lieu of the USD they held that time, it ditched the gold standard. In August 1974 it signed a 50 years accord with the Kingdom of Saudi Arabia ushering in the petrodollar. America has waged wars, toppled regimes and arm twisted every government and nationalist leader who has dared to defy the petrodollar system.

The Petrodollar Cracks

The US dollar is plunging to levels not seen since 1973 due to Trump's tariff wars. The dollar index, which measures the currency's strength against a basket of six others, which includes the pound, euro and yen, has dropped over 10 per cent so far this year, reported Financial Times. It is the worst start to the year since the end of the gold-backed Bretton Woods system. Saudi Arabia hasn't renewed the petrodollar agreement which expired in August 2024. Instead it has signed a 50 billion Yuan oil trading agreement with China, virtually introducing 'Petroyuan'.

What about a country with a humungous $37,000 billion debt? The US isn't much worried, at least in terms of appearances. Instead it has just hiked its defence budget to cross $1,000 billion for the first time in history.

The US economy is showing definite signs of stress. Since job numbers are down, President Trump thought it a good remedial measure to shoot the messenger. Erika McEnarfer, the head of Bureau of Labour Statistics was fired as soon as the report went public. In the first quarter, real GDP decreased 0.5 per cent. Trump now wants quarterly reports, in vogue since 1970, to be ditched and adopt a six- monthly reporting instead. It is expedient to put a shroud over bad news than try to fix the underlying reasons for poor performance.

Bad news is pouring in other fronts. China has decided to dump American soybean in favour of Brazil. American soybean and corn farmers are in deep distress, a reason why the US is pressuring India to buy its corn. Coupled with friend and former Brazilian President Bolsonaro's indictment, and 30-year jail term for attempting to upend last year's election verdict, Brazil eminently qualified for a 50 per cent Trump tariff.

South Asia in the Crosshairs

So did India! If continuing to buy Russian oil in greater quantities since the outbreak of Ukraine war in February 2022 wasn't enough, it dealt a severe blow to American built (GE Electricals) and perhaps American operated Nuclear Command Centre buried deep underground in Nur Khan Airbase near Rawalpindi on the night of May 9/10, 2025. That India could deliver a devastating precision strike on a tiny 45 cm air conditioning shaft vent of the underground command centre using GAMUT software and BrahMos ultrasonic missiles with RF plus IIR seeker from 350-400 km afar had sent shockwaves across the western world. To add salt to the insult, India denied any American role in agreeing to pause Op Sindoor on May 11, 2025, effectively trashing Trump's Nobel ambitions. In this context, some of the recent activities in India's neighbourhood are too important to ignore.

Saudi Arabia hasn't renewed the petrodollar agreement which expired in August 2024. Instead it has signed a 50 billion Yuan oil trading agreement with China, virtually introducing 'Petroyuan'.

Under the pretext of flood relief, the US landed two C-17 Globemaster in Nur Khan Air Force base, close to Rawalpindi. Curiously, the aircrafts were received by a Pakistani Army General instead of ministers if the purported goods were flood relief material. Now the US is not only seeking to do urgent repairs but may have possibly sent the latest AMRAAM missiles which it might test against India next time, instead of the Chinese PL-15 which failed to protect Pakistani skies.

A Precarious Gamble

The violent regime change in Bangladesh last year August has opened up another front for the US to target India. Four major joint exercises by the US forces with the Bangladesh Army in the past three months combined with invitations extended by Yunus government to the Pakistan army to train its forces indicate a heightened urgency for a regime change operation in India. The sudden and mysterious death of Terrence Arvelle Jackson, a serving Colonel of the US Army's elite 1st Special Forces Command (Airborne), inside Dhaka's five-star Westin Hotel on August 31, 2025, and the landing of a US Air Force C-130J Super Hercules in the strategic Chittagong on September 15, 2025 as part of an ongoing exercise must be read in that light.