Financial conditions in the United States continue to deteriorate to the point that it seems almost unbelievable that it could continue. With the recent passage by Congress of the One Big Beautiful Bill Act, the US annual budget deficit is expected to increase by trillions of dollars, and the national debt as a percentage of GDP is expected to increase to 127 percent, far higher than after World War II, when it was at its highest. The cost of interest on the national debt has surpassed both the US’ massive military budget and its spending on Medicare, the government medical insurance program for seniors. With Moody’s downgrading its US credit rating from AAA to Aa1, all three major credit rating agencies — S&P, Moody’s and Fitch — have downgraded their ratings. Yields on US Treasury bonds have increased, reflecting a concern that US Treasurys may not be the world’s safest place to park money, as they always have been.

Nevertheless, prominent US economists are not panicking. They believe that the US dollar is in a slow decline, but they do not predict a crisis. Harvard University economist Kenneth Rogoff predicts that the era of the US dollar may be winding down, but does not predict it to be sudden. Cornell University economist Eswar Prasad, an expert on the economics of money, says that the US dollar can survive US President Donald Trump’s wrecking ball.

But what if they’re wrong, and something sudden is lurking? The economist Herbert Stein famously said, “If something cannot continue forever, it will stop.” But will it stop suddenly, or will it simply peter out?

It can be as challenging to predict a financial crisis or a run on a bank as it is to expect a stampede in a movie theater because someone decided to shout “Fire!” at the top of their lungs. A financial crisis is triggered by a sudden and cascading loss of trust, much like the spread of an especially viral disease. If distrust in the dollar and in the ability of the US to make good on its debt reaches a tipping point, the rush to get out of the dollar could become a stampede.

The confidence of economists is not necessarily reassuring. Consider the onset of the 2007-09 financial crisis. Shortly before the crisis set in, economic and monetary experts like Ben Bernanke and Alan Greenspan, both former chairmen of the US Federal Reserve, the US central bank, publicly expressed their belief that the US was in a period called the “Great Moderation”, in which measures to decrease financial risks had been successful and had brought about an era of relative stability. In the media, there were mildly concerning stories about the possibility of subprime mortgage defaults, but since subprime mortgages were understood to be a small percentage of all mortgages, they were not interpreted as warnings of a major financial crisis.

In early October 1929, the most prominent US economist, Irving Fisher, proclaimed that “stock prices have reached what looks like a permanently high plateau”. Shortly thereafter, on Oct 29 — “Black Tuesday” — stocks dropped precipitously, initiating a long series of steep drops and leading to the Great Depression.

A financial crisis resulting from a run on the dollar would have extremely serious implications for the entire world, especially since no alternative is poised to take its place. Scenarios as to how this might play out, what its effects would be, and how the worst could be averted should be drawn up

Therefore, the confidence of prominent economists is not enough to assure the extreme unlikelihood of a new crisis.

During the decades after the detonation of atomic bombs over Hiroshima and Nagasaki and the acquisition of nuclear weapons by the Soviet Union and China, in addition to the US, there was great concern that there might be nuclear war. Two factions responded differently. One believed that it was necessary to think carefully in detail about that possibility, and what could be done if it happened. This faction wrote books like Thinking About the Unthinkable, by Herman Kahn of the Rand Corp. Another faction, very strongly against nuclear weapons, believed it was important not to think about the unthinkable, but to declare nuclear war unthinkable and to convince everybody that it was.

Now, the question is, should we begin to think seriously about the possibility, however remote, of a new financial crisis due to a sudden, cascading loss of trust in the US dollar? Should economists be focusing on this question, even as they offer assurance that this scenario is extremely unlikely? Another faction, like the faction opposing thinking about the unthinkable nuclear war, might argue that thinking openly about the possibility of a new major financial crisis might contribute to causing it, by subtly undermining trust — and that is a possibility. But perhaps thinking about it seriously — as was argued in favor of thinking about the unthinkable in the nuclear weapons case — could help to mitigate the damage if the unimaginable occurs.

A financial crisis resulting from a run on the dollar would have extremely serious implications for the entire world, especially since no alternative is poised to take its place. Scenarios as to how this might play out, what its effects would be, and how the worst could be averted should be drawn up. Likely, China is quietly doing precisely that. Let us hope that these efforts yield contingency plans that could prevent some or much of the risk.

The author, a pure mathematician and economist, spent more than 30 years in finance followed by 20 years critiquing the mathematics of the investment field in two books and 200 articles.

The views do not necessarily reflect those of China Daily.