Hope for the best but prepare for the worst is a good motto in economics, as in much of life. It comes readily to mind when I think of what Donald Trump could do to the world economy.

If we’re lucky, the financial markets will take a Trump victory more or less in their stride. No one would fall off their chair if it transpired, after all. The dollar, as has been indicated for these many past weeks, would take a tumble, but otherwise the world would, hopefully, wait to find out precisely what Trump has planned. If we’re very lucky, Trumponomics – tax cuts, deregulation and protectionism – would stimulate enterprise, investment and job creation, put trade relations with the rest of the world on a fairer, more sustainable, footing, and, as they say, make America great again.

Things might not turn out like that. Perfectly plausible is that a Trump victory would instead prove the catalyst for the next financial crisis. In truth, that crisis has been in the making for many decades and it will represent the third chapter in the trilogy that has the banking crash and the great recession as its first two episodes: the great dollar crisis of 2017 will be the final reckoning of the long boom and the era of financial irresponsibility.

Soon Trump may be in charge of nuclear weapons and the biggest armed forces in the world. Far more terrifying, though, and surprisingly little discussed, is that President Trump would be in charge of economic weapons of mass destruction: the dollar, the world’s only reserve currency; the world’s largest economy (the US is about one third of global GDP), and its largest blocs of debt.

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For example, the world’s investors – one third Americans, two thirds foreign – have lent the US government a colossal, unimaginable, sum: the best part of $20 trillion; some $19,809,400,298,300 last time I looked. Stacked as dollar bills it would go to the moon and back. Individuals, companies, pension funds and nations lend the US government such absurd sums because they trust the US Treasury and expect to get paid back. There is some doubt Trump would be able or willing to do so. Imagine, if you dare, what that might to do to an already overstretched Chinese commercial banking system (China holds $1.3 trillion of these US government bonds).

The most dangerous idea he has put forward as a way to deal with America’s debt is to buy it back at a discount. Some have interpreted that as an offer to pay back 85 cents in the dollar on outstanding debt, but the precise “haircut” is anyone’s guess – itself quite a cause of uncertainty. What is certain is that it would represent – in effect – the first modern default by the federal government on its debt, with, as a direct consequence, a spiralling devaluation of the world’s sole reserve currency.

To be fair, we’ve not heard much about the Trump Plan to deal with the national debt since the summer, but, if Trump takes a “businessman’s approach” to the US debt, something like that may well re-emerge in coming months. Even if he scrapped that plan, the chances are his tax-cutting would make the government deficit and the trade deficits even bigger. He would spin America into levels of indebtedness that would prove unsustainable even in a world that wished devoutly to believe in America’s essential goodness and strength. Not all wish to: think for a moment of powers such as Russia and some in the Middle East who might be tempted to start playing games with a tottering dollar.

In any case, running away from her debts won’t make America great again. It’ll turn her into the new Greece, and confirm once and for all that the modern American economy really was just the biggest Ponzi scheme in history; a confidence trick on the entire world where the last suckers in, lose their shirts.

Which is really the point. For Trump wouldn’t be anything to fear if America were not so indebted (and he can hardly be blamed for that). It’s also true that some crisis provoked by Hillary Clinton, say with the Russians, could also catalyse the great reckoning, though she is much more cautious about debt and the economy.

The fact remains, though, that America is vulnerable because neither the US nor her economic partners have sorted out the “global imbalances”, as the economists call them. Instead, for the past two decades, the US and China, and before that Japan, have indulged in an unsustainable game whereby the Americans run up huge trade deficits and the Chinese lend them the cash to keep it going. However, the mountain of dollars now held in China is so large that it cannot in reality be spent, or even managed. If they, the Chinese and Japanese, wanted to dump anything like a substantial proportion of their $2.5trn in US Treasury bonds, they would shred their wealth, their trade with the US and the wider world economy with it. The dollar in 2016, like the big Wall Street investment banks in 2009, is in that sense too big to fail. Trouble is, that didn’t prevent the banks failing, and only America saved the world from collapse.

This time, though, who will save America? The world will have lost its last lender of last resort.

If you’re a lord of finance, then, you know what to do about a Trump victory: “short” the dollar so you at least make some money when it falls. For the rest of us, let’s just hope for the best from The Donald, eh?

Donald Trump's most controversial quotes Show all 14 1 /14 Donald Trump's most controversial quotes Donald Trump's most controversial quotes On Isis: "Some of the candidates, they went in and didn’t know the air conditioner didn’t work and sweated like dogs, and they didn’t know the room was too big because they didn’t have anybody there. How are they going to beat ISIS?" Getty Donald Trump's most controversial quotes On immigration: "I will build a great wall — and nobody builds walls better than me, believe me —and I’ll build them very inexpensively. I will build a great, great wall on our southern border, and I will make Mexico pay for that wall. Mark my words." Reuters Donald Trump's most controversial quotes On Free Trade: "Free trade is terrible. Free trade can be wonderful if you have smart people. But we have stupid people." PAUL J. RICHARDS | AFP | Getty Images Donald Trump's most controversial quotes On Mexicans: "When Mexico sends its people, they’re not sending their best. They’re sending people that have lots of problems. They’re bringing drugs. They’re bringing crime. They’re rapists." Getty Donald Trump's most controversial quotes On China: "I just sold an apartment for $15 million to somebody from China. Am I supposed to dislike them?... I love China. The biggest bank in the world is from China. You know where their United States headquarters is located? In this building, in Trump Tower." Getty Images Donald Trump's most controversial quotes On work: "If you're interested in 'balancing' work and pleasure, stop trying to balance them. Instead make your work more pleasurable." AP Donald Trump's most controversial quotes On success: "What separates the winners from the losers is how a person reacts to each new twist of fate." Donald Trump's most controversial quotes On life: "Everything in life is luck." AFP Donald Trump's most controversial quotes On ambition: "You have to think anyway, so why not think big?" Getty Images Donald Trump's most controversial quotes On his opponents: "Bush is totally in favour of Common Core. I don't see how he can possibly get the nomination. He's weak on immigration. He's in favour of Common Core. How the hell can you vote for this guy? You just can't do it." Reuters Donald Trump's most controversial quotes On Obamacare: "You have to be hit by a tractor, literally, a tractor, to use it, because the deductibles are so high. It's virtually useless. And remember the $5 billion web site?... I have so many web sites, I have them all over the place. I hire people, they do a web site. It costs me $3." Getty Images Donald Trump's most controversial quotes On Barack Obama: "Obama is going to be out playing golf. He might be on one of my courses. I would invite him. I have the best courses in the world. I have one right next to the White House." PA Donald Trump's most controversial quotes On himself: "Love him or hate him, Trump is a man who is certain about what he wants and sets out to get it, no holds barred. Women find his power almost as much of a turn-on as his money." Getty Images Donald Trump's most controversial quotes On America: "The American Dream is dead. But if I get elected president I will bring it back bigger and better and stronger than ever before and we will make America great again." GETTY

If Donald Trump wins the presidency, the dollar will drop like a stone, and everyone will be poorer. Because everyone in the world, directly or indirectly, has some dollars in their pocket, their purse, their pension fund, their bank account or in their government's reserves. Everyone in the world also has an interest in the world’s largest economy being healthy and strong. It is a little surprising that more is not made of this risk. It may not be that substantial in reality, and currencies of course bounce around all the time. Yet there is some risk that things could quite easily run out of control. If so, the consequences would be truly catastrophic, for America and for the world. Yes, Donald Trump could prove the catalyst for a world economic cataclysm, one that would make the financial crisis feel like an aperitif for the main event.

It is an all-too-real danger. A Trump dollar is something in which the world would be less willing to place its trust. We can see it now. Every time Trump moves up in the polls the dollar gets sold off. So investors have already given us a gentle hint of what’s to come. Yes, the financial markets have discounted the risk of a Trump win to an extent; but the reality of victory, especially if it was coupled with Republican control of Congress, could easily lead to a much bigger rout. Like the effect the Brexit vote had on the pound – an immediate 20 per cent drop – it could easily prove much more of a shock than we think, precisely because we cannot know how people will react in the coming weeks, we cannot know how a lame-duck Obama White House and the Fed might react, and we cannot know what The Donald would do.

From what we know about the signs are not promising. I mean anyone in the world whose economic well-being is in whole or in part dependent on a strong and stable dollar, and in particular those who depend upon the value of US government debt as a store of wealth, say, to yield an income in retirement.

Let’s take the foreigners. The Trump effect would be truly global. A fall in the value of the dollar would affect anyone whose pension fund is invested in United States Treasury bills and bonds; anyone whose government has stored much of its national wealth in dollar assets. Pretty much anyone on the planet, in other words. Two thirds, indeed, of the US national debt is owned by foreign entities of one sort or another, with the Japanese and Chinese owning very substantial chunks of it (over a thousand billion dollars’ worth a piece), but virtually every bank, investment fund and government in the world is invested in securities issued by the US government and its agencies. Thus, if you are the lucky person in charge of the Chinese state’s holdings of US Treasury paper, you do not want to have to tell the stony-faces in the Chinese politburo why you’ve lost so much of China’s wealth, just because you sat on your hands while all around you investors were dumping their dollar assets.

Some commentators regard America’ astronomical debts as a matter of national shame or intrinsic danger. Not quite, because if the rest of the world is prepared to keep buying the IoUs the US treasury produces, then everyone is happy. Foreign banks and investors get to win dollar assets, backed by the biggest economy in the world; the Americans get to borrow to invest and, well to be honest, live a little beyond their means. In particular, the People’s Republic of China, with whom Donald Trump has an equivocal relationship, has a nice stash of about $1.3 trillion of US Treasury bonds and bills, its nest egg for a rainy day.

Enter a Trump presidency. While the financial markets, ever shrewd, have “priced in” the likelihood of a Trump victory, one has to wonder if that will really be sufficient to cushion the dollar form what could be a fairly catastrophic drop in its value. It is often remarked that a Donald Trump victory in the US presidential election would be analogous to the much-less expected victory of the Brexit campaign in Britain’s EU referendum. Well, the British know what happened next – a 15 to 20 per cent depreciation in sterling, which has only regained a little of its composure now that doubts about whether Brexit will actually happen have started to surface.

Imagine what effect a Trump victory – still not regarded as the most likely outcome by markets – would have on the US dollar, a far more important international currency than the pound sterling. His economic agenda, frankly, terrifies investors.

Ironically, richer Americans with lots of such assets won’t feel the loss so acutely, because, as we found with the effects of a weak pound on the London stock exchange, companies who earn lots abroad, but report their earnings and pay dividends in dollars, will face far more damage to their financial position on the personal “balance sheets” than any putative Trump tax cut might deliver for their incomes.