Sovereign-Currency Government Debt and Economic Security: Supply Capacity, Monetary Sovereignty, and Geopolitical Resilience

This conceptual preprint examines sovereign-currency government debt as a potential instrument of economic security. It develops an integrated analytical framework connecting macroeconomic stabilisation, monetary sovereignty, industrial policy, and geopolitical resilience. The paper argues that, under conditions of private-sector deleveraging and underutilised productive capacity, government deficits can help preserve aggregate demand and prevent temporary financial contraction from becoming a permanent loss of infrastructure, technological capabilities, productive organisations, and skilled labour. It further examines how sovereign-currency fiscal capacity may support strategic investment in energy, semiconductors, advanced materials, defence production, logistics, and other critical supply-chain bottlenecks. Through these channels, public finance can contribute not only to macroeconomic stabilisation but also to the preservation of policy space and the protection of strategically important assets from crisis-driven external dependence or distressed acquisition. The analysis distinguishes monetary solvency from economic sustainability. A government’s ability to issue liabilities in its own currency does not eliminate real constraints. Inflation, exchange-rate depreciation, imported energy and materials, labour shortages, productive bottlenecks, institutional weakness, and political capture may all limit the effectiveness of debt-financed policy. The paper therefore proposes that fiscal policy be evaluated through a broader set of indicators, including inflation, employment, capacity utilisation, external dependence, critical-input concentration, supply-chain resilience, and the quality of public investment, rather than through debt ratios alone. The paper also compares sovereign-currency debt with foreign-currency indebtedness through the international-finance concept of “original sin.” It argues that domestic-currency financing can provide greater policy space during external shocks, while emphasising that monetary sovereignty is not equivalent to autarky and does not remove dependence on imported resources, technology, or trade relationships. The contribution is conceptual and synthetic rather than econometric. It brings together insights from balance-sheet recession theory, financial-instability theory, functional finance, Modern Monetary Theory, international finance, mission-oriented innovation policy, and economic-security studies. The historical examples are selective, and contemporary cases require independent source-by-source verification. Future research should test the framework comparatively across countries with different currency regimes, import structures, institutional capacities, and geopolitical exposures. (This work was created based on the author's concept, with AI Gemini conducting Deep Research and AI Manus handling text generation, and completed under the author's supervision.)