In the US, Donald Trump is threatening to punish cities who disobey his immigration orders with any means at his disposal. Reducing direct federal funding is one way he can squeeze cities. Another is to reduce the size and scope of federal income tax breaks for municipal bonds. If conflicts between cities, states and the federal government become more acute, federal officials might try to undermine municipal financial systems. Of course, the Federal government is not in the best financial shape with nearly $20 trillion in debt. Disruptions in the flow of finances between city, state and federal governments could impact the federal government’s finances in significant ways. Since the Federal government controls the monopoly on the production of money in the United States, it has lots of tools at its disposal to manipulate currency markets to fill financial gaps, but even that power has its limits. Donald Trump acknowledges that the Federal government can always “print” the money it needs to fulfill its obligations, but even that mechanism is limited by the prospect of rampant inflation. If investors believe the federal government is losing control of its ability to raise tax revenue and needs to rely on monetary expansion to manage its debts, the price of Federal Treasury bonds could drop significantly, which would destabilize global financial systems.