project3 by Shawn Liu

Is dollar domination still good for the United States right now?

fangyuu6 — 2024-03-28 23:34:34 UTC

Yes, it is

fangyuu6 — 2024-03-28 23:36:47 UTC

No, it isn't

fangyuu6 — 2024-03-28 23:37:14 UTC

Dollar Dominance balance Inflationary Pressures

fangyuu6 — 2024-03-28 23:43:24 UTC

Creating money generally poses a risk of inflation, potentially leading to the depreciation of the dollar. However, the global dominance of the dollar enables the U.S. to uniquely offset the international inflationary pressures caused by money creation.

Current Account Deficits and the Confidence Conundrum

fangyuu6 — 2024-03-29 00:05:44 UTC

The U.S. maintains larger current account deficits through its foreign exchange reserves, which could lead to riskier economic policies with adverse effects.

Easier and deeper exports of high technology

fangyuu6 — 2024-03-29 00:13:22 UTC

Since World War II, the United States has transitioned from manufacturing to a focus on technological advances and a shift to high technology and services. Dollar hegemony brings many advantages to the modern industrial transformation, which maintains the attractiveness of the United States economy and the global demand for dollars, facilitating the export and diffusion of these advanced technologies.

Trade Deficit (Counter argument):

fangyuu6 — 2024-03-29 00:19:49 UTC

At the same time, in the wake of deep global dependence on the U.S. dollar, and the decline of U.S. high-tech development and manufacturing, the U.S. needs to import goods and thus ran a large trade deficit. This gap, coupled with the industrial transformation and rising economic status of other countries, poses a greater risk to the United States and the dollar.

Uncertainty arising from the need to stabilize the status of the dollar

fangyuu6 — 2024-03-29 00:35:23 UTC

The U.S. consolidates its dollar hegemony through its military and technological status, leading to global instability.

The consolidation of dollar hegemony through military and technological prowess is a pivotal factor in understanding the mechanisms through which the U.S. maintains its currency dominance.

Global Speculative Influence and Monetary Policy Flexibility

fangyuu6 — 2024-03-29 00:40:29 UTC

This advantage has allowed the United States financial sector to thrive and influence global economic trends, asset pricing and economic strategies, particularly in countries whose currencies are pegged to the United States dollar and those with floating exchange rates.

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fangyuu6 — 2024-04-04 04:53:54 UTC

"In the 100 years of U.S. monetary hegemony, the United States has used this power to spread global inflation" (Brown, 2020)

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fangyuu6 — 2024-04-04 05:12:03 UTC

“US firms participating in the global unbundling of production have constructed commodity chains in which they capture disproportionate shares of global profits through their control over Intellectual property. These profits sustain valuations and thus the attractiveness of dollar-denominated assets.”(Schwartz, 2019)

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fangyuu6 — 2024-04-05 17:22:23 UTC

“Because all these disparate views should find the continued centrality of the dollar troubling. From 1992 to 2017 the United States ran a cumulative current account deficit of $10.2 trillion ($11.8 trillion in 2017 dollars or 63% of 2017 US gross domestic product (GDP))”(Schwartz, 2019)

Increased dependence on dollar(Conter Conter argument):

fangyuu6 — 2024-04-05 17:26:38 UTC

But the dominance of the U.S.'s technological power has made the dollar even more dominant as countries around the globe can't get away from the U.S.'s technological and innovative power.

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fangyuu6 — 2024-04-05 17:41:48 UTC

"the U.S. government was exercising the unconstrained right to print money that others could not (save at unacceptable cost) refuse to accept in payment." (Kirshner, 2008)

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fangyuu6 — 2024-04-05 17:44:17 UTC

While the US has certainly lived beyond its means, which has

made it easier for it to pursue an ambitious and often costly grand strategy (the circumscribing of which would take some edge off pressures on the federal budget and thus the dollar), it retains global military preponderance, and the geopolitical roots of currency distress between the two states is markedly dissimilar. (Kirshner, 2008)

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fangyuu6 — 2024-04-05 17:48:31 UTC

“The structure of the international monetary system, as well as the expansion of the US global commodity chain and US law around intellectual property rights through global trade treaties, has enabled the US to turn what would otherwise be a bugaboo - persistent current account deficits - into a feature of US hegemony.(Schwartz, 2019)”

In sum, for global trade, dollar hegemony is an advantage for the United States

fangyuu6 — 2024-04-05 17:52:16 UTC

While global trade can create foreign exchange deficits that exceed expectations, U.S. exports of science and technology have also made the global economy more and more indispensable to the United States. Global trade has given the U.S. an increasing advantage in the international marketplace

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fangyuu6 — 2024-04-05 18:01:11 UTC

Their accumulation of excess export revenues in turn locks their banking systems into continued use of the US dollar in global credit creation. Those foreign financial firms face competitive pressures that enmesh them in a web of relations centered on the FED and the New York-London group of banks and their associated legal infrastructure (law firms, courts, and practices).(Schwartz, 2019)