Global dollar shortage

I stumbled upon this link from Jesse Felder report. It is well worth a read. Also, must read the original paper by Hyun Song Shin on the global dollar shortage. American current account deficit is lower. Higher fiscal spending, under the new President, will help to widen it again and increase dollar supply globally. But, would it last and would it be allowed to happen? What if American interest rates rise so much that dollar returns home? American current account deficit widened between 1980 and 1985 and yet, the dollar reigned supreme. World was glum and not booming.

American current account deficit widened between 2002 and 2007 and dollar was much weaker, then. The world was awash with dollars and happy. Global boom.

So, the answers for a world so dollar dependent?

(1) Reduced dependence on American consumer. Is he or she really spending much now, after excluding healthcare expenses which are both domestic and non-discretionary? The dependence on American consumer as the buyer of first and last resort makes all macro-economic policies synchronous around the world with that of the U.S and exacerbates dollar dependence, amplifies effects of dollar shortage.

(2) Multipolar world of currencies – No one is in sight. Everyone including China is America-dependent.

(3) America prints more dollars again. Likely under the new Trump regime? Will the Federal Reserve print again in 2017? Does not feel like it would happen.


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