> Coupled with the flooding of capital back to US via the reduced expatriation tax rate, US is firing on all cylinders.
What happens when all the money is repatriated and no more dollars left for other countries to import from US?
What happens when all the money is repatriated and no more dollars left for other countries to import from US?
Seriously though, you’re asking a fantastic question. And, surprisingly, my tongue in cheek response above is sort of correct. The world was actually in a similar position to the one you ask about right after WWII ended. The world was still on fire and most countries had no real currency to spend. So, we loaned them the money to buy our goods (not much of a services economy back then).
Of course, that’s what we know today as the Marshall plan. In it, we gave billions of dollars of aid to other countries to help them rebuild their infrastructure and economies.
But if that ever happened in peacetime (I.e. not right after a war), then that would be very unusual. Maybe after a worldwide depression, but that is usually followed by war anyway.
Great question, and hopefully we never really find out. It probably would be a very rough ride for lots of people on this planet.
[0] - http://www.history.com/topics/world-war-ii/marshall-plan
The world is in a very different state now. Most of the manufacturing bases are outside the US. If the US somehow withheld the dollar, most of the world would just switch to alternative currencies and continue to trade with one another.
That of course would most likely never happen in our lifetimes, since the dollar is a key pillar in the American economy and global power projection.
People wanted out of usd for lots of reasons but the other choices were worse.
The answer last time was global recession. Mainly because there was no alternative to USA and Soviet Union (which was crumbling). Third world countries were used as pawns.
This time though, most other countries have solid institutions of their own. More likely, they will unite and start trading with each other in other currencies, gradually reducing dependence on dollar and trading with the US.
The bitter truth about the world is that the US was a hero in 80s and 90s. Today, it's a toxic material that everyone deals with simply because of petrodollar.