Central banks may be quasi-government agencies, but they are still managed by bankers and that makes them lean heavily toward conservative ideologies. America has been pushing austerity fiscal policy for decades and its Main Street economy has declined in lockstep. The main tool of conservatives in selling their worldview is an irrational and uninformed fear of national debt and the false concept that tax policy drives fiscal policy. This is a leftover from the gold standard that no longer applies, but it makes very good political theater.
Sans a gold reserve to defend and not having any foreign-denominated debt means that Treasury can always make good on its obligations and its floating exchange rate makes it the perfect safe harbor for global capital reserves. Don’t expect to hear that from any politicians because its implications would create considerably more demand for money creation to fuel the domestic economy and that would mean considerably less demand for private bank debt.
That private debt sector of America’s economy has grown several fold since the mid-’80s when trickle-down economics was adopted by Congress and fiscal deficits became almost taboo in spite of larger trade deficits and far greater wealth accumulation. America literally sucked dollars out of its domestic economy to seed markets elsewhere. Middle-class consumers would benefit considerably from a bit more inflation, as dollars wouldn’t be sequestered in low yield capital investments and would be more likely to be spent in productive business ventures.
Low prices on imports only harm the economy if some equitable spending to compensate for the job losses isn’t possible. America will have to come to terms with its responsibility to its citizens, possibly becoming the employer of last resort, if it wishes to remain the big dog of global trade. That will require an honest reassessment of its own currency as fiat, letting go of old gold standard myths and political rhetoric. Deficits are “required” if we are to continue to rely on foreign sources of goods and allow extreme wealth concentration, both of which are currency drains.
