MarkHarvey on Nostr: The United States is lucky to have the world reserve currency but it comes at a cost, ...
The United States is lucky to have the world reserve currency but it comes at a cost, a structural trade deficit.
The US has not had a single year of trade surplus since 1975.
__________
1971 the US abandoned the gold standard and adopted the petrodollar system.
Under the petrodollar system, oil producing countries such as Saudi Arabia and Kuwait are required to price and sell their oil in US dollars. In exchange they receive protection from the US military of key trading routes.
Since oil is a key input for any economy, foreign countries are forced to hold US dollars in order to purchase oil from oil producing nations. This creates a constant demand for the dollar, and as a result, a structurally strong dollar relative to other currencies.
A strong dollar creates a situation where US exports become unaffordable to other countries, and imported goods/services become more affordable to the United States.
This imbalance creates a structural trade deficit, meaning the US always imports more than it exports.
The US has not had a single year of trade surplus since 1975.
__________
1971 the US abandoned the gold standard and adopted the petrodollar system.
Under the petrodollar system, oil producing countries such as Saudi Arabia and Kuwait are required to price and sell their oil in US dollars. In exchange they receive protection from the US military of key trading routes.
Since oil is a key input for any economy, foreign countries are forced to hold US dollars in order to purchase oil from oil producing nations. This creates a constant demand for the dollar, and as a result, a structurally strong dollar relative to other currencies.
A strong dollar creates a situation where US exports become unaffordable to other countries, and imported goods/services become more affordable to the United States.
This imbalance creates a structural trade deficit, meaning the US always imports more than it exports.