The US emission is based on the dominance of the dollar in international trade, as noted by the professor of the Department of Management and Business Technologies of the Russian Economic University named after G.V. Plekhanov, Doctor of Economics Valery Maslennikov.
Today is the anniversary of the CARES Act
Exactly one year ago, on March 27, 2020, the former US President Donald Trump signed the CARES Act: a federal law providing for the allocation of a record $2.2 trillion to the American economy.
The purpose of the law, as Trump outlined on Twitter, is to provide urgent assistance to families, workers and businesses in the United States.
The CARES Act was Washington’s response to the COVID-19 pandemic, quarantine measures and business closures that led to a 32.9% drop in the American economy in the second quarter of 2020. The United States responded to the events with monetary stimulation of the population, organizations and consumer demand, when direct subsidies were sent to households and economic agents.
The measures gave results: in the third quarter of 2020, the American economy showed growth of 33.4%, almost equal to the pre-crisis level, but the second wave of the pandemic canceled out success: the United States ended the year with a decline of 3.5%.
Events in the US economy affected the domestic political situation: Trump was replaced by Joe Biden, but the policy of printing more and more dollars and flooding the national economy with money remained under the new administration.
Biden signed new legislation guaranteeing $1.9 trillion in aid to Americans. There is evidence that fiscal policy will be backed up by another $3 trillion bill. The money for this is taken thanks to the quantitative easing policy of the US Federal Reserve: the department issued trillions of new dollars for 2020.
“There is a crisis in the American system, but it is latent. The world pays for the printing of money by the FRS: the peculiarity of the US economy is that other countries lend to their printing press”, – Maslennikov states.
This alignment has developed due to the fact that the dollar is the leading world currency and dominates in many gold and foreign exchange reserves of the countries of the world.
The emission of the US FRS is redeemed by the central banks of other states and is deposited in their accounts. As a result, there is no serious inflation in the economy of the United States, the dollar retains purchasing power, despite the astronomical volumes of emission.
“The world does not refuse to settle in the American currency, on the contrary, the peg is getting stronger. We finance both external and internal US debt. Fantastic numbers of obligations have been taken on the Fed’s balance sheet: if earlier the American debt was bought out by external players, today the regulator plays a leading role in this process”, – Maslennikov sums up.
Americans lend to themselves by issuing dollars and large-scale government programs.
“The system will remain stable as long as the dollar remains in world circulation and the UN global trade is accounted for in the American currency. The Russian Federation can declare its withdrawal from the dollar dependence, but the accounting of transactions will have to be kept in this currency. These factors support the US printing press: until the dollar leaves 40-50% of the turnover, it is unlikely that something serious will happen”, – Maslennikov concludes.
The policy of flooding crises with money has been applied in the United States since the events of 1973-1974, but the numbers are growing. On February 17, 2009, the Barack Obama administration allocated $831 billion to fight the Great Recession. After 11 years, the figure has almost tripled, and Biden’s statements say that this is not the limit: the United States will continue to invest trillions of new dollars in the economy.
The US national debt and dollar supply are growing, but the US economy is not experiencing visible difficulties.
“The crisis in the United States is not visible: Americans continue to exchange paperwork for real resources. Today, the process has become even more simplified: it is enough to rewrite the zeros in the computer accounting system. Until the dollar is abandoned in international trade, it is unlikely that something serious will happen because of such a policy of the US financial authorities”, – Maslennikov says.
U.S. returns big government
Director of the Center for Regional Policy of the RANEPA, Doctor of Economics Vladimir Klimanov, in a commentary for the FBA “Economics Today”, came to the conclusion that the paradigm of economic policy has changed in the United States during the “coronavirus crisis”.
“It will be necessary to assess the consequences of the 2020 coronacrisis after some time, when the situation on the world markets stabilizes and the problem with the pandemic is resolved, but we can still draw several conclusions. The first of them is that during a crisis, the role of the state in the economy greatly increases”, – Klimanov sums up.
The volume of government support, as can be seen from the example of the United States, may be too large in relation to the out-of-crisis situation.
“The measures proposed by Biden today are generally unprecedented, and it is no coincidence that Nobel laureate Paul Krugman said that Bill Clinton’s thesis about the end of the era of big government is becoming a thing of the past”, – Klimanov concludes.
For several decades, the United States has been curtailing programs to support the population and business, but now a new era of financial and economic policy is beginning there, which will be implemented through dollar emission.
Dmitry Sikorsky, Economy today