Part 11/13:
A crucial point often overlooked is how monetary policy itself fuels trade imbalances. The US’s expansive monetary approach—quantitative easing, low interest rates, and liquidity injections—has dramatically increased Americans' ability to consume beyond what they produce. This results in persistent trade deficits, financed by foreign credit inflows and dollar depreciation.
If the US shifted toward more deregulation and allowed markets to function more freely, it might naturally curb excessive imports and bolster exports. Currently, the system incentivizes borrowing and consumption rather than productivity and savings. Such distortions have created a situation where trade deficits and currency devaluation are intertwined with monetary policy choices.