[Sytten]

I am not sure this would haves worked since the return of the US stock market was quite high (due to that constant influx of foreign investment notably) compared to any other asset for people/businesses that wanted to invest their profit.

Also due to the reserve nature of the USD the dollar and international trade mostly done in USD there is a huge demand for dollars keeping it strong compared to other currencies. This fundamentally is at odd with an export driven economy.

[rayiner]

> Also due to the reserve nature of the USD the dollar and international trade mostly done in USD there is a huge demand for dollars keeping it strong compared to other currencies. This fundamentally is at odd with an export driven economy.

What if the Dollar weren't the world's reserve currency, either due to deliberate policy by the U.S., or the inevitable fact that the U.S. economy will shrink as a share of the world's economy as India and China develop?

[raincom]

If the USD ceases being the reserve currency, inflation goes up. Fed's neutral rate of interest 2% = the floor of inflation rate. For the third world countries, the natural interest rate = Fed's interest rate (or American inflation rate) + the local inflation rate. That's why third world countries pay more interest rate s in their own currencies; that's why they want to borrow in USD.