Does Fiat Money Cause Trade Deficits?
In his book, The Creature from Jekyll Island, G. Edward Griffin is rightfully suspicious of the American trade deficit and the US dollar’s special role in the world since World War II. He explains, When the dollar was separated entirely from gold in 1971, it ceased being the official IMF world currency and finally had to compete with other currencies.… From that point forward, its value increasingly became discounted. Nevertheless, it was still the preferred medium of exchange. Also, the U.S. was one of the safest places in the world to invest one’s money. But, to do so, one first had to convert his native currency into dollars. These facts gave the U.S. dollar greater value on international markets than it otherwise would have merited. So, in spite of the fact that the Federal Reserve was creating huge amounts of money during this time, the demand for it by foreigners was seemingly limitless. The result is that America has continued to finance its trade deficit with fiat money — count
