The US is able to pay for imports by exporting goods and services and because the US dollar is the world reserve currency. Billions of dollars have been printed or credited to overseas entities to buy imports. Most of these dollars remain overseas, used by virtually every nation on earth to trade with each other. Isn't it great to be an American?
Unfortunately, this free ride might be coming to an end. There are too many dollars overseas and there are too many foreign nations jealous of America's position and the seignorage it enjoys as a result of owning the world's reserve currency.
The creation of the Euro was, in part, an attempt to horn in on some of the seignorage the US dollar enjoys. The Euro experiment will end in a miserable failure and, ironically, might result in propping up, at least temporarily, the very US dollar it was supposed to replace or at least rival.
I, for one, wish it would. The short-term benefits have been great, but, in the long-term, the dollar's reserve status has allowed our government to indebt us and expose us to the risk of heavy price inflation. Bad moon rising.
I agree and, ultimately, it will have been a good thing. In my opinion, gold should be the international reserve currency but, despite the recent hype, I don't expect to see it until we've endured true misery.
Which we may.