As long as the phenomenon of rising US trade deficit does not create inflation in the surplus nations and unemployment in the US, the Keynesian financing of the global growth is benign for the US and global economy.

Over the last two decades, the phenomenon of globalization has put the US dollar at the global center stage. The dollar emerged as the international currency in the post-war period, replacing the earlier mighty pound sterling, which lost its strength and global acceptability during the two World Wars.

Under the edifice of the IMF, created at the Bretton Woods in 1944, the global monetary cooperation planned to provide for financing the Balance of Payment (BoP) deficits. This architectural feature carried an underpinning of Keynesian philosophy, which advocated budgetary deficit financing for domestic economies. The BoP financing constituted a vital functional feature of the Bretton Woods, but continued also in the post Bretton Woods floating rates systems governing the global payment flows. When dollar assumed the role of global currency, the responsibility of the Federal Reserve, the US government, and also the American financial system went beyond their territorial borders.

The US undertook the obligation to provide the rest of the world with the quantum of dollars it required at a price (exchange rate and interest rate). The post-war global growth owes its sustainability to Keynesianism and dollar. Keynesianism created, domestically through government budget deficits and internationally through US BoP deficits, the right economic milieu, while a strong dollar and US BoP deficits financed the global growth with stability.

The Analyst Magazine, US Dollar and BoP Deficit , The Keynesian Cure, Globalization, Global economy, Domestic economies, American financial system, Balance of Payment, BoP, Global monetary cooperation, US economy, Keynesianism, Floating exchange rates system.