WASHINGTON — The U.S. economy is grappling with record-high debt levels, sluggish growth, and a shrinking labor force, yet the dollar remains resilient due to structural quirks in the global monetary system, analysts say.
Debt and Inflation Risks Rise
The U.S. debt-to-GDP ratio has surged past 130%, a historic high that economists warn could stifle economic expansion. While the nation’s ability to print currency reduces default risks, unchecked debt could fuel severe inflation, eroding the dollar’s value.
Despite a 3.5% unemployment rate, nearly 8–10 million Americans aged 25–54 remain outside the labor force. The participation rate has plummeted from 70% in 2000 to 62% today. Factoring in discouraged workers, real unemployment may approach 10%—a threshold often linked to recessions.
Paradox of a Strong Dollar
The dollar’s strength defies weak economic fundamentals, a phenomenon tied to the Eurodollar system—a global network of dollar-denominated banking transactions. Walter Wriston, the late banking innovator, once likened the system to a closed loop: money withdrawn for investments like gold eventually returns to banks, affecting exchange rates rather than vanishing.
Today, the world faces a dollar shortage, despite the Federal Reserve’s balance sheet ballooning from800 billionin 2008 to over7.5 trillion in 2020. Much of this liquidity remains trapped as excess reserves rather than circulating in the real economy.
Money Creation Mismatch
The Fed injects M0 (base money) via asset purchases, but commercial banks drive M1 and M2—the money supply that fuels growth—through lending. Y
Outlook: Structural Vulnerabilities
The dollar’s dominance hinges on the Eurodollar system’s mechanics, not U.S. economic health. Analysts urge monitoring debt growth, inflation, and labor trends to gauge whether its strength is sustainable.
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