The dollar as a weapon.

Is trade deficit bad for the US, as Donald Trump claims? Apparently, the US must run a trade deficit with other countries to keep global trade moving, because most trade between nations is priced in dollars. This is known as the Triffin Dilemma, which predicts that there will be boom-bust cycles in the US economy because of having to run a deficit permanently. There have been 12 boom-bust cycles in the US since the 1940s. The most recent one was in 2008, known as the sub-prime crisis, because banks were lending mortgages to people with low incomes who could not service their loans when interest rate started to rise. Banks thought they had hedged their loans through Credit Default Swaps, but the market had become so big that the US government had to bail out firms like AIG.  Interest rate had been kept low because cheap goods from China kept inflation under check and the Chinese bought US treasuries to weaken the yuan, so that Chinese exports stayed cheap. China built up foreign currency reserves of $4 trillion in the process. The result was a huge asset price bubble, resulting in the Great Recession when it collapsed. All this came about because the Republicans voted for permanent normal trade relations with China in 2000, allowing China to become a member of the WTO, which meant that taxes on Chinese goods fell. US companies shifted manufacturing to China, resulting in massive job losses, which is why Donald Trump is ahead in the race for nomination to be the Republican candidate for the presidential election in November. Surely if the US withdraws the dollar from being the main reserve currency for world trade it would not have to run a trade deficit and can rid itself of the Triffin Dilemma once and for all? The dollar gives the US government the power to levy sanctions on other countries, no matter how strong they are, as it has done on Russia, by forbidding banks to trade in dollars with that country. It makes the dollar a formidable weapon to attack and weaken an opponent, without fear of reprisal. That maybe why the US got rid of the gold standard but still has the largest gold reserve in the world. Apparently, countries which want to become world powers, like China and India, are building up reserves of gold while Canada is selling its stocks. However, sanctions may force countries to retaliate in other ways as Russia has done in Syria. Russia's intervention has strengthened Iran, whose sanctions were lifted just recently, so that it threatened to walk away from the nuclear deal. China's economy is so big that the Federal Reserve agreed to help it to weaken the yuan in a secret meeting at the margins of G20. There have been empires in the past, some of which have lasted centuries. The US empire will also end. Whether with an explosion or a whimper remains to be seen.