The United States’ coming financial equilibrium

The United States’ coming financial equilibrium can be analysed in three steps : The expansionary fiscal policy at full employment will lead to a sharp deterioration in US foreign trade. The normalisation of US monetary policy will drive up dollar interest rates. The question is whether this rise in interest rates will attract enough capital to finance the US external deficit. The equity capital attracted by the tax reform must also be factored in. If capital inflows are insuffici ent to finance the US external deficit, then the dollar will depreciate after having initially appreciat ed on the rise in dollar interest rates.