Trump perfectly exploited the dollar’s reserve currency role to boost employment in the United States

Donald Trump implemented an “overheating policy”: demand was stimulated with expansionary fiscal and monetary policies even though the unemployment rate was low. Until the COVID crisis, this policy had a very positive effect on employment in the United States (rise in the participation rate, fall in the unemployment rate). But this positive effect on employment was only possible thanks to the dollar’s international reserve currency role: it is this role that enables the United States to have at once a very large fiscal deficit, an external deficit and very low interest rates, thanks to the systematic purchases of US financial assets by the rest of the world. Trump understood that the dollar’s reserve currency status makes this overheating policy possible.