Fiscal and Monetary Policy and U.S. Leadership: A Historical Perspective

Abstract

After WWII, United States hegemony was built upon the complementarity of four pillars: military might and relevant diplomacy, mastering a very efficient productive paradigm, an emblematic role in the defense of democracy and multilateralism, and finally the autonomy in the design of monetary and budgetary policies given the centrality of the dollar in international relations. Since then the catching up of Europe and Asia, the rise of global value chains at the initiative of large US corporations, lost wars, and poor international strategies have transformed an overwhelming and benevolent hegemon into a defensive and contested one. Nevertheless, the dollar is still an essential asset as well as the soft power associated with theorizing economics, not to mention energy self-sufficiency, quite important given the turbulence provoked by the Russian invasion of Ukraine. The United States are at the forefront of the search for an escape from Quantitative Easing, i.e., a new mix between monetary and budgetary policies. These decisions will reverberate all over the world given the role of Wall Street in world financial intermediation.

With the collaboration of Olivier Boylaud for the statistical apparatus.