U.S. National COVID Economic Collapse and the Collapse of the U.S. Dollar
23 Pages Posted: 8 May 2020
Date Written: April 14, 2020
Our article argues that the structure of the U.S. economy had already been damaged by the political promotion of disastrous trade deals.
The trade deals caused the American economy to bifurcate into a component of big companies that benefit from global trade, and the rest of the economy that is not connected to global markets.
Just like Chicago’s economy, in the 1980s, the U.S. economy has been “hollowed out” by the trade deals. Trump’s COVID economic stimulus, that would have worked in America, prior to 1992, is wasted because the employment and income multipliers are gone.
We summarize our conclusions: We predict that macro general equilibrium conditions will deteriorate, causing GDP to decline, by about 35% by the end of 2020, to a GDP of $14 trillion. Most of the remaining $14 trillion will be related to economic transactions in large global corporations.
The decline of the GDP will weaken the dollar as a unit for international currency transactions because the strength of the dollar, globally, depends on the strength of the U. S. economy, domestically.
The strength of the U.S. economy, at a $21 trillion GDP, provided credibility and value to the dollar as the international reserve currency.
Monetary growth and the increasing issuance of Treasury notes that are not backed by a strong economy will lead the dollar to collapse, in U.S. domestic transactions.
We estimate that, in 2019, when there was comparability between a 21 trillion dollar GDP, and a 20 trillion dollar national debt, that the U.S. dollar still had value.
The U.S. GDP will decline to around $14 trillion, and the amount of sustainable, comparable U. S. debt should be $14 trillion, not $24 trillion.
The sections of our paper are:
The Bifurcated U. S. Economy.
The Essential Economic Role of Geographic Value Chains.
The Origins of the Economic Collapse.
The Collapse of the National GDP.
The Effect of the GDP Collapse on the U. S. Dollar as International Reserve Currency.
The Collapse of the U. S. Dollar.
U. S. Economic Goals for Economic Growth.
Keywords: COVID, economic collapse, US economy, input output models
JEL Classification: O11
Suggested Citation: Suggested Citation