Although good for the US national ego I am not sure it has been good for the US' or the world's economies. And, I don't think it has been good for the US' national security or people.
Why has the dollar been so strong even when there has been a surplus of US dollars floating around in the world economy and there are so many economic problems in the US? One major reason: Almost all people in the world feel that if everything in the world falls apart the last refuge (besides gold) that will be left is the US dollar. That is why the dollar, relative to other currencies, does well during times of serious foreign crisis and less well in times of stability.
There have been serious problems with the strong dollar. One problem is manufacturing being driven out of the US and surplus US dollars floating around the world economy. Japan, China and other Asian countries have built their export driven economies on exports to the US. Besides a strong dollar they have gone out of their way to covertly keep their currencies weak. With a strong dollar, a weak yen and yuan, and an open market the US has been a sitting duck for exports from these countries. That has driven much of the manufacturing out of the US and created a huge amount of US dollars floating around the world economy.
Another problem has been the ability for the US to not suffer any ill short term effects for running budget deficits and a negative balance of payments balance year after year. When other countries do this the county rights itself or goes down the tubes. A great example is Brazil. Brazil ran negative budgets and balance of payments for years and went nowhere. It then got a hold of its budget and balance of payments and has done great for about 10 years.
In the US case so many individuals and countries wanted to put their surplus dollars back into the US, or to hold them, that there was no problem with the Federal government to keep running negative budgets and the dollar didn't crash because of the negative balance of payments. So, there were no economic signals sent to the US that would have forced the country to adopt long term supportable Federal budgets and trade policies.
There is now a concerted effort by many countries to stop using the US as the de facto world trading currency. It is led by China, Russia, Venezuela and Iran. They are doing it for political and economic reasons. As an American there is a part of me that automatically wants to stop this. But the more I think about it the more I think it would be good for the US.
The dollar would fall in value relative to other countries. That will make exports more competitive and imports more expensive. This is bound to bring a lot of manufacturing back to the US, help the economy and the balance of payments.
The dollar would not be nearly as desirous as it is now and this would make it very hard for the Federal government to keep borrowing. There simply won't be that many countries and individuals who would buy the governments debt. I consider this to be a good thing. It will enforce some discipline with the Federal budget that currently does not exist. And, in the long run, this is paramount if the US is to survive as a wealthy and powerful country.
So what is the downside with a dollar no longer one top? I don't really know. It will be bad for our short term national dignity for sure but so what? It also could force the dollar to fall too quickly and destabilize the world and US economy. But I don't see any other downside.
