After finance ministers and central bankers met at the World Bank/IMF spring meetings in Washington last month, the buzz is on the future of the dollar-anchored international monetary system.
US Treasury Secretary Scott Bessent told the gathering that, while the purpose of the Bretton Woods institutions was stability, “everywhere we look across the international economic system today, we see imbalance”.
He blamed US deficits on “an unfair trading system”. He blamed the “intentional policy choices by other countries” for hollowing out the US’ manufacturing, undermining its critical supply chains and risking its economic security. And he declared that the world’s “persistent over-reliance on the United States for demand is resulting in an evermore unbalanced global economy”.
This comes after Bessent, a former George Soros fund manager, vowed to “monetise the asset side of the US balance sheet for the American people”, following a Trump order in February to create a sovereign wealth fund.
What does the US balance sheet look like? According to the Federal Reserve, US households and non-profits ended last year with a net worth of US$169.4 trillion while the federal government had a net liability of US$24.6 trillion, including a net liability to foreigners of US$24.7 trillion.
In short, American households grew rich on the back of rising financial and real estate values, which have grown by US$43.2 trillion and US$21.3 trillion respectively since end-2017. Foreigners’ net holdings of American assets have also increased by US$17.4 trillion, reflecting the demand for US debt and equity due to the high returns.
