1945-50: WWII ends with the US as the Global Manufacturing power - US dollar becomes world reserve currency, US runs a TRADE SURPLUS with the world. The rest of the world is devastated by war and the US is the world's manifucturing giant and exports all over the world. The US is strong and a CREDITOR nation.
The GI Bill creates a strong US middle class, it guarantees free university studies for returning soldiers and cheap loans to buy a house. WWII veterans find it easy to get a good free education, a cheap house and they start families like crazy. (I know, the GI Bill is shockingly socialistic).
However: US Industry and economy remains Militarized. The foundation of the MIC (Military Industrial Complex is laid)
1950's Korea war
Vietnam war begins
TURNING POINT - US GOES FROM CREDITOR NATION TO DEBTOR NATION
Now how did this happen? Four things occur in the beginning of the 1970's that forever alter the US economic system.
1. The US loses the war in Vietnam and the cost of it bankrupts the US. The US starts the system of PRINTING FIAT DOLLARS to cover it's debts.
President Nixon (without a democratic debate) is forced to abandon the gold standard and start the fiat dollar system. If he hadn't done that the US would have lost all it's gold in Fort Knox to foreign creditors (France and Germany et al).
2. The US reaches Peak Oil. From now on the US is reliant on importing oil to meet it's consumption.
OPEC becomes a major international player. This consides with the Yom Kippur war 1973, and in protest against US support of Isreal OPEC declares an oil embargo on the US. In 1979 the US supported Shah is overthrown in Iran and panicked markets drive the oil price up to extreme levels.
3. Inflation strikes.
Wars are extremely inflationary to any economy and the inflation from the war in Vietnam, and other economic mismanagement, returns with a vengence.
4. The US gets used to cheap imports of foreign products (mainly from Japan and Germany at first - later China ofc.)
1981-2 critical inflation stopped by Fed Chairman Volker at interest rates close to 20 % - the Fed was able to pay such interest ONLY because the US was not yet deeply into debt. Today such interest rates are utterly impossible.
1985 Plaza Accord - The US forces Japan and Germany (the main exporting nations to the US at the time) to accept a devaluation of the dollar. In effect exporting economic depression to both nations.
1987 Stock market crashes - a lot of inflation is swept away when world wide bubble pops. The effects of endless printing of dollars sent overseas is shown.
1990s - Outsourcing and offshoring begins in ernest
Gulf War I Global economic contraction - Bush I loses to "It's the economy stupid" Bill Clinton.
Clinton deregulates markets and repeals Glass Steagall Act (a law from the 1930s depression put in place to stop Trusts - thereby setting up for new round of Wall Street looting/speculating). NAFTA comes into effect. Dot.com bubble forms amply inflated by Greenspan Fed policies.
1995 Plaza Accord 2
Wall Street loots Jeltsin Russia to the tune of hundreds of billions of dollars. The collapse of Russia and the looting by the oligarchs ensures very cheap oil during the 1990's.
1999 Dot.com bubble bursts.
2000s - US becomes a service economy in the jobsector and financial economy instead of a manufacturing power.
2001 global contraction. GW Bush enters the White House
9/11 attack minor blip on economy
2001 - to present: Eternal War on Muslims begins (wars are extremely inflationary)
2003 Gulf War 2 - Invasion of Iraq. GW Bush encourages Housing Bubble by his policies and further deregulations of laws. The Fed/Greenspan stokes more inflation into the US economy to keep the wheels churning helping blow up the housing bubble.
2006 "Helicopter" Ben Bernanke is appointed new chairman of the Fed. He is so named because he promises to flood the markets with dollars incase there is a problem. And so he will.
2007 Japanese Carry trade collapses - this is the precursor the collapse of the US economy. Due to the near Zero Rate Interest Policy (ZIRP) investors had been taking dollar loans (Japan has a mountain of dollars from trade with the US) and invested them in the US and in commodity markets. Enormous bubbles were formed. When these popped in July/August 2007 Wall Street was doomed to crash soon after.
TURNING POINT 2
2007- US Banks bankrupted. US Housing market collapses. Fed prints money to save Wall Street banks from liquidation (Quantitative Easing 1 and 2, TARP etc - leaving taxpayers with a $ 2Trillion+ dollar bill).
Fannie Mae and Freddie Mac bankrupted and socialized into the US government, leaving taxpayers with the bill.
It's a great system. Ideally the US:
1. Imports tangible goods by sending paper overseas
2. Exports inflation and depressions
3. Uses inflation to limit real payment for dollar investments to foreigners
4. Uses the US Fed to inflate with more dollars whenever possible, or by keeping the interest rate below the level of inflation.
But this system is now fatally broken.