Oh, deficits do matter, from a monetarist, keynesian or international balance of payments perspective. And even from an austrian perspective.
Monetarists and keynesians essentially both believe in counter-cyclical policy - loose (inflationary for monetarists, budget deficits for keynesians) when the economy is in a downturn, tight during growth. But both agree that perpetually loose or perpetually tight policy is by definition not counter-cyclical.
From an internation perspective, the current global financial system requires US trade deficits and budget deficits. Nixon & Kissinger moved to world from gold-backed dollar reserves to dollar reserves based on a promise of US trade deficits (instead of dollars being convertible to gold, they are convertible to the ability to export to the US and invest in the US), US budget deficits (providing a safe investment vehicle for sovereign funds and foreign investors) and US oil imports (propping up the demand for dollars by requiring dollars in order to buy oil).
The essence of the Triffin Paradox is the unsustainability of the system. Ongoing growth in US budget deficits, trade deficits and energy imports make the US economy vulnerable. But any reversals in US budget deficits, trade deficits, and energy imports makes the entire global system and the dollatr’s value vulnerable.
I call it the MAD (Mutual Assured Destruction) global economic system. Loan us back our money for nothing or you will have no jobs.
Good post. And I hadn’t seen the Triffin Paradox used outside of its relation to the Kennedy-Johnson era.