More choices again: In classical economics, currency-exchange gives a net-importer nation a manufacturing price advantage — as its money devalues. USA instead chose to open its capital markets to speculation — allowing the currency to remain strong — as the trade situation worsened. Choices.
But all you're really saying here is that US incomes and purchasing power could have been allowed to decline in real terms through other mechanisms (the exchange rate).
And it's not at though the US didn't try to make that happen, for instance via the Plaza Accords.
As for the capital account, the main driver wasn't speculation, but investment in US debt, much of it government debt. And with that came a lot of (temporary) advantages, including the ability to consume more than we produce.
But all you’re really saying is that American asset prices should go up forever — regardless of the productive (earning) power of the people who actually live in the USA. The resulting class inequality has fueled fascist rage. So, “number go up” has its own costs.
I don't think I said that. But getting your currency to depreciate when the rest of the world wants to hold it as a reserve currency, and Americans are wedded to the benefits of it being so, is not easy to accomplish. Nor is it a cure-all to the underlying issue of an increasingly competitive world.
It certainly has distribution effects, but I don't think it simply boils down to asset vs wages, not when much of the capital inflow is going to prop up consumption.
The capital inflows mostly prop up consumption by asset holders. This is trickle-down economics. Most Americans are left behind in this system, and that creates real instability. But again, fascism may keep the lid on this inequality. Asset holders like what they see so far — number go up.
You could argue that the government spending and debt funded by those capital inflows - especially with entitlement spending eating up more and more of the budget - mostly prop up consumption by non-asset-holders.
Asset prices went up with national debt. Dollar debt bonds are collateral for everything. If the government cut and taxed away that deficit — what would private assets be “worth”? You could argue that Mr. Market is a welfare queen. He should very be thankful for entitlements.