Printing money is often touted as the solution to the macroeconomic problems faced by developed economies today, namely lacklustre GDP growth, public and private overindebtedness and underemployment. However, could a trade surplus go a long way to remedying each of these by increasing aggregate demand instead? My line of thinking is as follows:
Given that AD = C + G + I + (X - M), moving from trade deficit to surplus would have a positive effect on output. This much is obvious. The decline in foreign holdings of domestic currency, an injection into the economy, would then allow domestic economic agents, both public and private, to deleverage without causing unemployment, at least at the aggregate level. Although I am no expert, I get the impression that the risk of unemployment / weaker GDP growth has since 2008 been the biggest obstacle to reducing debt:GDP ratios faced by governments in developed trade-deficit countries, which can be observed by comparing net exporter Germany's government debt:GDP ratio with net importers like the US, UK and France.
Underemployment would be at least partially offset by a trade surplus if exporters are exporting more, with increased demand drawing factor inputs to the export sector. Most proponents of MMT point to the apparent underutilisation of resources such as factory capacity and labour as a reason to introduce full employment policies using printed money; perhaps this problem wouldn't be so apparent if countries like the US and UK didn't have chronic trade deficits or, on the flip side of the coin, overvalued exchange rates, which harm domestic producers. I admit to not having looked at the data on economic slack between net exporting and net importing countries; it could well be that it occurs irrespective of the balance of trade. At a simplistic level, however, I would expect net exports to be a positive in this regard.
With that in mind, would printing money be necessary for remedying developed world macroeconomic problems such as underemployment and overindebtedness if trade deficits are closed? In other words, would such problems occur regardless of a trade deficit? China has very high private debt levels in spite of being a net exporter although I feel they're a special case as they're more of a state-driven than market-driven economy.
As a disclaimer, I am not making the case against public money creation as a potentially useful policy towards a healthier economy; it may well be a worthwhile policy if the problems above also occur under conditions of balanced trade. I am merely uncertain as to whether it solves or merely alleviates some of the macroeconomic problems that developed economies face today. If the US economy is structured in a way that tends toward over indebtedness and trade deficit, money creation may simply mask or worsen those problems for example by inflating export prices, by stimulating demand for imported goods, by encouraging further indebtedness. This seems to have been the recent experience of the US with its extensive use of QE and fiscal deficits to [rightfully] see people through lockdown recessions.
PS By public money creation I am referring to policies which directly inject money into the 'real' economy as opposed to the financial sector alone. So, I don't believe QE in the absence of large fiscal deficits is relevant to this question though do correct me if I'm mistaken.