US President Donald Trump Hints at Bringing Back Gold as Money
We have the Gold, so bringing back the Gold Standard would not be very hard to do.
Inside President Trump’s speech at CPAC was what an intriguing observation: “Global cooperation, dealing with other countries, getting along with other countries is good, it’s very important. But there is no such thing as a global anthem, a global currency or a global flag. This is the United States of America that I’m representing.”
There is a keen insight in there that could transform our lives, America, and the World.
President Trump said there is No “global currency”.
The Big Q: Was it a high impact political sign for the world financial markets?
Hang on what about the USD?
Most international trade is priced in dollars. The Bretton Woods international monetary system invested the USE, which then was defined as and (internationally) was legally convertible to Gold at $35 oz, with global currency status.
France’s then-finance minister, later its President, Valéry Giscard d’Estaing, called the “Reserve Currency” status of the Dollar — its status, along with Gold, as global currency, an “exorbitant privilege.”
By this President d’Estaing was alluding to the fact, as summarized at Wikipedia, that as American economist Barry Eichengreen summarized: ‘It costs only a few cents for the Bureau of Engraving and Printing to produce a $100 Bill, but other countries had to pony up $100 of actual goods in order to obtain one.'”
That privilege, which made great sense during the period immediately after World War II, became a curse.
The in Y 1971 US President Nixon, under the influence of his Treasury Secretary John Connally, “suspended temporarily the convertibility of the Dollar into Gold.”
That closure proved durable not temporary. The US Dollar became, and remains, the world’s global currency.
What had been an “Exorbitant Drivilege” devolved into an exorbitant liability.
John D. Mueller, formerly Rep. Jack Kemp’s chief economist, writing in the WS-J in Trump’s Real Trade Problem Is Money recently said: “…a monetary system based on a reserve currency is unsustainable, since foreign official dollar reserves are acquired and must be repaid in goods.” Meaning, the increase in official Dollar reserves equals the net exports of the rest of the world, which means it must also equal US international payments deficits, an unsustainable situation.
So, if President Trump wishes to address America’s merchandise trade deficit he will find that allowing the Greenback to be used as the global currency is a real issue in the economic picture.
The Dollar’s burden as the international reserve currency, not currency manipulation by our trading partners or bad treaties, is the “Villain” in the ongoing problem of US jobs creation.
Mr. Mueller’s WS-J column lays out 3 options open to President Trump, they are as follows:
- muddle along under the current “dollar standard,” a position supported by resigned foreigners and some nostalgic Americans, among them Bryan Riley and William Wilson at the Heritage Foundation, and James Pethokoukis at the American Enterprise Institute.
- turn the International Monetary Fund (IMF) into a world central bank issuing paper e.g., SDRs (special drawing rights) reserves—as proposed in 1943 by Keynes, since the 1960’s by Robert A. Mundell, and in Y 2009 by Zhou Xiaochuan, governor of the People’s Bank of China. Note:This kind of standard is highly political and the allocation of special drawing rights essentially arbitrary, since the IMF produces no goods.
- adopt a modernized international Gold Standard, as proposed in the 1960’s by Mr. Rueff and in 1984 by his protégé Lewis E. Lehrman …and then-Rep. Jack Kemp.
Do not expect President Trump’s to muddle along, that is anti his vow to Make America Great Again. It would crudeh his crucial commitment to get the economy growing at 3%+ — vastly faster than it has for the past 17 years, which is the recipe for robust job creation and upward income mobility for US workers. It also is the Key ingredient for balancing the federal budget while rebuilding our infrastructure and military.
Next to turn the IMF into a world central bank would be against President Trump’s economic nationalism. To subordinate the dollar to the IMF’s SDR would be equivalent to replacing the American flag with the flag of the United Nations on every flagpole in America. Not going to happen period!
Leaving the 3rd option, to “adopt a modernized international Gold Standard, as proposed in the 1960’s by Mr. Rueff and in Y 1984 by his protégé Lewis E. Lehrman, and then-Rep. Jack Kemp”
To this will mean the removal of tax and regulatory barriers to the use of Gold as Money, not a commodity.
Happily, President Donald Trump likes Gold.
He has also shown a keen intuitive grasp of how the Gold Standard was Key to having made America Great in the 1st place.
Donald Trump said, “We used to have a very, very solid country because it was based on a gold standard.” But he said it would be tough to bring it back because “we do not have the Gold. Other places have the Gold.”
Donald Trump’s comment in the press, “Bringing back the Gold Standard would be very hard to do, but boy, would it be wonderful. We’d have a standard on which to base our money.”
President Trump has been misled to believe that “we do not have the Gold. Other places have the Gold.”
When in fact, the United States, Germany, and the IMF together have about as much Gold as the rest of the world combined and America has more than Germany and the IMF combined, more than 2X as much.
Again, we have the Gold, so bringing back the Gold Standard would not be very hard to do.
Have a terrific weekend.