Donald Trump’s “Madness”
The comments below are an edited and abridged synopsis of an article by Hugo Salinas Price
The problem of the world’s monetary system, based on the paper dollar as the fundamental currency of the world, is called Triffin’s Dilemma.
If the dollar is required by all central banks as reserves, there is only one way that these banks can obtain them: They must sell more to the US than they buy from the US. The difference between the dollars they get from sales is more than the dollars they spend to buy from the US. That difference—the US trade deficit—flows to central banks and swells their reserves.
If Trump cuts the trade deficit, foreign central banks would find it harder to obtain dollars for their reserves.
What the world’s monetary system, based on the paper dollar, has done to the US was unexpected: Foreign goods are obtained by tendering paper money in payment, something that is fundamentally fraudulent. And that fraud has come back to haunt the US.
Trump is alienating the world with the threat of tariffs in order to reduce the trade deficit. He doesn’t seem to understand that the trade deficit is built in to the US economy, because the world´s central banks need dollars for their reserves.
There is one way to do away with the trade deficit and renew the productivity of the US: abandon the international monetary system and return to the gold standard.
There are no trade deficits under the gold standard because all countries have to pay cash gold for their imports and collect cash gold for their exports. Result: balanced trade. No deficits.
So is Trump’s ‘madness’ really leading to the gold standard? Is that what he wants? Because if he continues to undermine the dollar as the world’s reserve currency by making it impossible for central banks to obtain dollars through the US trade deficit, that would be the likely outcome.